Tequila in Canada

Canada has been behind the times, tequila-wise, compared to the rest of the world. In our nation of hockey viewers and beer drinkers, the wealth of new and premium tequilas that began to blossom in the USA in the mid-1990s has never taken root in Canada to anywhere near the same degree. This is for several reasons.

 

First, Canadians are much further away from Mexico, with another intervening country between us, and the travel costs are that much greater. Canadians are more likely to travel to Florida than to Mexico. About 1 million Canadians visit Mexico every year, compared to 14 million who go to the USA. So our exposure to Mexican culture and traditions is comparatively lower.

 

Second, while Canada has a growing Latin American population, it is still marginally small compared to the USA's, so the influence of Latin - and specifically Mexican - culture, cuisine, and tastes on the rest of the population is much less here. Cinco de Mayo is virtually unknown in Canada as an event or festival.

 

Perhaps more important is the way Canada handles alcohol sales. Almost every province controls the sale of alcohol through a provincial (publicly owned) liquor control board (LCB - Alberta is the sole exception: liquor sales and distribution are privatized). That means there are no competitive, national or even provincial chains looking for exclusive deals, new products to position themselves against the competition, so there is less commercial pressure to look at new or emerging products, or to take risks. In most provinces, all alcohol is sold only at government-run and staffed outlets.

 

 

And prices are the same at all provincial outlets since discounting and sales are restricted or nonexistent, so there is no price competition among outlets.

 

Not all Canadians are happy about the government control over their liquor sales, and there are movements - small, but determined - to privatize liquor sales. In an article for the frontier Centre for Public Policy, Manitoba's governmental control of liquor sales as, "Dowdy, puritanical, patronizing, not to mention expensive and inconvenient, are apt adjectives for our remaining blue laws and the entrenched monopoly that enforces them."

 

The article goes on to point to the success of the Alberta model, where liquor sales were privatized in 1993: "For real reform, Manitobans need only look to Alberta, which privatized liquor retailing in 1993. The initial benefit to Alberta, an injection of $51million into provincial coffers from the sale of assets, was followed by significant investment in new, taxpaying enterprises. Over the last ten years, the number of private liquor stores multiplied, as did product lists and employment in the industry, not to mention the expanded consumer convenience of locations and store hours. The price of liquor in real terms remained the same, and Alberta’s government deliberately kept the tax bite neutral. Red herrings raised by detractors, among them increases in alcoholism, consumption by minors and crime, have not materialized."

 

Alcohol sales are a major source of provincial and federal revenue, as well Ontario took in $1.2 billion from liquor sales from its LCBO in 2006, up $57.5 million from the previous year). That encourages LCBs and the federal government to heap taxes on top of imported prices. Typically a bottle of tequila sells for 30-40% more than the Mexican price, and may be considerably more. Even mixtos sell for $50 CAD a bottle and more. A mid-level premium bottle may sell for $100 or more.

 

Such pricing can discourage consumers from experimenting with premium products that sell in the stratospheric level of single malt scotch and fine cognacs.

 

On the plus side of this equation, LCBs are large so they have tremendous buying power, plus they have a captive market since no one competes against them. That means they can position a product well for exposure by stocking it in hundreds, even thousands of stores. The LCBO - Ontario - is the world's largest alcohol-buying agency, with more than 4,500 outlets. So the potential to make an impact with any brand or product is great.

 

The LCBO says that, as of 2007, tequila has seen a net growth of 12% in sales (2006 sales of $10.8 million), 11.8% in volume. The increase over the past five years is a whopping 76.5% in sales, which suggests Canadian consumers are more aware of quality tequilas than ever before.

 

To cater to that need, the LCBO has slowly expanded its line of tequilas. LCBO's Vintage outlets may offer a few brands (Sauza Hornitos, Hussongs, Tenoch, Herradura blanco, Cuervo Tradicionel), or be able to order a few select brands for you, but expect to pay a hefty price ($30-$60 Cdn). Sadly, the LCBO usually has only three or four 100% agave brands available at any time, the rest being rather low-quality mixtos, so you may have to shop across the border for the better brands until they get a wider selection locally.

 

But getting into any of the government-owned monopolies has proven frustrating to many tequila manufacturers, some of whom have simply given up trying to get into Canada. They cite poor product understanding, disinterest, sluggish bureaucracy, red tape, and the necessity of repeating the same steps at every provincial agency.

 

Still, the news isn't all bad. The LCBO reports a compound annual growth rate of 12% on net sales, 11.8% in litres. Total increase over 5 years: 76.5% net sales, 75.0% litres; dollar increase: net sales of $10.8 million. As one source told me, "We believe we will see continued growth from tequila, and that customers' interest will grow as they continue to explore the spirits category, possibly beginning to look for alternatives to vodka and rum."

 

Canadian customers are more educated and are looking for higher end tequilas, and are aware of the varying types. Premium tequilas are growing extremely well, and, an LCBO representative wrote, "the price point does not seem to create much resistance among connoisseurs and people interested in quality products."
 

However, the LCBO's larger volume still comes from the mixtos. But that may change: the LCBO says it will continue to expand its selection of premium tequilas, and will be looking specifically to fill in the mid-price range with 100% agave tequilas.

As for the new flavoured tequilas, the LCBO is cautiously optimistic: "We have carried several 'flavoured tequilas' in the past, and we believe there is an opportunity here. Once we start to see success in this area in the U.S., we think our consumers will be more aware of these products, and be interested in them."
 

Mezcals are even more limited here. Since mid-summer most tequilas have been getting significant price hikes - 60-100% across Canada. Read my report on tequila in Canada (Sept. 2000) at Tequila Aficionado.

 

The Canadian Government's own take on tequila is particularly out of touch with trends and the international markets. In a paper on the Agri-Food Past, Present and Future Report, presented in China, in January, 2007, the author, Ben Berry, wrote,

 

Stout, lager, rum, tequila and hard liquor are generally perceived to be drinks of the older generation.

 

To be fair, the author has told me he was writing about the Hong Kong market, not Canada, but I can't believe the former British colony would be a couple of decades behind trends in the rest of the world.

 

Recognizing the need to educate not merely consumers, but everyone in the hospitality industry,in 2006, the International Academy of Tequila, which provides training to bartenders, buyers, producers and consumers, announced it was opening a branch in the USA. Negotiations started in early 2007 about opening a Canadian branch.

 

 

 

Sources

• The LCBO

• Frontier Centre for Public Policy
• Academia Mexicana del Tequila

Back to top