The Pandemic's Impact on Local Wine Businesses
Part II: A follow-up discussion about Ontario’s wine marketplace
Last summer, I spoke with three Ontario wine businesses — a winery (Rosewood), an importer (Drink Better), and a restaurant (The Rosedale Diner) — about how they were adjusting to the early days of the pandemic, in Part I of the The Pandemic's Impact on Local Wine Businesses.
I followed up with them to discuss their experiences and perspectives on how 16+ months of the pandemic has changed their operations, as well as the customer experience — bottle shops! wine tastings 2.0! Excerpts from our conversations follow, edited for length and clarity.
How has the pandemic changed your business?
Rosewood Winery: It changed what we do on two distinct fronts. First, with online retailing and e-commerce, and second with on-site service. We had a courier we worked with for our restaurant sales — which had been a substantial part of our sales pre-COVID — but when the pandemic hit, we asked our courier to deliver to home consumers instead. We were well positioned to pivot as we already had an e-commerce site, and we had built up a strong following online on Instagram over the previous years, and so we saw an 8-10x increase in online sales in 2020, compared to previous years.
On-site, our service moved from indoors to outdoors, and we changed how our tastings work. Instead of single tastings, we are doing tasting flights — partly as a way to reduce multiple contact points and keep everyone safer — but also as a way to enhance the tasting experience. We invested in an extensive aluminum pergola, and an outdoor sound system tethered to our turntable, which has created a great vibe outside. These changes have elevated and evolved the service and quality of our tastings, creating a versatile experience that our guests are really enjoying.
Overall, our vision and approach to winemaking hasn't changed — Mother Nature is not affected by the Coronavirus — so we still have to tend to the grapes and vines in the same way as before.
Drink Better: I had to rethink some of the offerings in our portfolio, as the wines people drink at home may be different than what they drink at a restaurant, which is normally who I sell to. A Barolo, for example, is more of a special occasion wine that you have when you're out, versus a regular Tuesday night, so it's easier to sell a case to a restaurant, than a six-pack to a consumer. But there wasn’t a lot of time to adapt to those changes given the long lifecycle of a wine that ships through the LCBO, plus there’s been extensive global shipping delays — we are currently waiting on 300 cases of wine that should have been here in late June, and summer is a huge sale season for us. It’s too soon to say if the pandemic has fundamentally changed our business, but we are concerned about the long-term impacts of the extensive shipping delays.
But this is also a great time for local Ontario wines to shine! We recently added Trail Estate Winery to our portfolio, who are a great fit with our mission to showcase farms and families who manage their business and land with respect and integrity, using minimal intervention.
It’s also changed things for me as I would normally travel to different wine regions to discover new producers. But over the last year, we’ve had about six virtual tastings with producers who sent us products to taste, after we made sure they were the type of winery we want to work with, and I’m happy to say we have added five new producers to our portfolio, with some expected to be available in the fall. I even met one of the export managers, who represents a few of the new wines we’re bringing in, in one of the wine ‘rooms’ on Clubhouse!
Rosedale Diner: It has affected it tremendously. Even being back to business, and being consistently busy, and even with funding/help from the government, we still have a lot of ground to make up, and prices of food stuffs have gone up by a significant margin. In terms of the industry itself, at least thus far, I know many restaurants are struggling to find help, both FOH [front of house] and kitchen, as many people have moved onto other vocations or aren’t ready/qualified to reenter the workforce. It’s always been a slog trying to find qualified kitchen workers, but now it’s harder than it’s ever been.
Has the pandemic changed your relationship with customers, and have their preferences changed?
Rosewood Winery: There has been a shift in relationships with certain customers, like restaurants, who shifted to bottle shops. For retail, not much has changed with the average customer, though we have noticed that more people are looking for more experiences because of the pandemic, and we are getting more calls for our tours and tasting events, but unfortunately we are short-staffed right now.
Drink Better: Our focus will always be on licensees (ie. restaurants), so bottle shops have become a big part of our business during the pandemic. Private customers were never more than 20% of our business, but we have added that as a secondary focus, and we are seeing more customers splitting cases with friends. For us, attracting private customers means offering product combinations that they can’t get anywhere else. Our Judith Beck mixed case was really popular, and there had never been six wines of hers in the market at once, so that was a really fun offer — those are the types of exclusive producer or style-specific collections that we would like to do. But we are also aware of the fact that the bottle shops, restaurants, and bars are our primary customers, and we wouldn't want to cannibalize their business, so we recognize everyone's place in this market.
In terms of customer preferences, from us people are buying more easier drinking, casual styles of wine, like Pet-Nats and Prosecco. And some people are moving to low and no alcohol consumption, a mature category in the UK, but one that we are starting to see more of in Canada; in fact, we just launched Feragaia, an alcohol-free spirit made of botanicals from Scotland.
Rosedale Diner: Our regulars kept us in business, and were dining with us on our last night before each lockdown and our first night when we’d reopen. They’ve really kept us alive. Some customers still think we’re living in pre-COVID times and have a harder time adjusting to certain safety protocols or price changes, but that seems to be a problem with human nature more than anything.
The BC government provided wholesale alcohol pricing, at first as a temporary pandemic measure, but now it’s permanent. Do you support wholesale alcohol pricing in Ontario?
Rosewood Winery: We support wholesale pricing, but on the premise that the Ontario government review its taxation model. There are still higher sales taxes levied on wines sold at the winery versus other channels, which means less money returned to the winery for their own sales. And there are additional taxes when we sell to a licensee (restaurant or bar). The least expensive option is direct-to-consumer.
No other industry in Ontario is taxed like this. We pay 30% tax, plus a federal tax — we are farmers who decided to ferment alcohol — it's not an equal playing field. The Ontario model penalizes businesses like ours, who are reliant on Mother Nature, where our crops can be reduced, or destroyed, by extreme weather events. The wine taxation model is a huge problem and not forward thinking.
[In Ontario, there is an “import tax” levied on 100% Ontario/VQA wine sales, plus a 6.1% tax (on top of other sales taxes) levied on wine sold at the winery, even though no other products are subjected to such a tax].
Drink Better: I'm absolutely behind this and am ready to pass on any savings I receive, but the LCBO charges a 62-ish % mark-up, which I absolutely do not. So if the LCBO could offer agents wholesale pricing – it would have to come from their margins, let's be honest. So the question is, will they want to reduce their margins even a little? We have wholesale pricing for virtually everything else in this world, and restaurants could really use the break, plus it could help everyone make more sales, which the LCBO gets a piece of every one of those anyway. But the place that has to give is the LCBO. I stand behind my opinion that the province can really help out the industry as a whole by lifting the yoke on local wineries, cideries, breweries and distilleries to sell within the province more competitively (and not just for VQA wines, which is absolutely bullshit for anyone who wants to make anything really innovative). For imports, charge more to bulk producers who are using heavy bottles, excess packaging and who are creating tons of plastic waste, so a sustainability initiative from one of the world's largest buyers can carry real weight in the long term. Also, and I am back on my soapbox about this one, get rid of foil and plastic capsules. Don't penalize producers who are trying to reduce waste.
Rosedale Diner: I wholly support wholesale alcohol pricing, and anything that makes alcohol sales for restaurants and bars/small businesses more equitable and less monopolistic.
It’s unfortunate that so many people outside the industry think that restaurants are price-gougers without realizing that we don’t get the same kind of pricing the LCBO does, and that the LCBO in fact makes money on all transactions, even ones made directly between us and a winery or brewery. I’m no fan of how alcohol sales work in Ontario, and I know many brewers and winemakers who feel the same.
The early days of the pandemic saw increased dialogue and awareness surrounding inequalities in the hospitality industry. Is this a 'New Era' for the industry?
Rosewood Winery: We have always tried to provide above industry wages, especially for hourly staff, as we have a cyclical seasonal flow of work, peaking in summer and in the fall during harvest; and in May, we began providing health benefits for salaried staff, which is half our work force. Regarding equality, overall there is more mindfulness and consideration of all aspects of inclusion — whether that's racially driven, preference for what pronouns to use, and from every kind of standpoint — and we have those conversations often. When we develop a new wine label, we have our own set of checks that we review it against, to ensure we are being inclusive, regardless of race, gender, age, or sexuality.
Drink Better: Right now, in 2021, I am struggling to keep my business afloat, especially because wines are coming in so slowly. I need more income in order to do everything I have committed to in the community, including the scholarship fund we published on social media a year ago. That said, I do have a casual employee and I pay them well, which has been important to me to build into my operating costs, as has donating wine and money to causes we care deeply about – but it's not enough for us. The sharing of profits is currently far less than what we want Drink Better to be doing. In my work with George Brown Chef School, I am using my platform as an instructor to have lots of conversations with students going into the industry about leadership, career prep, negotiating fair wages, cultural awareness and systemic racism, identifying sexism and how to combat it, and self-advocacy. Truth be told, I learn as much from them as I teach.
Rosedale Diner: We have such a small crew that hopefully knows we support them wholeheartedly in any capacity, and if they ever encountered discrimination or harassment in and around our restaurant and we were made aware of it, we’d put a stop to it immediately. I’m familiar with that kind of toxic environment, having worked at places that were like that, and pride myself on making sure ours is nothing like that. I’m not sure if this is a “new era,” as things generally revert back to the norm, but I sure hope so.
