A Loaf of Bread, a Bottle of Wine... God Forbid You Sell Both in BC!

The Marché Saint George is nestled in residential East Van between Main and Fraser Street, at East 28th Avenue. Adorned with antiques, it is the perfect neighbourhood cafe, artisanal mini-market, or hangout for a morning croissant. It even boasts minor celebrity, having just been featured in a Monocle video piece called Best Cafes. The place languidly suggests community in the most civilized way, making people say things like "This is so [insert European country here]." Marché Saint George will never be a beacon for the vapid Starbucks crowd, but it is independent and inspiring -- the kind of place where I like to spend my time.

After poring over the shelves of Marché Saint George and devouring a pain au chocolat one morning, old dreams were rekindling: aspirations I once had to open a slightly different kind of shop. Call me crazy for wanting this. But what if Vancouver, or Victoria or Lillooet or Nelson or any town in British Columbia, were home to a café where, in addition to all the edible goods, a few wooden crates and a small shelf stocked with bottles of wine would sit in one corner? Bottles from small family producers of a certain ethos, both local and imported. A little shrine to all delicious things local, strengthening the 100-mile economy and bringing pleasure to visitors from near and far. How crazy would that be?

Not crazy at all... if you happen live somewhere else. I came up with the idea during my first visit to Terroir in San Francisco, a place whose owners are less interested in selling mass volumes of wine than they are in offering the kind of wine they believe in. In the meantime, the owners have created a community of wine lovers who come from all over to buy bottles off the shelves or drink wine at the bar and chat. My dream would be some charming and soigné marriage of the two. In many ways, it would be the most civilized place I could imagine.

I sit down to start planning. But it's long before I get to sketching the blueprints when things begin to get complicated. Nutty, even.

Looking for a license

Every store that sells alcohol in B.C. needs a license from the Liquor Control and Licensing Branch (LCLB). Simple enough. While browsing the categories on their website, only one fits the bill for my dream shop: the Liquor (Licensee) Retail Store, or LRS. However, the bold and exclamation-marked announcement: "We are not accepting applications for new licensee retail stores at this time!" is an obvious obstacle.

With a little correspondence, I find that it is possible to purchase an existing license off a current licensee. The transfer of a license fee is $330 and the relocation cannot happen within one kilometre of an existing LRS or government store -- a seemingly strange anti-competition law. (Imagine if coffee shops were given that kind of comfort: we'd more often be forced to frequent lame baristas, solely relying on their location.) But fine. A current list of license holders costs $30 and you can obtain it by faxing in this form.

When I asked an employee at the LCLB what people do with this list of licensees, and how to find the ones for sale, she said: "Sorry, no idea on that. We don't usually ask why they want the information, as it is information that can be found on the face of the licence [which is displayed in the establishment]."

That's all the LCLB can help me with. Unless I want to canvas the local license holders to see who's willing to sell, I need to find an agent to locate a license for sale and help me negotiate a price. A business like Rising Tide Consultants will broker a deal for me, but a bit of correspondence with Bert from Rising Tide unveiled some frightening figures:

"An operating LRS is selling for about four or five times the net earnings of the store at the existing location. I doubt you would ever get a store for less than $500,000, even a non-operating store. The last non-operating store that sold in Vancouver went for about $700,000."

Chatting with other shop owners in the city reaffirmed that the going rate for a LRS starts in the cool $500,000s. Yup, half a million. For the license. That extinguishes any image of running a shop where wine plays a lesser element to the overall sales. That's a big debt to pay off when I'm only planning to move a few cases a day. I'm either going to have to sell a lot of espresso or scrap the whole "artisan, family producer" dogma and start case-cutting the Yellowtail. But, while we're already into it, let's pretend that the licensing costs aren't prohibitive and continue through the planning stages.

As an aside, it is perhaps important to point out that the LRS license is different than the six grandfathered wine shop licenses that were given out during Expo '86 (now called "Independent Wine Stores"), which receive a higher purchasing discount and are some of the best wine shops in the city, including Marquis, Liberty, Kits/Dundarave Wine Cellars, Everything Wine, and Broadway International Wine Shop. The higher discount makes it more conducive to being profitable without relying on mass sales. Should one of these licenses become available on the market, it would cost substantially more than an LRS, as the potential for earning is much greater.

Goods for sale: cigarettes and chips?

Say I've bought my license. Let's see what else I can sell in my store. Page 12 of the Licensee Retail Store Licence terms and conditions states that I may sell "B.C. lottery products, cigarettes, packaged snacks (i.e., chips and nuts) and liquor-related items." However, my store cannot "resemble a convenience store and... may not stock other items, such as milk and newspapers." I know that many LRSs sell soda, so I figured that I'd ask the LCLB if I would be able to sell coffee. Here is an excerpt from the letter I received in response:

"Liquor stores must be separated from and appear to be distinct from any other business. Liquor stores must focus on the sale of liquor and are only permitted to sell liquor and liquor related items (glasses, corkscrews, bottle openers, etc) -- in addition to these liquor related items, liquor stores are also permitted to sell only a limited selection of other products such as cigarettes, lottery tickets, and packaged snacks such as chips or nuts. The sale of coffee or espresso would not be permitted in a liquor store."

The letter goes on to say, "Within B.C. you would need to open two separate businesses. The first could be an artisanal neighbourhood cafe and market. The second could be a small boutique wine store -- possibly even next-door to the cafe/market. Both businesses would have to be stand alone and there could be no appearance that wine store and neighbourhood cafe/market are connected to or affiliated with one another."

So just to be clear: I can put cigarettes in the mouths of my patrons while they gamble, but I can't sell them a jug of milk. And definitely not a shot of espresso. Also, not only are two elements of my business (the artisanal neighbourhood cafe/market and the small boutique wine store) required to have separate entrances, but they can't even appear to be affiliated with one another.

Despite the absurdity of this scenario, the rationale is obvious. The government doesn't want grocery stores to sell booze. If the Jimmy Pattisons and the Safeways began stocking alcohol and moving high volumes of it (which they would), they would be able to use their buying power to put pressure on the government and lobby for reasonable, business-minded liquor laws. Safeway clearly wouldn't be happy with a lowly 16 per cent licensee discount on alcohol if they purchased tens of millions worth of alcohol annually.

A modest proposal

Say that I decided to proceed with a somewhat bastardized version of my dream, bought the $500,000 license and found two retail spaces for lease side-by-side (and the two spaces are branded completely differently, because they aren't allowed to look like they're affiliated). Now I run into a new problem -- profits. The wine that I buy from the government to stock my shelves gets a measly 16 per cent discount (this explains why most private LRS stores need to charge you more than the government liquor stores [BCLDB] do). No one on the planet would consider running a retail store with 16 per cent profit margins, so LRSs are forced to sell wine at a higher price than their competitor (and supplier), the BCLDB, does. If an LRS were shooting for a modest 30 per cent profit margin, they'd need to sell a $20 bottle for about $24 ($20 - $3.20 discount [16 per cent] = $16.80 [70 per cent cost] + $7.20 [30 per cent profit] = $24).

Pretending for a minute that my store had no lease and no operating costs (labour, security, etc.), I would need $1.66 million in sales (at 30 per cent profit) to regain the cost of the license ($500K). If I managed to do that in one year, that would require $32,000 a week in sales or $4,560 a day. In my outlined model, where wine would be a lesser element to the cafe and market, accounting for approximately $750-$1,000 in sales per day, I'm looking at somewhere around five years down the road until the license would be paid off. Throw in a lease, labour, and other operation costs, and it's closer to a decade.

This is why there is no such thing as boutique LRS wine shops in this province. There are no hole-in-the-wall neighbourhood shops and thoughtfully curated selections in local markets as there are in San Francisco, New York, Portland, Paris, Berlin, etc. Not only do the government's high wine markups (123 per cent) make it unappealing to purchase fine wines, but the licensing makes it nearly impossible to sell fine wine.

Ideally, there would be another boutique category of license created. It would allow the licensee to sell wine in conjunction with other goods -- a list of goods that wouldn't include cigarettes or lottery tickets. The volume could be controlled to prevent the creation of wine and grocery emporiums. You could even require that the boutique wine license may only purchase up to $500,000 of wine from the BCLDB annually.

More ridiculous laws created within a ridiculous and frustrating system -- but at least a step towards sense. Until then, my dream remains impractical, implausible and crushed. Crazy me.