Download - Uncorking Provincial Borders
![Page 1: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/1.jpg)
Uncorking Provincial Borders
Will the long awaited changes resulting from Bill C-311 help BC Wineries thrive?
![Page 2: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/2.jpg)
What is Bill C-311?• The Federal
Importation of Intoxicating Liquors Act (IILA) from 1928 prevents shipment of alcohol between provinces unless it is arranged through provincial liquor agencies
• Bill C-311 is an amendment to the IILA
![Page 3: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/3.jpg)
What Bill C-311 allows
• The importation of wine from a province by an individual for personal consumption– Not for resale or commercial use– “brings the wine, or causes it to be brought
into another province”
• In quantities as permitted by the laws of the destination province
![Page 4: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/4.jpg)
Bill C-311: Where are we at?
• On June 28, Bill C-311 became law
• Federal law now allows individuals to import wine between provinces for personal use
• Subject to law/regulation of the destination province
![Page 5: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/5.jpg)
Dragging the Provinces kicking & screaming
•BC adopting a weak “let’s let the Provincial Liquor Boards work it out” attitude. •Ontario implementing a task force•Wording of Alberta and Manitoba law already allows importation for personal use•See WINELAW.CA for ongoing updates
PROV. LIQUOR BOARDS
BILL C-311
GOVERNMENTMONOPOLY
FREE TRADE BETWEEN PROVINCES
![Page 6: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/6.jpg)
Per capita wine consumption
![Page 7: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/7.jpg)
Wine sales in BC by Origin
![Page 8: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/8.jpg)
The Opportunity
• Canadian per capita wine consumption continues to grow but we are just now approaching the world average
• In BC, sales of BC VQA wine still only represent <20% of all wine sold
• Canadians are drinking more wine and there is room for Canadian wineries to capture more of the growing domestic market
• Because of the IILA, only a small fraction of BC wine labels are currently sold outside BC
![Page 9: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/9.jpg)
Profitability of Dtc sales vs other sales channels
SOURCE: M. Hicken – “FreeTheWine” website (2008)
![Page 10: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/10.jpg)
Out-of Prov. Winery Visitor
Online Customer
Shares with others (word-
of-mouth)
More online orders / Out-of-province
“fans”
More winery visitors
DIRECT TO CONSUMER
![Page 11: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/11.jpg)
DTC (Direct to Consumer) wine sales – US numbers
• DTC sales accounted for 3% of total wine sales for the year ended April 2011
• Breakdown of 3%:– Phone, internet, clubs 40%– Wineshop sales 60%
• DTC more important to smaller wineries• DTC grew by 11.6% - over twice the
overall rate of wine sales growth in the US(SOURCE: ShipCompliant & WinesVines DATA)
![Page 12: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/12.jpg)
What do DTC sales mean for a small to medium sized winery?
• Moss Adams study (no Canadian study available)
• CA, WA & OR wineries
• 2007 & 2008 data• 71% of respondents <
50,000 cases
![Page 13: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/13.jpg)
Findings regarding Sales Channel Strategy
Smaller wineries are more reliant on DTC sales than larger wineries
![Page 14: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/14.jpg)
Wineries that sell more wine DTC tended to have better revenue per case sold
Findings regarding Sales Channel Strategy
![Page 15: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/15.jpg)
Wineries that sell more wine DTC tended to have better margins
Findings regarding Sales Channel Strategy
![Page 16: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/16.jpg)
Findings regarding Sales Channel Strategy
Wineries with a higher proportion of DTC also tended to have higher selling and admin cost
![Page 17: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/17.jpg)
What does DTC growth mean for a BC Winery?
ASSUMPTIONS• $1,500,000 wine sales from 7500 case volume• Retail prices: reds = $26.00; whites = $21.50• Sales mix 58% red; 42% white• Sales channel mix BCLDB 40%; LRS stores
30%; DTC (wineshop) 30%• Margins & balance sheet ratios = StatsCan
2010 data for BC wineries < $5 million in sales
![Page 18: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/18.jpg)
10% shift from BC LDB to DTC
Before
Gross margin = 53%
Pre-tax earnings = $40,000
RONA = 4.0
Interest coverage = 1.62
Net revenue/bottle = $16.67
Valuation* = $945,000
After
Gross Margin = 54.85%
Pre-tax earnings = $81,500
RONA = 5.4
Interest coverage = 2.25
Net revenue/bottle = $17.35
Valuation* = $1,318,500
* Assuming a EBITDA multiple of 9
![Page 19: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/19.jpg)
Worth the Effort?
• An investment of $20,000 generated an after tax return of $35,978; ROI = 180% in first year!
• By shifting sales from government stores to DTC, your winery keeps significantly more of the retail price.
• Incremental costs are fairly minimal, therefore most of the increased margin falls right to the bottom line
• In our example, this one change increased the value of the winery by over $370,000
![Page 20: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/20.jpg)
SUMMARY• Canadians are drinking
more wine• Bill C-311 should make it
easier for BC wineries to sell more wine DTC in other provinces
• The DTC sales channel is the most profitable for BC wineries
• Selling more wine DTC vs. Government stores improves profitability & ultimately value for BC wineries
![Page 21: Uncorking Provincial Borders](https://reader036.vdocument.in/reader036/viewer/2022062703/555326c5b4c905a7778b517d/html5/thumbnails/21.jpg)
Join the Conversation
Follow us on Twitter
@MNP_FoodAgPro
Tweet using the #MNPwine and keep the wine conversation flowing