Wine: Depanneurs Sell 25% Of The Volume For 15% Of Revenue

The state monopoly on the sale of wines and spirits in Quebec is increasingly questioned and more frequently criticized.

Recommendations of the Auditor General, the Robillard commission and independent studies such as Monopole Inc. all point to the need of real reforms, something that many provinces like Alberta have already done.

Why should the government take over the sale of alcohol? Isn’t enough for the state to (badly) manage education, health, road infrastructure, justice, social services and others?

And then, why just selling alcohol? Why not food? Clothing? Sports articles? Pharmacy? The list goes on and on.

The very existence of the SAQ, the current state monopoly, no longer has any consistency or relevance: it is purely an anachronism.

It is still there simply because dismantling it would cause so much troubles, hence the inertia of successive governments that have other more urgent priorities to pursue.

The resistance would likely come from the main stakeholders that are benefitting from the current system:

• SAQ’s management and senior management;
• SAQ’s unionized staff which enjoys much better pay and working conditions than industry standards;
• Wine agencies that do good business with the SAQ;
• SAQ partners such as Éduc’alcool;
• SAQ’s suppliers (services, real estate, etc.).

Convenience stores, on the other hand, have a tiny portion of the market of the kind that requires hard work for low profits.

Indeed, apart from a few exceptions, they can only sell products bottled here and whose name is specifically created and exist only within their network.

In other words, the “depanneur” wine, as it is called, is this low-priced, artificially created product designed to not compete with the SAQ, which sells real labels, names and regions at any prices it wants.

In addition, this low-level wine category requires much more handling efforts and costs for much less profits.

According to the SAQ’s latest quarterly report, the depanneur and grocery channel sold $ 83 million worth of wines, compared to $ 490 million by SAQ branches, or 15.5% of revenues over a period of three months, from March to June 2017.

But in terms of volume, depanneurs and groceries sold 10 M of liters out of 40 M, or a quarter of the volume of all the wine sold to consumers!

In other words, convenience stores carry a quarter of the volume for one-sixth of revenue! And this, for margins much less interesting in the order of 16.5% versus the SAQ with its 135% margins and more.

Indeed, it is high time that things change for real in Quebec. What an excellent issue for the next election!