LCBO Competition – an Oxymoron

Posted on February 10, 2013 by The Old Wineau

The LCBO hates being called a monopoly. Their marketing machine will swiftly counter that label by pointing to their wide and varied competition – the privately run Beer Store, wineries and distilleries and their 472 outlets, brew-it-yourself shops, and…well, I guess that’s about it. They’ll tell you that half of all beverage alcohol sales in the province are in private hands, in competition with the LCBO. Of course, this assertion puts paid to the notion that privatization would be a bad thing, since it’s already here, but that’s another story. The LCBO needs nominal competition so they can try to refute the notion that they are a monopoly but, since they are in any case a commercial business, what they really want to do is quash or at least stifle the competition in order to maximize their own sales and profits. Of course they won’t admit to this goal, at least not publicly, but in the end actions speak louder than words.

So how do they go about keeping a lid on the competition? Let me count the ways:

Expensive advertising. How often do we see glossy promotional flyers from the LCBO in our newspapers or mailboxes? And don’t forget the free and very attractive Food and Drink magazine. Then there’s radio advertising – now that’s not so expensive, but then neither is the glossy stuff because the LCBO makes its suppliers pony up for most of that cost anyway. For more details check out this article by Martin Regg Cohn in The Star.
The LCBO can open a new store whenever it likes, but they and the Ontario government ensure that the number of private winery stores is capped. Winery outlets can, however, be acquired, usually by big business buying out the boutique winery that owns the legacy retail licence. In any case, the cap on numbers is clearly not enough, because the LCBO recently announced that they are initiating a program to place LCBO “kiosks” in large supermarkets. That is precisely the space where we now see most of the winery outlets! The first ten locations constitute a pilot project with many more in the planning stage. This is not really a new idea – the LCBO has had agency stores for decades. There are now 214 of these “stores within a store”. They were originally meant to supply remote northern communities, but most of them are now located in the southern part of the province, as evidenced by this list. The only real change is that these kiosks will be in large supermarkets in large cities, rather than in small stores in small towns and cities.
I remember when you couldn’t get beer in the LCBO. Those times have certainly changed as more and more beer is available there, effectively taking business away from the privately run Beer Stores.
What about lesser known ways of buying alcohol? For example, Ontario residents can buy directly from the private importers, or agents, but those agents are handcuffed by the rule that they can only sell to the public in quantities of at least 6 bottles, and in practice only in full cases. The LCBO gets its usual profit in any case, but without all the overhead costs. The only way to buy (a few of) these wines in smaller quantities is through the Vintages Shop On Line program. Agents must meet sales targets and do the advertising/marketing. That effectively ends up as advertising for the LCBO because there is usually no competition for a given product in any case. Even LCBO promotions (see above) are paid for by suppliers. The agent also takes the hit if a product is discontinued and put on sale – 25% of the retail price comes out of the agent’s pocket.
You are also allowed to order a case of wine from another country or province if you order through the LCBO (but see the next point). However, you have to be willing to pay 3-4x the retail price in the country of origin! And that’s only if the LCBO is gracious enough to waive testing and the associated $175 fee. Importing can also take place through a wine club or similar organization, such as the Opimian Society.
Now we get to the most ridiculous impediment to freer competition – restrictions on the movement of wine from province to province. Only last year was the archaic post-Prohibition ban amended by Parliament, through Dan Albas’ Private Member’s Bill C-311. It creates an exception for:

“the importation of wine from a province by an individual, if the individual brings the wine or causes it to be brought into another province, in quantities and as permitted by the laws of the latter province, for his or her personal consumption, and not for resale or other commercial use.”

That sounds good – both carrying wine with you and placing an order (e.g. on line) appear to be permitted. The kicker is the phrase “as permitted by the laws of the latter province.” In other words, the province must be on board as well. So far, only BC, Alberta, and Manitoba appear to have acquiesced, according to Mark Hicken’s legal opinion. Ontario is resisting, of course. The same legal opinion suggests that silence implies tacit assent, but the LCBO has issued a statement contradicting that idea and limiting interprovincial “imports” to 1 case, brought in person only, not through ordering from a third party. In the end, it is unlikely that they would risk a legal challenge to their untenable monopoly situation by prosecuting ordinary citizens acting reasonably. A summary of the various liquor boards’ ultra-conservative viewpoints is given on the webpage of the Canadian Association of Liquor Boards.

A recent Harris-Decima poll found that an overwhelming majority of Canadians (82%) agree that they should be able to purchase wines from other provinces on-line. If you would like to explore this issue further, check out Free My Grapes.

Whether it’s the Beer Store, winery stores, agents, or private importation, the LCBO has implemented measures to limit or reduce their market share, i.e. to crush the competition. This is from an organization that already has a monopoly in sales of spirits and a near-monopoly in the sale of imported wines and beers. This is from an organization that, in tandem with their cousins the AGCO (The Alcohol and Gaming Commission of Ontario), is able to set the rules for its competition. What private business wouldn’t kill for that kind of power! This situation does not serve the consumer well and needs to be changed. Please let your MPP know what you think.

Is Wine Good for You?

Posted on January 13, 2013 by The Old Wineau

A pair of recent news items got me thinking about wine and health again. The first was the newspaper article based on a BBC radio series, stating that we should consume less than one drink per day for good health. On the flip side, we heard about the sad death of Serge Renaud, the man who gave the world the “French Paradox.” These two stories exemplified the often-heard and irritatingly conflicting opinions that a reasonable amount of wine is either good for us or bad for us. Well, which is it? And why can’t we get a straight answer? I’m going to try to answer these questions and clear away at least some of the confusion (but not all). I won’t be going into great depth about the many scientific studies relating alcohol consumption to a whole host of human diseases and conditions. There are many good reviews out there, including an excellent article by Rusty Gaffney in his Pinotfile newsletter, and the meta-study Alcohol and Cardiovascular Health, published in the Journal of the American College of Cardiology in 2007. In addition, you can find a good review of the subject by Chris Kissack and Jamie Goode in wineanorak.com.

Now, why does the research community continue to come out with such conflicting and confusing results? I see several reasons for this situation:

The first issue is what statisticians call confounding, where there are factors at play that are not the focus of the research. It is very difficult to take into account all influences on the relationship between alcohol and health. Some possible confounding factors include smoking, eating patterns (including whether or not alcohol is taken with a meal), physical activity, age, gender, ethnicity, dietary supplements, rate of ingestion, pharmaceuticals, and the local environment. An ideal statistical study is carried out with a population in which all confounding factors are controlled, where the study is “double blind” (i.e. neither the experimenter nor the participant knows who is getting the tested treatment and who is getting a placebo), and where it is randomized, i.e. who receives the treatment or the placebo is randomly selected. Now, double blind is almost impossible with alcohol – we can usually tell whether or not a drink contains it! And it is very difficult to control the confounding factors. One partial solution is to do a meta-study, where researchers look at all the relevant studies and statistically synthesize them so that there is a larger, more significant population, and more confounding factors can be addressed. One example is referenced above; another is the paper by Castelnuovo et al. from the journal JAMA Internal Medicine in 2006.
A related problem is self-reporting. Since a double blind study is difficult, most research relies on participants in a study reporting their own alcohol consumption. If there were only random inaccuracies, then the problem would be minor. However, what has been found consistently is something statisticians call a systematic error, an error that tends in one direction. In this case, the problem is under-reporting. It seems to be human nature to minimize the amount of alcohol consumed, both in terms of the number of drinks and the size of each drink. In principal, this phenomenon should mean that the consumption limits for good health are actually higher than study results suggest. In practice, drinkers who try to follow guidelines will still often indulge themselves with a bit more to drink than they are admitting to themselves, so for the most part, the bias probably cancels itself. In addition, scientific studies rely on a standard drink, set in the US to be 17.7ml or 14g of pure alcohol. This is equivalent to one 5 ounce glass (just under 150ml) of 12% wine. However, an individual may pour more than 5 ounces and call it one drink, or the wine may contain more than 12% alcohol (very likely these days).
There is also the problem of the typical study that focusses on only one outcome, or at best a small set of related outcomes. A prime example of this phenomenon turned up in 2011 when it was found in a report from the Nurses’ Health Study that even fairly small amounts of alcohol increased the chances of breast cancer. I’ve placed the data on the following graph. Notes: (1) alcohol intake was averaged over 28 years; (2) the alcohol intake in the paper was grouped into ranges – I have plotted the average of the range, except for the >30g/day range, where I somewhat arbitrarily chose 40 to be representative.
Dependence of breast cancer risk on average alcohol consumption, derived from the Nurses’ Health Study (JAMA 306, 1884 (2011)) over a 28 year period. The straight line is fitted to the data and yields a 12% increase in risk for each 10g/day consumption, similar to the value of 10% per g/day obtained from statistical analysis by the authors of the paper.

These results created a mini panic with the press enjoining women to limit their alcohol intake to a fraction of a drink per day. Some analysis of the numbers gives a different picture. Breast cancer causes 13.7% of cancer deaths in women and cancer is responsible for 12.5% of all deaths in women. Therefore breast cancer causes 1.7% of women’s deaths. An increase of 33% in breast cancer mortality (for 2 drinks per day) works out to an overall mortality increase of a negligible 0.6%. Yet no one took into account the benefits of alcohol consumption to other areas of health. The best established positive effect of wine consumption is improvement in cardiovascular health. Since heart disease is a much more frequent killer of women than breast cancer, the resulting improvement in longevity from better heart health easily offsets the small increased risk of breast cancer. This brings me to a key concept: the J-curve.
If we plot relative risk of mortalilty (over some fixed period of time) against alcohol consumption, then the relationship usually turns out to look roughly like the letter J, i.e. a J-curve, where risk drops rapidly for low consumption and then turns around and rises as consumption increases. An example is shown below, where I have summarized some of the results from the meta-study by Castelnuovo et al.

Fitted relationship between alcohol consumption and risk of mortality. Risk is rapidly reduced for very low consumption and then rises, reaching the non-drinker (baseline) risk at ~2 drinks per day for women and ~3 drinks per day for men (a standard drink is considered to contain 14g of alcohol).

Women react to alcohol at lower doses than men, due to lower average body weight and a slightly reduced ability to absorb alcohol. This type of J-curve illustrates the collective effect of a host of conditions, at least those that affect longevity. It does not say anything about mechanisms. There is a lot of consensus now that it is the alcohol that is mainly responsible for health improvement, through the enhanced production of desirable HDL cholesterol at the expense of LDL cholesterol and through inhibition of blood clotting. The possible additional benefits from wine, especially red wine, may arise from compounds called polyphenols, of which resveratrol is the most interesting. There is, however, still a lot of contradictory evidence with regard to resveratrol.
One possible contributor to the confusion over the benefits of alcohol consumption is the medical mantra “Do no harm.” This fundamental dictum is highly worthy, but can cause problems when medical practitioners don’t look at the whole picture. If an isolated negative effect is observed (e.g. with cancers, as in the breast cancer report discussed above), then the behaviour is considered undesirable. Instead a holistic approach is required where benefits and drawbacks are considered together. I should add that most researchers understand this point well, but front line health care workers and the press may not always be provided with the whole picture.
There is one last point that I would like to emphasize since it is often neglected in discussions of alcohol and health. How does the rate of consumption, and in particular the slower consumption rate with food, change the effects of alcohol? It is fairly well established that binge drinking, that is consuming five or more drinks at a time and then skipping for a few days, is very unhealthy compared to the same amount of alcohol spread over several days. That difference occurs because the liver can only metabolize alcohol at a fixed rate; the rate varies significantly from person to person but one half drink per hour is a good working number. However, before alcohol is metabolized, it must first be absorbed, i.e. passed from the digestive tract to the blood. It is alcohol that has been absorbed but not metabolized that causes problems. At least one study has shown that a meal eaten with alcohol not only resulted in a 35% reduction in peak blood alcohol content, but it also took 36-50% less time to metabolize the alcohol. Perhaps this result explains why wine sometimes appears to be more beneficial than other drinks. Since it is much more often taken with food, wine drinkers may be in effect getting a lower dose. More research in this area would be very welcome.

So what can we conclude from all this? These are my thoughts:

Don’t take up drinking if you are currently an abstainer. There is universal agreement on this point.
Don’t binge drink.
Do drink with food.
If you are looking for the maximum health benefit from alcohol, drink only small amounts, say half a standard drink or less.
If you wish to enjoy your good wine, and still be at least as healthy as non-drinkers, stick to 2-3 drinks per day (for women/men respectively).
Finally, it might be speculated that if your drinking consists almost entirely of a fine wine with dinner, then the limits may be more relaxed, but there is not yet enough direct evidence to support this enticing possibility.

Private Affairs

Posted on December 28, 2012 by The Old Wineau

I find that there are two connotations of the word “private” when applied to the LCBO. First, there are the continuing calls for privatization of the LCBO’s business. In fact, it seems to be routine for every political party to call for privatization while in opposition. Right on cue, we have recently heard that familiar call from the Conservative party. However, as soon as a party takes over the government, the idea is always dropped. The closest we came to anything happening was in 2005 when the government of the day set up a blue ribbon commission to study and recommend the best future direction for the beverage alcohol business in the province. The unanimous recommendation of the panel was for full privatization, so naturally the report was put on ice and any further discussion was quashed. Since it was no longer up for public discussion, it effectively became “private” as well (the second connotation of the word). Fortunately, the report is still available for perusal on line. So, let’s take another look at the report and the panel’s recommendations in more detail and try to get a better idea of what the options might be.

There were four members of the Beverage Alcohol System Review Panel (BASRP), none of whom had any financial interest in the industry. The chairman was a former Vice-Chair of the LCBO, so its workings were well understood. The other members were a former Commissioner of the OPP, a corporate CFO, and a senior banking executive. Therefore the major concerns of social responsibility and revenue generation were also well represented. The terms of reference were to undertake a broad review of the beverage alcohol system and recommend how to get better value for consumers and government. Any recommendations had to maintain or enhance each of these five factors:

Socially responsible storage, distribution, sale, and consumption;
Convenience, variety, and pricing for the customer;
Value to the taxpayer;
Reuse and recycling;
Promotion of Ontario products.

In order to fulfill their mandate, the panel members began by studying options from many other jurisdictions in Canada, U.S., U.K., Australia, and New Zealand, alongside an operational analysis of the present system in Ontario. Then they put this information together to identify a number of viable options for Ontario. Each of these options was subjected to analysis, both qualitative and quantitative, as well as risk analysis. Five options were identified as the most promising and one was unanimously selected as the final recommendation. The five options are described in the following table:

Option	System	Description
1	Licensing	Retailers and wholesalers are licensed by public sale for five year periods, and pay an annual fee; Limit the number of retail outlets; Set a minimum price level.
2	Retain/Improve	Status quo with improvements recommended by an operations review
3	Divestment	Sell LCBO assets to a non-profit beverage alcohol authority (monopoly) or through a public offering
4	Joint Venture	LCBO, BRI, and winery stores merge into a single organization
5	Competition	Private retailers and wholesalers are licensed while the LCBO, BRI and winery stores remain in business in direct competition

Now I’d like to look at the advantages and disadvantages of each of these systems, especially in terms of the five factors (listed above) that need to be maintained or enhanced. I’m going to skip a discussion of social responsibility and recycling since both of these can be handled by legislation and enforcement policies that are essentially independent of the distribution and sales model. The focus is really on value to the customer and value to the taxpayer, with a nod to access to Ontario products. A summary is provided in the next table, following which I’ll elaborate on some of the most interesting or controversial points (Note: in this table the advantages are in bold while the disadvantages are in italic).

System Option	Value to the Customer	Value to the Taxpayer	Access to Ontario Products
1 - Licensing	Improved price and selection through competition; Limits on number of retail outlets may limit specialty retailers; Minimum pricing policy may limit consumer advantage.	Increased revenue (est'd. $200M/year); Removes operational and investment risks from having government in the retail business.	Improved access to the system for small producers.
2 - Retain & Improve	No improvement and prices may even rise.	Politically easy - no disruption; Potential for increased revenue through reduced costs and increased prices; Government remains in retail with associated risks and investment requirements.	No improvement.
3 - Divestment	No improvement in competitive landscape, pricing or convenience.	Big chunk of change for the government; But, payment is one-time only; Government remains in retail with associated risks and investment requirements.	Uncertain pricing and access for small producers.
4 - Joint Venture	No improvement in pricing or convenience; Competition landscape even worse that at present.	Rationalization of store locations and product offerings, providing operational efficiency; Government remains in retail with associated risks and investment requirements.	No improvement.
5 - Competition	Increased competition; Improved pricing, selection, and access.	Increased government revenue; Complete restructuring not required. Profitability of LCBO uncertain as competitors would have much lower operating costs and LCBO cannot easily transform its very high cost structure; Government remains in retail with associated risks and investment requirements.	Improved access to the system for small producers.

The only two options that are advantageous to the consumer are 1-Licensing and 5-Competition (which includes licensing but does not eliminate the LCBO). I have always been a proponent of the Competition option because it seemed to provide the best of everything. Perhaps that was at least in part because I was tired of hearing the LCBO constantly telling us how good they are. If they are so superior, then there should be no problem permitting competition because the LCBO would just grind their competitors into the ground! Now, however, I have been set straight by the BASRP. They assert that the LCBO cost structure is so heavy, with gold-plated stores and unionized staff being paid top dollar for stocking shelves, that they would fold under the pressures of real competition. This drives home the point that the government should not be in the retail business in the first place.

The recommended option is Licensing. In this scenario, the government sells off the LCBO’s physical assets and then auctions licences to private concerns for the right to retail or to wholesale beverage alcohol. Because the licences would expire after five years and bidding would again take place, and because there would also be annual fees, the panel estimated that the LCBO would net $200 million more than they currently make. That was in 2005 so the figure would likely be higher now. The two most important requirements, consumer value and taxpayer value, are both satisfied. Now, in order to deal with the other requirements,especially social responsibility, the panel does suggest imposing some restrictions.

First, they propose an upper limit on the number of retailers allowed, both within a region and within the province as a whole. This idea is intended to allay concerns over social responsibility, as they claim that fewer retail outlets reduce consumption. However, their own data does not appear to support that claim. The following graph plots consumption/person/year versus population per retail outlet for many of the external jurisdictions that were studied. If the claim were true, then the data should show a clear drop moving from left to right. In fact, the data fall into three groups.

Dependency of alcohol consumption on number of retail outlets. Greater population/outlet means fewer outlets (right end of axis). The data fit into three general groups but there is no overall trend.

The data fall into three main groups. Group 1 (Iowa and Quebec at the bottom, UK and Australia at the top) shows the opposite trend to what might be expected – this trend likely has more to do with cultural differences than with access to supply. The bulk of the jurisdictions (several US states plus New Zealand) fall into Group 2 where there is no discernible correlation. Finally, Group 3 (all of which are Canadian provinces) shows relatively low consumption rates but almost no dependence on accessibility. In fact, government controlled Ontario, at 760,000 people per access point, had the same consumption rate as the fully private system in New York state, at 95,000 per access point. Once again, the position of Group 3 on the graph is likely a result of culture (since they are all the same country) rather than any direct correlation. All in all, there does not appear to be a strong reason for limiting the number of retail outlets. But, if that helps with making a change in the system politically palatable, then OK. It’s something that can easily be fine tuned at a later date.

The other important restriction is to set a price floor. This is trickier. Like it or not, it is perfectly reasonable for a licensing body to restrict the number of licences. However, price control of private industry is another matter entirely. Now, if there is a flat minimum price in order to prevent a lot of “two-buck Chucks” from appearing, then the situation is not too bad because that is the market space where cheap booze could be an issue. But if it is the markup that is regulated, then it’s a different problem. Then there is little chance for price competition, case discounts, and sale prices, even for premium products where mass market over-consumption is much less of a concern. Value to the consumer is significantly impaired.

Still, even with these flaws, the recommendations of the BASRP would be a huge improvement over the current situation. Let’s put these proposals back on the table. Let your MPP know what you think, for example through MyWineShop.ca. Turn this private affair into a public discussion.

What Goes Around Comes Around

Posted on December 2, 2012 by The Old Wineau

One of the most significant trends in the winescape over the past few years has been the movement to “natural” wines. Since two interesting books on the subject have published within the past year or so, I thought it was worth taking a closer look at the phenomenon and even attempting to understand what it’s all about. The two books, by the way, are “Naked Wine” by Alice Feiring, and “Authentic Wine”, by Jamie Goode and Sam Harrop. Right away you can see one of the problems – nobody agrees on a common name for the style, partly because no one seems to be able to come up with a universally accepted definition. It’s one of those wine terms like “terroir” that everyone understands but no one can clearly define. But what the hell – here goes…

It’s easier to say what natural wine is not than what it is. In general, human input is limited to the minimum necessary to obtain the desired fermented grape juice. It is not over-ripened, over-extracted, or over-manipulated. None of the 60+ additives permitted (e.g. in the U.S.) is used except for some sulphur, but even that is controversial – more on that subject later. These precepts apply both in the vineyard and in the winery, so natural wine is not equivalent to organic wine, although organic or biodynamic principles are generally applied. Naturally occurring yeasts create the alcohol. In a nutshell the modus operandi is “nothing added, nothing taken away.” Now, of course, some input from the winemaker is required because if you simply leave a bucket of grapes out in the barn, you will eventually end up with very expensive vinegar. There is crushing, possibly destemming, pressing, selection of fermentation tank, temperature control, pigeage or batonnage or not (usually not), allowance or suppression of malolactic fermentation, barrel aging, filtering (usually avoided), fining, and use of sulphur. Now you see the problem with the term “natural” and why the search is on for a better handle. In a way, this movement returns to the more traditional practices of the past (hence my title for this post) but employs ultra clean techniques (not always so traditional!)

There is a lot of upside to natural wines. Because manipulation is minimized, they tend to reflect the terroir much more accurately than “modern” wine making. Over-ripeness, over-extraction, overuse of new oak, and a lot of other “overs” are avoided so that these wines are typically more food friendly. The avoidance of pesticides, other vineyard treatments, and additives in the winery is appealing to adherents of the local/organic/slow food movements. On the other hand, casual wine drinkers are often put off by the idiosyncratic, even “funky” flavours that can develop. Most of all, the wines tend to be fragile, not handling temperature variation or travel well. This characteristic arises from the minimalist use of sulphur.

Hard core natural wine producers use no sulphur at all, while others add a little at bottling to make the wine more robust for travel and storage. As a reality check, it should be noted that the Demeter organization (the most recognized authority for biodynamic practices) permits up to 110 ppm for red wines and 140 for white wines, not a lot below the EU standards of 160 and 210 respectively. Now the majority of natural wine producers are small scale farmers whose product does not travel far from its place of origin. Thus there is far less stress placed on a somewhat unstable chemical soup. Therein lies the main reason why so many wine lovers rhapsodize about the authentic terror-driven wine they tasted with the winemaker on site, while critics further afield are often much less enthusiastic as they focus on the major faults that they find. In fact, Robert Parker famously called natural wine “one of the major scams being foisted on wine consumers.” (Note that no one provides a reference for that quote – I haven’t been able to turn it up with a quick scan through my back issues of the Wine Advocate. Does anyone out there know?) On the other hand, one of Parker’s contributing critics, Neal Martin, states that he has “adored, indeed occasionally worshipped the wine of López de Heredia”, one of the most famous traditional, and in fact natural, wine producers in the world. And so the controversy continues – for a fairly recent take on the issue, have a look at Eric Asimov’s January 2012 article in his New York Times column “The Pour”.

So how do we get a chance to try natural wines and form our own opinion without needing to travel to the source every time? Well, it’s not easy in Ontario where the LCBO emphasizes big fruit-driven, often highly-manipulated wines. To provide some contrast, a couple of months ago I researched through books, magazines, and websites and made a long list of some 1667 wines from 361 natural wine producers worldwide, with the majority being from France. I then looked through the on-line listings for both the LCBO (Ontario) and the SAQ (Quebec). There were 117 of the wines available in the SAQ, and just 46 in the LCBO (shame!) However, at least there are some possibilities. Therefore I recently gathered with some friends to taste a few of them and the results gave me reason to be optimistic.

Some of the earliest natural wine producers came out of Beaujolais, so that’s where we started. From time to time the LCBO carries wines from Terres Dorrées, one of the most respected producers in Beaujolais. We had a 2010 Morgon and compared it with another 2010 Morgon from Jean-Ernest Descombes, who operates under the Duboeuf umbrella and therefore employs a more modern style. The tasters were divided as some preferred the spicy fruit-forward nature of the Descombes, while the majority voted for the Terres Dorrées, which was more complex, slightly earthy, and exhibited better balance. Everyone agreed that it was the better bet as a food wine.

A much more dramatic contrast was provided by a pair of 2005 Riojas. One was the Viña Cubillo from the aforementioned R. Lopez de Heredia while the other was a Maetierra Dominum Quatro Pagos. Maetierra Dominum is an ultra-modern organic winery that employs Michel Rolland as a consultant, so it was expected to provide a nice contrast to the ultra-traditional Lopez de Heredia. In fact, the contrast was striking, right from the colour. The Maetierra was black, while the Heredia was a translucent garnet. There was lots of oak, vanilla, and fruit in the Maetierra while the Heredia was complex, slightly oxidized, medium bodied, and dense with interest, not pigments. Tasters were split on which they liked best, but again the votes went to the Heredia when potential food pairing was the main criterion. The overall impression was that the Maetierra could have come from anywhere, while the Heredia could only have come from Rioja.

I should also recommend another good natural wine that the LCBO has stocked in the past – Montirius Le Clos Vacqueras. There was still some available as of the date of this post, so pick up a bottle and compare with one of the more conventionally produced Vacqueyras. The bottom line is: if you want to learn about natural/authentic/traditional/naked wine, the best way is the usual way – try them and make up your own mind.

The Select Few

Posted on November 6, 2012 by The Old Wineau

In an earlier post, I promised that I would make the effort to say some good things about the LCBO. So here is my list (although some items still have qualifiers…oh, well):

There is a reasonably wide selection from all parts of the world with no one region or country especially favoured, in contrast, for example, to the preponderance of French wines in the SAQ (Quebec). Of course, this even-handedness even extends to Ontario and other Canadian wine, which is a bit odd. Imagine a wine shop in Bordeaux not having a comprehensive Bordeaux section!
Continuing with the Bordeaux theme, the LCBO provides good access to Bordeaux futures, with only a 25% deposit, compared to the 100% demanded elsewhere (e.g. in the U.S.)
Thorough technical testing and a generous take-back policy ensure that very little contaminated or adulterated wine appears on the shelves. On the other hand, the take-back policy is only generous to the customer. The little-known requirement making the supplier pay back the full retail cost on returns is unconscionable (look here to see how the LCBO instructs agents to pay for all costs associated with “defective” product).
Food and Drink magazine, at least from a consumer viewpoint, is a well put-together publication, although it is bad news for the rest of the magazine publishing industry, who must put up with a subsidized competitor.

All right, with that out of the way, let’s get on with this post, in which I want to take a closer look at point number 1 – selection. In order to get a better feel for the breadth of the selection at your neighbourhood LCBO, try these experiments the next time you cross its threshold:

Ask to see the Vintages German wine section. You’ll likely only find a couple of bins. After years of suffering through post-Liebfraumilch trauma, German wines, and Riesling in particular, are finally experiencing a renaissance in most of the wine-drinking world. Try telling that to the LCBO. German wines don’t fall into their wine world view of massive overextracted “blockbusters” that earn 90+ points from all the “right” critics.
Now try to get a decent half bottle of wine. For a real laugh, look for a half bottle of good German wine!
Next, let’s say there is a claret or a Chianti Classico that you find you really enjoy. Try to find a vintage other than the current one in the store. In fact, in the regular listings section, wines are not catalogued by vintage. As the vintage changes, the CSPC does not – they don’t care. For the LCBO, wine is a commodity – after all, the SKU on a light bulb doesn’t change from year to year.
For an additional whimper, visit your neighbourhood delicatessen or other specialty food shop. In Europe, in many parts of the USA, and in most of the rest of the civilized world, that shop would include an inviting wall of fine wines to accompany the excellent breads, cheeses, sauces, and charcuterie…sigh. Unfortunately, we’re stuck with a monopoly. Yes, private specialty stores would add immeasurably to the selection of wines available to the Ontario consumer, but privatization is a whole other topic that I will address in a later post. In the meantime, it is still relevant to this discussion.

So why is the selection at the LCBO so inadequate? Or is it? After all, the management will try to tell you how many thousands of separate listings they have in order to prove they have a wide selection. But that’s equivalent to a ladies’ wear shop telling you that they have a large number of distinct items of apparel, so you’ll find everything you ever want in their shop and you should never need to enter another store. In other words, the biggest and most obvious reason is: it’s a monopoly. Their selection would be laudable if they were simply one chain competing against many other shops and chains with their own selections and specializations. But, outside of Ontario winery stores, those don’t exist.

However, the study of economics tells us that it is possible for monopolies to provide us with a very wide selection. Competitors generally focus on the high volume, high profit lines to stay in business and may ignore small volume specialty products and their niche markets. A monopoly, on the other hand, can afford to stock a wide range of products satisfying all markets. Satisfying niche markets will actually increase their revenues and profits beyond the high runners. In an attempt to be somewhat even-handed, I should say that you can, in fact, see evidence of these trends in the Canadian wine retailing business. In Alberta there are periodic complaints about the lack of selection in many shops, although there are also high quality retailers in the major markets. On the other hand, the LCBO monopoly does broaden its market appeal through its Vintages section. Now they could do a lot better if their own policies and practices didn’t hold them back.

One example is the requirement that any one wine must be acquired in sufficient quantities to be made available throughout the province, at least at the level of Vintages locations. That practice sets a lower limit on quantity and effectively shuts many of the small quality producers out of the Ontario market. There is a solution to this problem – allow Product Consultants to list wines (and other products) in their own store up to some maximum value (e.g. 5-10% of their Vintages Corner budget). These wines could come from agents’ stocks, or there could be a modest budget to allow PC’s to travel once or twice a year to wine regions and to make their own selections. These wines would then go through a process similar to that undergone by any private importer to ensure that they meet LCBO standards. This procedure would also see more limited production Ontario wines make it to the store shelves.

Let me toss out another issue that affects selection. The LCBO seems to be fixated on highly manipulated fruit-forward wines and tends to play down the more terroir-driven food-friendly wines that are making a comeback elsewhere. I have some evidence to support that statement as I recently put together an extensive list of producers of so-called natural or authentic wines (at least those that have some visibility internationally). I came up with 1667 distinct wines from 361 producers. Then I checked for availability – only 46 wines were listed with the LCBO while 117 could be found at the SAQ. Oh well, at least we can now transport wine legally across provincial borders! Check out Free My Grapes.

In the end, the only real solution will be private competition. Don’t hold your breath.

Good Old Wine

Posted on October 25, 2012 by The Old Wineau

There’s too much in my cellar. I’m finding, like many a cellar owner before me, that some of my cherished wines are over the hill. I keep making a resolution to drink up all suspect bottles a.s.a.p., but then the next LCBO release comes out and there are six or eight that I would like to try. And because my favourites never seem to last very long on the shelves, I need to pop those corks fairly expeditiously – if there is something that I just have to have for my cellar, I must get back to the store while there is still a supply remaining. Now you begin to see the problem. Since this process repeats itself every two weeks, there isn’t much time to drink the old stuff, and of course I may even exacerbate the problem by grabbing a half dozen Barolo that I loved out of the last release, thereby restocking the cellar.

Bottles aging in the cellar but begging to be enjoyed

Anyway, that’s all prologue to my main topic. As I sniff and swirl wines that I laid down a decade or so previously, I find some gems and some dross, but the results don’t seem to correlate particularly well with expectations for aging potential. So what’s going on?

It would be easy to blame my cellar, since it is not a $50,000 climate controlled work of art. It’s just a small room in the corner of my basement with passive climate control; i.e. the ceiling, interior walls, and upper exterior walls are insulated, but the floor and lower exterior walls are not. The result is a gentle and steady transition from 19-20°C in midsummer to 13-14°C in midwinter. The average, then is 16-17°C, not ideal, but not bad. I would expect slightly faster aging than in a cellar constantly at 13°C, but that’s about all. Of course it’s dark and there isn’t much vibration – our house sits on bedrock. In any case, I regularly uncork beautifully aged examples – if the storage conditions were very bad then I would expect most of them to be over the hill early. So what gives?

One possibility is that some wines are not meant for long aging in spite of traditionally falling into such a category. Even classified Bordeaux can lull you into a false sense of security. Here vintage is all important. I recently opened a 1995 Ch. Calon-Ségur that was fully mature and drinking beautifully – 1995 was a good year for aging. On the other hand, my 1994 Ch. Pichon Longueville Comtesse de Lalande has never really come into its own. The wine was as well reviewed as the Calon-Ségur at the time of release, and Pichon-Lalande did a great job in 1994, but that was not a great year. In the long run, no amount of good work in the cellar and the vineyard can make up for that initial handicap.

Terroir makes a big difference as well. Burgundy, both red and white, is well regarded for its longevity, but when you take Chardonnay or Pinot Noir away from home, they don’t last as long. Even good Chardonnay from California tends to fade fairly quickly, while pricey Ontario Pinot Noir is losing it after three or four years. In both these cases, however, there are signs of improvement. In particular in Ontario vines are getting older and local techniques are adapting to local conditions. You still have to keep a close eye on Pinot from the newer Prince Edward County DVA as a lot of it isn’t really cellar-worthy yet (although I keep trying!) On the other hand, examples from Niagara’s Le Clos Jordanne seem to be just coming into their own after several years in the cellar. Even with the poster child for lengthy aging, Cabernet Sauvignon, terroir makes a difference, but in a more subtle way. There is no longer much doubt, for example, that Napa Valley Cab can age as long as a good Médoc, but in a rather different way. While Bordeaux evolves in bottle into something that (we hope) is completely different from and transcends the young wine, the Napa stuff can maintain its fruity elegance for decades, but always resembles its younger self. Even a ham-fisted amateur winemaker like me can make age-worthy wine with good Napa starting material. A recent bottle of my 1996 was fresh and fruity – maybe I should not have stopped making the stuff…

A number of factors affect aging of wine (for more information, look here): the grape variety, the terroir (here I include local viticultural and winemaking practices), the vintage, and the cellar conditions. Each has an influence on the wine’s chemical constituents, which is what really counts in the end. Higher concentrations of acids, sugars, and phenols (including tannins) all increase longevity. The hundreds of chemical compounds in wine, especially the aromatics (mostly esters, terpenes, and mercaptans) as well as phenols, affect flavour evolution as their concentrations increase or decrease with time. The bottle stopper also affects the aging process, but I’m not uncorking that can of worms today – you can read more about the latest on the relationship between closures and “reduction” here.

So how does this all relate to my cellar experiences? I think there are at least two lessons to be learned. The first is to check on your keepers fairly often and then drink them as soon as they seem ready. The second lesson is to drink sooner rather than later. Wines are generally more enjoyable when they are a couple of years young rather than a couple of years too old. If you want to keep a bottle or two out of a case for posterity or to see how a particular wine fades into old age, fine, but if, like me, you love about wine because you love how it enhances life, then drink it, don’t collect it.

The Legacy of Prohibition

Posted on October 18, 2012 by The Old Wineau

Ontario suffered under the Ontario Temperance Act (“prohibition”) from 1916 to 1927. Although it was repealed over 80 years ago, its legacy is still with us. Repeal was not a reaction against temperance, since that concept still informs much government thinking. Instead it was a realization that the province could reduce expenditure (by eliminating all that crime arising from selling and drinking alcohol) and increase income because of the vast profits to be made by assigning the retail role to itself. What has been the legacy of that period and that transition?

A mass of information can be found at puncheddrunk.ca. One interesting point that you may not know is that, until 1975, the Ontario government tracked every person’s every alcohol purchase through the purchase order forms that each customer needed to fill out to buy alcohol at the LCBO. If Big Brother felt that you were buying too much, you were cut off from all purchasing, province wide. These surveillance forms were only phased out with the advent of self-serve stores in the late 1970’s.

Moving on to the present, my view on the current situation is as follows:

The government’s schizophrenic approach to temperance encourages a public attitude that alcohol is just a little bit naughty. As a result, over-consumption becomes a goal for younger consumers. The more mature approach would be to treat consumption as a component of everyday life where, for example, wine is an integral part of a good meal and a picnic in a public park can be accompanied by a picnic wine. Prohibitions should not be placed on alcoholic beverages themselves, but on the misuse (drinking and driving, drunkenness leading to violence, etc.);
All alcohol is equally demonized. Although the main impetus behind Prohibition was to curb the drunkenness arising from the consumption of whisky in saloons, the result was that beer, cheap wine, fine wine, cheap whisky, fine single malts, and fine cognac were all tarred with the same brush. Other jurisdictions (e.g. Quebec) have recognized the differences by, for example, allowing private beer and wine sales;
Prices are artificially high. It was recently disclosed in the Ontario Auditor General’s Annual Report that the LCBO sometimes encourages its suppliers to charge higher prices to the LCBO than to other customers so that it can maintain artificially high retail prices and thereby maintain the guise of “social responsibility.” This revelation has slid off the Teflon LCBO like water off a duck’s back because the government figures that it is in their interest not to interfere with or reprimand the LCBO in any way at all in case profits should be affected;
Prohibition is clearly alive and well in the guise of several legislative attempts to place warning labels on all alcoholic beverage containers. In this case, however, kudos to the government for resisting the pressure. Such an effort is superfluous nowadays as anti-drinking-and-driving campaigns and informational campaigns about the effects of alcohol on pregnant women have achieved universal and very public awareness. For the consumer, the downside isn’t really the additional expense per se, as trumpeted by the beverage industry. Instead, such legislation further solidifies the hold on the industry of large (often multinational) companies that can easily handle the label modifications and that have the ear of the government. Conversely, it marginalizes the small quality producer, whose product is generally used in exactly the kind of way that should be encouraged, i.e. as an integral part of a good meal.

Even in the United States, the former poster child for Prohibition, most states have decided that consumers of alcoholic beverages may actually be adults. Wine is sold privately, sometimes even on sale or with case discounts, and you can enjoy a rosé with that picnic in the park. The LCBO’s paternalistic attitude should be treated as the anachronism it is, with no place in our modern cosmopolitan society. There is plenty of legislation in place to deal with misuse of alcohol: by all means keep alcohol from young children, but don’t treat all adults as children too!

For more on this subject, you might want to take a look at this article by Connie Woodstock.

The Best of Prince Edward County

Posted on October 9, 2012 by The Old Wineau

Vineyard at Long Dog Winery

Prince Edward County (known by locals as “the County”) may be Ontario’s newest wine region, but its wines have grown up a lot since the first all-grape winery (Waupoos Estates) opened its doors eleven years ago. Viticulture was further kick-started by the tireless efforts of Geoff Heinricks to promote the County as a cool climate region and to educate prospective grape growers about the terroir. Then the Prince Edward County Winegrowers Association was formed and they were off and planting. The region has now established itself as a distinct Ontario DVA, boasting over 30 wineries and nearly 300ha of vines.

The land itself can be described as a giant slab of fractured limestone with a dusting of one sort of overburden or another. When you enhance that terroir with a cool climate growing season (similar number of degree days to Burgundy), you can understand the excitement, especially for northern grapes like Pinot Noir, Chardonnay, Melon de Bourgogne, Riesling, and Cabernet Franc.

Winery at the Grange of Prince Edward

This excitement has manifested itself in lots of press coverage. Reviews continue to appear with regularity and by all reports the wines are improving, even if they are a bit overpriced, by and large. However, very few writers have come up with a ranking of overall winery quality, although Bill Zacharkiw has taken a small stab at it. So I thought I would take the plunge and present my personal view on the best of The County. My criteria are: (1) they have been releasing wine long enough to have a reasonable track record; (2) the wines are good across the board with no stinkers; and (3) their portfolio should include one or more of the best individual wines of The County. In no particular order, my County “Grands Crus” are:

Rosehall Run (winemaker Dan Sullivan), particularly good for Chardonnay and Pinot Noir;
Norman Hardie (winemaker Norman Hardie), best for Pinot Noir;
Closson Chase (winemaker Deborah Paskus), best for big-ass Chardonnay;
Long Dog (winemaker James Lahti), good for Pinot Noir and Chardonnay*.

*Provisional, pending more data on how well Long Dog wines last. Most PEC
wines do not yet age particularly well, but Long Dog is more problematic because
of their use of plastic corks. I tried a 5 year old (2007) Top Dog Pinot Noir recently
and it was not as good as I had expected. However, I am not removing Long Dog
from the list yet because they are so good when young.
I just wish they would switch to cork or screwcap.

You may have observed the dominance of Pinot and Chardonnay from the best producers in The County. That trend confirms the Burgundian nature of the terroir with limestone soil and a cool climate. Now, there are also wineries that are producing good stuff, but don’t have a long track record. The “Ones to Watch” are:

Stanners (winemaker Colin Stanners), best for classic Pinot Noir as well as Pinot Gris;
The Old Third (winemaker Bruno François), only makes Pinot Noir;
Keint-he (winemaker Geoff Heinricks), best for Pinot Noir;
Hinterland (winemaker Jonas Newman), all sparkling, best for Les Etoiles and Rosé;
Lighthall (winemaker Glenn Symons), best for Chardonnay;
Exultet Estates (winemaker Gerry Spinosa), best for Chardonnay and Pinot Noir.

Then there are the following wineries producing generally Good Quality Wine that on occasion can excel:

Huff Estates (winemaker Frédéric Picard);
By Chadsey’s Cairns (winemaker Vida Zalnieriunas);
The Grange of Prince Edward (winemaker Adam Delorme);
Karlo Estates (winemaker Richard Karlo);
Redtail (winemaker Gilbert Pronovost).

Finally, where are the Good Value Wines? Well, wine growing in the County is intrinsically difficult, low yield, and expensive, so don’t expect a lot of bargains. However, there are a few wine growers that produce decent quality at reasonable price. The most noteworthy are Rosehall Run, Huff Estates, By Chadsey’s Cairns, The Grange, and Sandbanks Estate Winery (winemaker Catherine Langlois).

Wine and accessories shop at Huff Estates Winery

Of course, many of the wines from these producers are unavailable at the LCBO, since they don’t produce enough quantity for the whole province (at this point we all wistfully wish for some private niche retailers and then we wake up to reality). Wineries with a presence at the local monopoly (at least some of the time) include Rosehall Run, Norman Hardie, Closson Chase, Huff Estates, The Grange, and Sandbanks. Otherwise, you can try them at the winery, at some restaurants, and by ordering from the winery websites.

For a complete list of County wineries, take a look at one of these sites:
Wikipedia article on PEC wines
County wines official website
Wines of Canada (PEC page).

Mission LCBO

Posted on October 4, 2012 by The Old Wineau

I’ll have a lot to say about the LCBO in future – some of it is even good! But first it’s worthwhile to try and understand why it is here at all and what it is trying to do. The Liquor Control Board of Ontario (the quasi-monopoly responsible for retail alcohol sales in Ontario) was formed after the repeal of the Ontario Temperance Act (“Prohibition”) in 1927 – more about that in future. That’s why “Control” is so prominent in the name. Surely that’s all changed after more than 80 years! What is their mission now? I’ll bet very few of you have any idea what it might be, in part because it’s so contradictory. While they still have the mandate to control and restrict the sale of alcohol, they are also a major retail organization with the need to maximize sales and profits. According to the LCBO website, its mission statement is:

“We are a socially responsible, performance-driven, innovative and profitable retailer, engaging our customers in a discovery experience of the world of beverage alcohol.”

Clearly the fourth point (“profitable”) is the most important because the very next paragraph boasts that:

“Sales in fiscal 2010-11 were $4.55 billion and the LCBO delivered a $1.55 billion dividend to the Ontario government.”

OK, no wonder a mind-numbingly long succession of Ontario governments have chosen to do next to nothing to reform or replace the LCBO – they love the money too much. So what about their number one mission objective – “social responsibility?” That phrase primarily means preventing alcohol sales to minors while incidentally campaigning against drinking and driving and so forth. So how are they doing? Well, a recently published study sent out secret shoppers, both underage (15-18) and legal age (19-24), to the government run LCBO, the privately operated Beer Store chain, and privately owned convenience stores (purchasing cigarettes in this case), in order to test their dedication to the prevention of underage drinking. The results were: convenience stores only sold to minors 1 time in 8; the Beer Store record was 1 in 5; and the LCBO came dead last at 1 in 4. There was a similar trend, in terms of carding, for the legal age customers. Oops.

The other mission objectives are to be performance-driven and innovative. For performance-driven, read “profit maximization” (see above.) As for innovation, not much has happened since the requirement was dropped that every drinker in the province had to be licensed and under surveillance (for more information, check out the Punched Drunk website), and since the service model evolved from purchase order forms and a furtive booze-in-a-paper bag philosophy to normal retail self-serve. Sure, they’ve added some new purchasing vehicles over the years (Classics catalogue, Shop Online, etc.), but what about evolving the stores to resemble normal retail wine stores elsewhere in the world, with case discounts, sale prices on more than bin-ends, quality in-store tasting events, and delegation of some power to product consultants so they can stock independently?

But reform will be hard. Successive political parties have always made noise about how the LCBO should be privatized and liquor laws modernized, while they were in opposition. But as soon as they get into government, they can’t resist the profits. As usual, when trying to understand human behaviour, remember Jerry Maguire’s immortal words: “Follow the money.”

P.S. – For more on the subject, check out the latest newsletter from Michael Pinkus, the Grape Guy, at OntarioWineReview.com.

The Old Wineau

A jaundiced but experienced view of the world of wine

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