Quebec liquor board targets sales abroad

[jesseps]

Quebec is pushing for a global presence as a connoisseur of wine and liquor.

 

The Société des Alcools du Québec, the government-owned liquor board, is venturing outside its own borders as a wholesaler, carrying hefty pricing power given that it is already a major buyer.

 

The SAQ currently buys wine and liquor to supply only its network of provincial retail outlets. But, the agency said Monday, a government change will allow it to go abroad as a wholesaler on global markets.

 

And it hopes to bring partners on board. For example, under the terms of its new mandate, the SAQ could negotiate the purchase of a certain number of cases of wine from a French producer on behalf of a U.S. specialty wine distributor and even provide marketing services to that distributor.

 

The SAQ is setting up a new company in which it will own 50 per cent, with the remaining half held by two labour union funds.

 

There is growing pressure on wholesale prices from demand in emerging countries such as China, Brazil and South Korea, and the move is intended to protect and enhance the SAQ’s strong position as a major buyer in international markets, spokeswoman Isabelle Merizzi said.

 

“We want to ensure that we maintain our purchasing power,” she added.

 

Among the big players in the global wine business are U.S. discount grocery giant Costco and Britain’s Tesco PLC. “These and other groups are increasingly buying more wine and want to be able to keep pace,” she said.

 

The SAQ is already one of the world’s biggest purchasers of wine, spending about $900-million per year buying from producers around the globe. The new venture will give wider scope to the SAQ in seeking out partners to ensure it maintains a strong buying power, Ms. Merizzi said.

 

Opening retail stores in other provinces is not part of the plan. The SAQ is, however, studying the possibility of partnering with wine distributors in other provinces and would even be open to a partnership with a provincial agency such as the Liquor Control Board of Ontario, Ms. Merizzi said.

 

LCBO spokesman Chris Layton said the board has no plans at this time to partner with the SAQ.

 

Among the services the SAQ will offer through the newly created company are distribution, marketing and quality control, Ms. Merizzi said, adding that talks are under way with potential partners outside the province but that no details are available yet.

 

Ms. Merizzi said the venture is starting out modestly, with an anticipated $50-million to $100-million in revenues after three or four years. SAQ CEOPhilippe Duval said the timing is right for the state monopoly to tap into its expertise and go beyond its borders.

 

Among strengths at the SAQ, he cited its international business network, efficient purchasing chain, respected quality-control lab and extensive retail sales experience.

 

Mike Veseth, who writes the Wine Economist blog, said economies of scale are becoming more and more important as ever larger wine buyers vie to get the best deals.

 

(Courtesy of The Globe and Mail)