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B.C. distillers see business bump from BCGEU strike

Local distilleries and wineries are able to sell directly to private liquor stores and restaurants
Okanagan Spirits CEO Tyler Dyck and his sister Melissa Duncan, director of marketing, hold products in the family's store.

They make a tiny fraction of the spirits sold in B.C. but the province's craft-distillery sector has seen a business bump from union job action that has closed government liquor distribution warehouses. 

While the British Columbia General Employees' Union (BCGEU) said Tuesday that the B.C. government's Public Service Agency had invited the union's bargaining committee back to the table, the picketing continues, and will "until further notice," according to the union.

BCGEU workers on August 15 started picketing British Columbia Liquor Distribution Branch (BCLDB) warehouses in Richmond, Delta, Kamloops and Victoria, thereby disrupting the flow of alcohol from distillers and wineries based outside the province to government-run and private stores.

Distillers and wineries based in B.C. are legally allowed to sell directly to restaurants and liquor stores, meaning that their products are still being delivered.

Shelves at many liquor stores are empty thanks to some panic buying and a general lack of replenishment. One government strategy to keep products in stock was to last week start rationing sales. Individuals, restaurant owners and others may now only buy a maximum of three of each product at any one time.   

"I would say that our sales last week would have been double [that of a normal week]" Okanagan Spirits co-owner and CEO Tyler Dyck told BIV, referring to sales his company made to restaurants and private liquor stores. 

His company also has a single store, and that store is just as busy as it would have been if there were no strike, he said.

Okanagan Spirits produces nearly 50,000 litres of spirits per year, with whisky accounting for about 65 per cent of that, and gin and vodka amounting to about 25 to 30 per cent of that total. The rest is liqueurs and products such as Taboo absinthe. 

Dyck is also the president of the Craft Distillers Guild of British Columbia, and he said that he believes that most of that organization's more than 70 members have also seen business increase – particularly distillers in urban areas. 

Despite the lure of increased sales, Dyck said his company, and those of about 20 per cent of the province's craft distillers, are unable to increase production because of a government-imposed cap on tax-free production that makes doing so financially not viable.

Once a craft distiller passes the 50,000-litre-per-year threshold, the B.C. government imposes a 21-per-cent tax or mark-up on the distiller's entire production – something that Dyck said would effectively cost him about $210,000 on the first bottle he produces that is more than 50,000 litres per year.

The B.C. government-appointed panel tasked with looking into how to potentially change liquor policy in 2018 recommended that the government "rethink" how its tax regime on craft distilleries was structured. Mark Hicken, who chaired that panel, told BIV that he does not think any government changes to the policy are coming soon.

Many craft distillers are smaller producers who are able to increase production without going over 50,000 litres in a year and being dinged by higher taxes. Dyck, however, said that any production increase that those craft distillers provide would be just a drop in the bucket of what would be needed to meet market demand if picketing disrupts liquor distribution for a month or more.

"We [as the craft distillery sector] account for less than 0.1 per cent of the volume of spirits consumed and sold in the province," he said. "The industry will never grow to a place where it would be robust enough to actually supply the domestic market."

Smaller craft distillers told BIV that they have yet to see a spike in sales but they are hoping that one will come. 

Robert Simpson said that his Granville Island-based Liberty Distillery produces about 2,000 cases of spirits per year, or about 18,000 litres. That includes seven different whiskies that sell in the $60-per-bottle range, and four different gins as well as vodka that sell in the $40-per-bottle range.

"We do small batches," he said. "This is handcrafted, handmade. It's attention to detail on every cask, and every bottle for blending. All that stuff is done by hand."

Because Simpson's processes are time-consuming, he estimated that it would take him at least a week in order to increase production. 

He also runs the Liberty Wine Merchants store at a different location on Granville Island, and it carries products from dozens of B.C. craft distillers, he said.

"The strike is a great opportunity for people to support their local small businesses based here in B.C. – whether they are the liquor stores, the breweries, the distilleries, the wineries or the cideries," Simpson said.  "They can discover all of the great beverages that B.C. has to offer."

B.C. also has a non-craft distillery sector that is burgeoning. 

Long Table Distillery owner Charles Tremewen estimated to BIV that about 40 per cent of B.C.'s overall distillery sector pays a 121-per-cent mark-up on production, unlike Okanagan Spirits and the craft distilleries that are part of the guild. 

That is because non-guild distilleries, such as Long Table Distillery, Victoria Distillers and Sheringham Distillery, buy base alcohol from bulk producers instead of making their own. 

Tremewen said he buys the base alcohol from a third party because it is more consistently tasteless and it saves time. He said it is the way production is done in most parts of the world. 

His distillery produces about 25,000 litres per year and he has noticed a recent sales bump, as hotel representatives have asked to buy his product.

The result is that he has increased production so far by about five per cent. The most that he thinks he could reasonably increase production in the short term would be by about 20 per cent. 

This could be short lived, he added. 

If the government restarts contract talks with the BCGEU, pickets are likely to come down, liquor will once again start to flow and small distilleries' sales will return to normal, he said. 

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