Each week, we bring you the latest whisky news on WhiskyCast. Now, we’ll be bringing it to you as it happens here on our News Updates page!

Impact of Tariffs Dampens U.S. Whiskey & Spirits Industry in 2018

February 12, 2019 – There’s some good news, and some bad news. That phrase usually makes one’s stomach churn, and it wouldn’t be a surprise if this morning’s Distilled Spirits Council economic briefing in New York had some U.S. spirits industry executives reaching for the antacids at lunchtime. While there were a number of bright spots in the overall report, the impact of retaliatory tariffs on U.S. whiskey exporters had a significant impact in the final half of 2018.

The European Union, Canada, Mexico, and China all imposed punitive tariffs ranging from 10 to 30 percent on Bourbon, Tennessee Whiskey, and other American-made whiskies starting in June following the Trump Administration’s decision to slap tariffs on imported steel and aluminum from those trading partners. Turkey went one step further, imposing a 140 percent tariff on all U.S.-made spirits.

The result: while total U.S. spirits exports for the first eleven months of 2018 set a new record of nearly $1.7 billion dollars, the value of whiskey exports during that period actually fell slightly. In the pre-tariff period between January and the end of June, whiskey exports rose by 28 percent over the previous year to nearly $600 million. However, once the tariffs took effect, exports between July and November fell 8.2 percent from 2017 according to data from the U.S. International Trade Commission.

“We’re facing the most challenging period for our exporters than probably we ever have, which has increased the amount of uncertainty for our exporters,” Christine LoCascio of the Distilled Spirits Council told reporters and analysts at the briefing, while noting that the spirits industry has been caught up in a trade dispute it had no role in creating. LoCascio acknowledged that some of the early increase may have been due to exporters shipping more whiskies in anticipation of the tariffs, but said the overall increase for the period was in line with gains from previous years.

“Whiskey is so important for our exporters – it accounted for $1.1 billion worth of export sales in 2017…of that $1.1 billion, 59 percent went to the EU alone. The EU market is extremely important to our exporters, so hence the 25 percent tariff in that market on whiskey is particularly harmful,” LoCascio said. EU-bound whiskey exports grew by 17 percent between 2016 and 2017, and grew by 33 percent during the first half of 2018. However, the impact of the European tariff led to an 8.7 percent decline during the July-November period from 2017.

Listen to the Distilled Spirits Council’s economic briefing teleconference:

https://whiskycast.com/files/DSC_2019EcoBriefing_20190212.mp3

 

The Council recently received a grant from the Agriculture Department to help fund additional export promotion programs as part of a federal effort to aid agriculture-based industries affected by the trade war. That comes as little comfort to Catoctin Creek Distillery co-founder Scott Harris, who saw export sales at his family’s Virginia distillery shrivel almost as soon as the European Union tariff took effect. Harris said their importer stopped returning their calls, let alone placing any orders for new shipments.

Catoctin Creek distilling co-founder and head distiller Becky Harris works the bottling line at the Purcellville, Virginia distillery. Photo ©2018, Mark Gillespie/CaskStrength Media.

Catoctin Creek distilling co-founder and head distiller Becky Harris works the bottling line at the Purcellville, Virginia distillery. Photo ©2018, Mark Gillespie/CaskStrength Media.

“When have lower sales, that affects not just our own bottom line and the families of 20 employees that we have, but also we have four farms that we source from for our rye whiskey, we have a fifth and sixth farm that are cattle farms that we give our spent mash to that offsets their cost for cattle farming. We source all of our materials for bottling in the U.S., so that means the glass coming from Anchor Hocking in western Pennsylvania, the closures coming from South Carolina, so this has an impact that spreads a lot further than just our little home town,” Harris said.

The situation is brighter on the domestic side, where the overall spirits industry recorded a ninth consecutive year of gains in market share against beer and wine along with increases in both revenue and volume. Supplier revenues grew by 5.1 percent over 2017 to $27.5 billion, according to the Council’s data. Volume grew by 2.2 percent to the equivalent of 231 million nine-liter cases.

The American whiskey category recorded another strong year in 2018, with gains across all price categories and a 6.6 percent increase in revenue. Bourbon, Tennessee Whiskey, and Rye all recorded sales increases, while sales of corn and so-called “white whiskey” declined. The U.S. remains one of the largest single markets for Scotch Whisky exports, and sales of both blended and single malt Scotch whiskies grew during 2018.

Irish Whiskey also depends on the U.S. for a significant percentage of its overall growth, and the category grew by 10.2 in volume and 12 percent in sales – which reached $1 billion for the first time on growth in high-end sales. Canadian whisky sales were flat during the year. with a 0.3 percent increase in annual revenue of $2 billion and a decline of 1.1 percent in volume.

Links: Distilled Spirits Council | Catoctin Creek Distilling

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2018 A Record Year For Scotch Whisky Exports

February 12, 2019 – Scotch Whisky exports set new records during 2018, according to statistics released today by HM Revenue & Customs. The export value of all Scotch Whisky exports during the year reached £4.7 billion GBP ($6.057 billion USD), a 7.8 percent gain from the previous record set in 2017. In addition, the volume of exports also set a new record with the equivalent of 1.28 billion 70cl bottles, up 3.6 percent from 2017 and breaking the previous high of 1.26 bottles set in 2011.

“If you take market by market, there’s some important growth as well,” said Graeme Littlejohn of the Scotch Whisky Association. The United States continued to be the most important single export market for the Scotch Whisky industry, and became the first-ever “billion pound” export market in 2018 with a 12.8 percent increase in export value to £1.04 billion GBP ($1.8 billion USD). The U.S. also remains the second-largest market by volume at 127.5 million bottles (70cl equivalent) behind France, which continues to lead the world at 178.4 million bottles. The difference is generally attributed to more “value-priced” bottles being exported to the French market, while the need to bottle whiskies in 75cl bottles for the U.S. market makes it more economically practical to export higher-priced whiskies to America.

The top export markets for Scotch Whisky during 2018 by volume and value. Graphic ©2019, CaskStrength Media.

“The underlying strength of the Scotch Whisky industry is at the heart of this,” Littlejohn said in a telephone interview following the annual release from HMRC. “There’s a growing trend for premiumisation across spirits – that’s not just involving Scotch Whisky, of course, it’s across all spirit categories, but there’s demand for Scotch Whisky growing in some developing markets across the world,” he said.

Among those markets, India was a surprise with significant gains in both volume and value. Littlejohn noted the gains came despite India’s 150 percent import tariff India charges on imported whiskies, but said the trade association’s economists will need some time to analyze the government data before coming to specific conclusions on the gains in India and other countries.

On a regional basis, the European Union remains the largest market for Scotch Whisky exports. With Great Britain still scheduled to depart the EU on March 29 and no final agreement on their future relationship in place, the SWA is calling on UK officials and their counterparts in Brussels to agree on an “open and positive” future relationship with “frictionless” trade.

“The EU is still our biggest regional market with 30 percent of Scotch Whisky by value going to EU countries, 36 percent by volume with France being the number one market in the world by volume again…it’s important that we get some clarity around Brexit so that we can continue to improve on some very strong numbers in exports last year,” Littlejohn said.

Scottish Rural Economy Secretary Fergus Ewing praised the 2018 results while calling for support to protect the whisky industry as the Brexit date approaches.

“It’s an industry that, despite having been established for centuries, has still gone from strength to strength in recent years, thanks in part to the determination from the Scottish Government and the industry to work together, in order to create a national brand with a global reputation. Thanks to that success abroad, Whisky is a major employer in Scotland. Of course Brexit continues to threaten that progress, particularly in relation to the European market which accounts for 30% of our exports. But we are doing what we can to support the sector against growing uncertainty, and ensure it remains one of the biggest contributors to Scotland’s economy,” he said in a statement.

Links: HM Revenue & Customs | Scotch Whisky Association

 

 

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Kentucky Distillers and Retailers At Odds Over “Distillery Exclusive” Whiskies

February 8, 2019 – There’s a feud brewing in Kentucky, and it could make the legendary feud between the Hatfields and McCoys look tame. That feud in the years following the Civil War started with a forbidden romance, but this one is all about money – and whiskey.

Wednesday, when the Kentucky Distillers Association released its biennial study of the Bourbon industry’s economic impact on Kentucky, University of Louisville economists cited the multiplier effect of jobs indirectly linked to the industry such as coopers, truck drivers, and even marketing executives in claiming the industry is responsible for 20,100 jobs.

However, that estimate did not include retail employment at the state’s liquor stores. Not all Kentucky liquor retailers have benefitted from the state’s boom in Bourbon-related tourism, which drew an estimated 1.4 million visitors to Kentucky distilleries in 2018 according to the KDA. While no specific statistics are available, anecdotal evidence suggests retailers in Louisville, Lexington, Bardstown, and other areas located near distilleries do benefit from tourist traffic along the Kentucky Bourbon Trail.

As Bourbon-related tourism has grown in recent years, there has been an uneasy truce between the retailers and the distillers. As recently as a few years ago, it was common for distillery shops to price their whiskies slightly higher than local retailers were charging, while emphasizing that they were not trying to take business away from small businesses in the community. In addition, distillers are only allowed to sell a visitor 4.5 liters of whiskey – the equivalent of six 750ml bottles – each day, while retailers have no limit.

That truce may be in its final days, though. The KDA is supporting House Bill 200 in this year’s session of Kentucky’s General Assembly, and the bill would remove one long-standing restriction that ensured parity between the distillery shops and retailers. Kentucky law requires that so-called “souvenir” bottles sold at distillery shops be made available to any licensed retailer in the state, making it impossible for distilleries to offer the “fill your own bottle from a cask” exclusive whiskies common at distilleries in Scotland and Ireland.

According to KDA President Eric Gregory, the legislation would create parity between distillers and Kentucky’s brewers and wineries, both of which can offer exclusive products in their shops. “It also keeps Kentucky competitive with other states, and distillers around the world, who have enjoyed this privilege for years,” he said in an email to WhiskyCast. “Visitors expect that they can buy something at one of our innovative and immersive visitor centers that they can’t get anywhere else, and they’re disappointed when they find that’s not the case,” he said.

However, that puts the distillers into direct conflict with the liquor retailers, who are already marshaling their forces to fight the bill. Karen Lentz is the executive director of the Kentucky Association of Beverage Retailers, and told WhiskyCast that her members already have problems getting access to the limited-edition releases now available at a number of the Commonwealth’s distilleries.

“We have lots of retailers who don’t get a single bottle of some premium products even though those products are sold at the distillery shop. Sometimes it’s just not practical for anyone who wants it to get it,” ” she said in an email while also providing a statement on the association’s behalf arguing the impact on consumers.

“House Bill 200 would allow any distillery, for any reason, to withhold from distribution to Kentucky retailers any product they chose and sell it exclusively at their distillery.  There would be no competition to keep prices reasonable because they would be the only place in the Commonwealth where the product would be available for purchase.  We certainly want to support our Kentucky distilleries and applaud their success with the Bourbon Trail.  However, we do not believe that it is in the best interest of our customers to force them to travel to the distillery location just to purchase a product that today they could get at their local package retailer.  Premium bourbon is in such high demand and this bill would allow a distillery to restrict access to their most coveted bourbons, like Old Forester Birthday, Woodford Double Oak, or Pappy Van Winkle, by making it only available to Kentuckians from their distillery.  If you live in Paducah or Pikeville and have the good fortune to purchase some of these high-demand bourbons at your neighborhood package retailer, this bill could force you to drive 4 or 5 hours to the distillery and hope you are lucky enough to purchase a bottle.  We believe this is not in the best interest of Kentucky bourbon consumers to allow a distillery to withhold from retail shelves some of the world’s best bourbons and force bourbon lovers to drive to the distillery.  We do not believe that all distilleries will use this opportunity to drive customers to their own stores, but House Bill 200 in its current form would certainly allow that to happen. We plan to discuss our concerns with the bill sponsor.

The Jim Beam American Stillhouse in Clermont, Kentucky would be allowed to sell "distillery-exclusive" whiskies under House Bill 200, currently under consideration in the Kentucky General Assembly. File photo: Mark Gillespie/CaskStrength Media.

The Jim Beam American Stillhouse in Clermont, Kentucky would be allowed to sell “distillery-exclusive” whiskies under House Bill 200, currently under consideration in the Kentucky General Assembly. File photo: Mark Gillespie/CaskStrength Media.

One example can be found at the Jim Beam American Stillhouse visitors center on the Jim Beam Distillery campus in Clermont. The shop sells souvenir bottles of Old Tub Bourbon as a nod to the Beam family’s heritage dating back to the pre-Prohibition era when the Beams sold it to people by the jug at their distillery. Old Tub doesn’t play any part in the current Jim Beam portfolio, but the Kentucky law requires Beam Suntory’s wholesaler to make the 375ml bottles of Old Tub available to retailers who want to carry it.

Kevin Smith represents Beam Suntory on the KDA board, and argues that a growing number of Kentucky retailers already get an advantage over the distillery shops – with the help of the distillers themselves. “They come in and do these (single) barrel selections, and all we’re trying to do is extend this out a little bit to see how we can have an exclusive program that helps to build tourism at the distilleries just like wine and beer,” he said in a telephone interview. Smith also suggested that a possible compromise would be to create “exclusive” bottlings for sale only at Kentucky retailers. “Exclusive can also mean sometimes that there’s exclusives for retailers, I don’t know…but it could be a win all the way around if it’s done right,” Smith said.

The KDA represents most of the Commonwealth’s distilleries, with the notable exception of Sazerac-owned Buffalo Trace and 1792 Barton. While not taking a direct position on House Bill 200, Sazerac CEO Mark Brown told WhiskyCast in an email that his company’s distilleries would not take advantage of any change in the current law.

“We do not have an interest in creating “distillery exclusive” products for many reasons but in particular we believe it would disadvantage our customers that are not within reach of the distillery nor do we want to disadvantage our retail partners’ product selection,” Brown said. “Although there are many current obstacles in the market which we are working to overcome, we continue to believe and work hard to ensure that our brands are distributed across the country as fairly as possible at fair prices.”

It should be noted that Sazerac employs Frankfort-based Commonwealth Alliances as a political consultant and lobbyist at the state level. Commonwealth Alliances also lists the Kentucky Association of Beverage Retailers as a client, and Karen Lentz is a partner at the firm.

No committee hearing has been scheduled for the bill, which was introduced by House Licensing, Occupations, and Administrative Regulations Committee vice chair Rep. Matthew Koch (R-Paris). This year’s General Assembly session is limited to 30 business days, with action on pending legislation scheduled to be completed by March 7.

Links: Kentucky Distillers Association | Beam Suntory | Sazerac | Commonwealth Alliances

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Bourbon’s Economic Impact Booms in Kentucky

February 6, 2019 – Ten years ago, leaders of Kentucky’s Bourbon industry staged a protest at the Capitol in Frankfort by pouring their whiskey on the steps to protest yet another tax hike on spirits by the Commonwealth’s lawmakers. They also put the wheels in motion for a better way to make their case to the politicians – by proving their impact on Kentucky’s economy.

Today, many of those same industry leaders were welcomed inside the Capitol to present the fifth in a series of biennial economic impact studies conducted by University of Louisville researchers for the Kentucky Distillers Association. That report found more than 20,000 jobs either directly or indirectly linked to Kentucky’s distilling industry with an annual payroll of around $1 billion. When the researchers calculated how that payroll works its way through the economy along with spending on capital projects, raw materials, and other operating costs, they found an overall economic output of $8.6 billion annually.

By way of comparison, the first study in 2009 found 9,848 jobs with links to the distilling industry with around $442 million in annual payroll spending. While the industry employs around 5,000 people directly, the indirect employment covers farmers, cooperage workers, trucking and logistics company workers, bankers, and even marketing firms – not counting the impact of the distilling industry on tourism-related jobs such as restaurant and hotel staffs.

“As you look at the employment spinoff factor, there’s like four other folks that are impacted by everything that’s happening here,” KDA director Kevin Smith of Beam Suntory told WhiskyCast. “The Bourbon boom’s massive economic impact, as we’re calling it over the last ten years has been significant,” he said in a telephone interview.

A Cooper selects staves to be made into barrel heads at the Brown-Forman Cooperage in Louisville, Kentucky. The KDA report outlines the economic impact of indirect whiskey-related jobs such as coopers in its estimate of 20,100 Bourbon-related jobs in Kentucky. Photo ©2019, Mark Gillespie/CaskStrength Media.

A cooper selects staves to be made into barrel heads at the Brown-Forman Cooperage in Louisville. The KDA report outlines the economic impact of indirect whiskey-related jobs such as coopers, truck drivers, and grain farmers in its estimate of 20,100 Bourbon-related jobs in Kentucky. File photo: Mark Gillespie/CaskStrength Media.

It should be noted that the report is based on data collected before retaliatory tariffs on American whiskey exports were imposed last summer by the European Union, Canada, Mexico, China, and other countries after the Trump Administration imposed its own tariffs on imported steel and aluminum from those trading partners. Kentucky distillers exported around $381 million in whiskies during 2017, with nearly half of that to countries now imposing tariffs on those exports.

Maker’s Mark Chairman Emeritus Bill Samuels Jr. was part of that Capitol protest ten years ago.

“Kentucky and its citizens have been the big winners since the General Assembly reversed course and began reducing taxes and eliminating Prohibition-era regulations on the spirits industry,” he said in a statement issued by the KDA. “This new economic impact study proves that conclusively.”

State officials, keeping in mind the $235 million in local and state tax revenue Kentucky’s distillers generate each year, lauded the report while highlighting their own efforts to pass tax reforms and remove restrictions affecting the Bourbon tourism business. The most recent changes cleared the way for distillery visitors centers to offer cocktails instead of just small samples and permitting out of state visitors to have bottles shipped home if their home state allows for it.

According to State Senate President Robert Stivers, “every time we pass legislation that takes the regulatory shackles off this legendary industry, our Commonwealth sees record investment, jobs and growth. That’s a return on investment that makes for sound public policy.”

Stivers and his colleagues in the General Assembly will be asked to do even more for the Bourbon industry this year. The KDA wants to see updates in a 2014 law that allows distillers to take a credit against their corporate income taxes for the “barrel taxes” they pay to local governments on maturing inventory. With increasing production and last year’s cut in the state’s corporate income tax, distillers are paying far more in barrel taxes than the credits they can take and the 2014 legislation did not allow for tax refunds or a transfer of those credits to contractors or other third parties.

In addition, the KDA may face a battle with one of their key partners in the Bourbon boom – retailers. House Bill 200 would end the state’s ban on so-called “distillery exclusive” bottlings. Currently, if a distiller wants to sell a unique whiskey at its visitors center, it has to make that same whiskey available to in-state retailers. KDA President Eric Gregory told WhiskyCast that would bring distilleries in line with Kentucky’s wineries and breweries, and the issue is one of parity. The Kentucky Association of Beverage Retailers, which represents the interests of local liquor store owners, has come out in opposition to the bill.

The industry also has a public policy goal in mind. According to Smith, the KDA is encouraging lawmakers to pass legislation aimed at increasing the use of ignition interlock devices by those convicted of driving under the influence. “Right now, the law requires repeat offenders to have them…we’d like to see that so hey, if you get a DUI, let’s get you back into a right mind-set here and do the proactive thing. The reality is that we want people to use our products responsibly, and unfortunately, sometimes people make bad decisions…this helps that. It doesn’t solve it, but it helps that,” he said.

Given that this year’s General Assembly session is an abbreviated one, Smith believes there may not be enough time for lawmakers to accomplish all three objectives. He projected the barrel tax credit reforms may have to wait for a special session or until next year’s session because of the complexity of that proposal.

The Kentucky Distillers Association represents most of the Commonwealth’s whiskey and spirits distillers, with the exception of Sazerac’s Buffalo Trace, 1792 Barton, and Glenmore distilleries. The entire report is available to download from the KDA’s web site. 

Editor’s note: This story has been updated to reflect that the Kentucky Association of Beverage Retailers opposes House Bill 200. We have more coverage of this story available at WhiskyCast.com. 

Links: Kentucky Distillers Association

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Walsh Whiskey, Italy’s Illva Saronno Split Up in “De-Merger”

January 25, 2019 – The Irish Whiskey business has been booming in recent years, but there have been undercurrents of discontent amid all of the excitement. That played out in today’s announcement of a “de-merger” between Walsh Whiskey Company and Italy-based Illva Saronno, that amounts to the equivalent of a corporate divorce. The two companies joined forces in late 2013 with Illva Saronno making a major investment to help fund the €25 million ($34.1 million USD) construction of the Walsh Whiskey Company’s distillery near Carlow, Ireland.

“Unfortunately, I suppose…not all mergers and partnerships work out, and that’s what happened in this case,” Walsh Whiskey founder Bernard Walsh said in a telephone interview Friday morning. “We had, I suppose, different views on where the company should go…the vision for the future. It’s very important to me we focus on premium and super-premium whiskies…our vision and the vision of our Italian partners were just not shared.”

The terms of the de-merger call for Illva Saronno to take full ownership of the distillery, which will be renamed the Royal Oak Distillery effective immediately. Walsh Whiskey will retain full ownership of its Writers’ Tears and The Irishman whiskey brands, while the two will continue to collaborate for now as Illva Saronno imports those brands into the United States, Italy, the Netherlands, and Switzerland.

Illva Saronno executives were not available for interviews, but in an email to WhiskyCast, spokesman Stefano Battioni provided this comment:

“Illva’s objective is to further enhance Royal Oak as a centre of excellence in Irish whiskey making by continuously improving its technology and processes, producing all three styles, Malt, Pot and Grain under one roof, enhancing the visitor experience and achieving recognition as one of the best quality Irish whiskey producers in the market.

Regarding the commercial side, Illva Saronno never reveals ahead of time it plans for the future. In any given moment we study developments for our spirits business based on our global vocation. We always look at way to exploit the best opportunity offered by the global market environments that is our natural habitat, and by our strong distribution network that covers 160 countries making international markets responsible for more than 90% of our turnover.”

The still room at the Royal Oak Distillery in County Carlow, Ireland. Photo ©2018, Mark Gillespie/CaskStrength Media.

The still room at the Royal Oak Distillery in County Carlow, Ireland. Photo ©2018, Mark Gillespie/CaskStrength Media.

No jobs will be affected by the split. Production and visitors center staff at Royal Oak will be employed directly by Illva Saronno going forward, while the sales and marketing team at Walsh’s office in Carlow will remain with Walsh Whiskey.

None of the whiskey distilled at Royal Oak since it opened has reached maturity, meaning there will be no impact on the Walsh Whiskey brands. Walsh’s supply contracts with Irish Distillers provide for enough whiskey to meet growing demand for both brands worldwide. “We’ve grown that business three-fold, so if you like, we’re inheriting a business which is three times bigger, and I am very confident that we will double the size of that business in the next three years,” Walsh said.

However, the loss of the distillery remains a personal blow for Bernard and Rosemary Walsh following years of work to build the brands first and then a place to make their own whiskey.

“We plowed every furrow, we picked every tile, we oversaw every pound of concrete that was poured into the distillery, every piece of wrought iron for the supports, we were there right the way through…it was something that we absolutely loved doing, and for us, we created that chapter of history, that chapter of Irish Whiskey distilling in Carlow and in Southeast Ireland which had been absent for 200 years, so we are proud of what we created, and now it’s up to our Italian friends to write the next chapter.”

To hear the entire interview with Bernard Walsh, please listen to the latest episode of WhiskyCast.

Editor’s note: Walsh Whiskey Company’s Writers’ Tears brand is a sponsor of WhiskyCast. 

Links: Walsh Whiskey Company | Illva Saronno

 

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British Columbia’s #FreeOurWhisky Campaign Now in Second Year

January 25, 2019 – The wheels of justice often turn slowly, and not unlike a good whisky, a legal dispute can often take years to reach maturity. Allura and Eric Fergie don’t want their dispute with the British Columbia government to take that long – since their 242 bottles of whisky now in the government’s custody have already matured for years.

“It was very surreal…it was something right out of Prohibition. They just came in, and they had their truck full of empty boxes, and they were just like ‘yep, we’re here to take your whisky,” is how Allura Fergie describes the morning of January 18, 2018.

The Fergies own Fets Whisky Kitchen in Vancouver, and in what is believed to be the largest coordinated raid by Canadian liquor enforcement agents since the Prohibition era, British Columbia liquor inspectors seized 242 bottles of Scotch Malt Whisky Society whiskies from Fets. Inspectors also conducted simultaneous raids at the Grand Hotel in Nanaimo, the Union Club of British Columbia and Little Jumbo – both in Victoria.

The four are the Society’s “partner bars” in the province. Their crime: purchasing the SMWS whiskies from two privately-owned liquor stores in Victoria and Vancouver that legally sell those whiskies to consumers. British Columbia regulations require that bars, restaurants, and hotels with “hospitality licenses” purchase all of their alcoholic beverages directly from the province’s own liquor stores.

“We shop at six to twelve government liquor stores just to acquire the products we need to operate our business,” Eric Fergie said during an interview at the Victoria Whisky Festival. Private liquor stores, such as The Strath in Victoria and Vancouver’s Legacy Liquor Store, legally order SMWS whiskies and their other inventory through the province’s Liquor Distribution Branch. However, the SMWS whiskies and many others are not sold in the provincial stores, and that gives the Society’s partner bars in the province no legal option to source them.

“The government system is not set up to manage and support small businesses looking for specialty items,” Eric Fergie said. “They’re a big box store, and we go and get the main brands.” In addition, the Fergies have to pay full retail price for all of their stock – then pay additional taxes on the markup they charge their customers.

After the raids, British Columbia Attorney General David Eby created a panel to look at potential changes to the province’s liquor system. That panel, led by attorney Mark Hicken, submitted its report last June with 24 recommendations, including one to lift the ban on private liquor stores selling to “hospitality license” holders.

Last week, Canada’s Competition Bureau entered the debate on the side of the Fergies and other business owners, calling on the provincial government to remove what it deems “anti-competitive” restrictions on the private sector.

“If the province’s stores don’t pick up the products, the products aren’t getting to restaurants and bars and that has implications for competition at a number of different levels,” Associate Deputy Commissioner for Competition Leila Wright told WhiskyCast in a telephone interview. “The bottom line is it’s better for consumers to be able to have these products offered at bars and restaurants across B.C.,” she said.

The Ministry of the Attorney General declined to make Eby or a spokesperson available for interviews, but provided a prepared statement from the attorney general.

“I appreciate that the federal Competition Bureau is interested in our work to modernize and improve our liquor policy and how it deals with hospitality, in particular. I’m a little surprised that they are so interested as British Columbia is not the only province that operates the way that we do, but I’m glad for the letter and will certainly take it in to consideration as we go forward with the review process.”

A spokesperson for the ministry indicated that the Hicken Report’s recommendations are still under review and being discussed with public health experts and labor representatives, with no timetable for a decision on whether to implement them or not. In addition, the ministry and the Liquor Distribution Branch have also been dealing with the impact of cannabis legalization nationwide last October, and the BCLDB is also serving as the province’s exclusive legal wholesaler supplier for cannabis products.

Allura Fergie isn’t buying that excuse.

“Cannabis hasn’t been paying any taxes, and us as liquor buyers have been paying taxes for years, so you’ve gotta give us equal time,” she said.

While the other three bars settled their enforcement cases with the province and paid small fines, the Fergies are still fighting the potential loss of around $40,000 (CAD) worth of whisky and a proposed fine of $3,000. Their hearing has been pushed back to this May, and their lawyer has filed open records requests for the province’s emails and other documents leading up to the raids. Their hope is to have the entire case thrown out on the grounds that the raid illegally violated their rights under Canada’s Charter of Rights and Freedoms.

“We also believe that the government will eventually do the right thing and make it go away…they’ve got a lot of outs and can still look good,” Eric Fergie says. The case has received international attention over the past year, along with a #FreeOurWhisky campaign on social media that he believes has helped make visitors to Vancouver more aware of Fets.

“We did get a lot of press, yes…but we’d still rather have the whisky.”

The controversy also had an impact on the 14th annual Victoria Whisky Festival. The Scotch Malt Whisky Society did not present master classes, along with several other independent whisky companies who traditionally depend on the province’s private retailers to serve their customers. A sign next to the SMWS whiskies on sale at The Strath’s pop-up shop in the lobby of the Hotel Grand Pacific noted “hopefully, we’ll be back soon.”

Editor’s note: To listen to the entire interview with Allura and Eric Fergie, listen to Episode 751 of WhiskyCast

Links: Fets Whisky Kitchen | BC Liquor Distribution Branch | SMWS Canada | Competition Bureau Canada | Victoria Whisky Festival

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