After industry boom, Quebec distilleries fight for space on liquor store shelves

Starting with locally grown corn, Samuel Gaudettetransformsgrain into alcohol, then adds ingredients such as juniper berries, Labrador tea and common prickly ashto produce agave sprite and gin at his boutique distillery in Quebec's Eastern Townships.

Gaudette, one of the founders of Comont distillery, based in Bedford, Que., sells ready-to-drink cocktails and spirits in Quebec's government-owned liquor stores, the Socit des alcools du Qubec, known as the SAQ.

It's one of the only ways Quebec distillers can sell their products. But the SAQ is trying to cut down on a glut of locally produced spirits amid a downturn in sales and a crowded market, andsome producers are worried. They're asking the province to allow them to sell their goodselsewhere, includingdirectly to customers online and at farmers' markets.

"We never know when the telephone will ring," Gaudette saidin a recent interview in his distillery's tasting room.

He's worriedthe SAQ could call him and say they will no longer carry his gin, or other products.

"Now I'm kind of scared."

The number of producers making spirits has exploded. There were just two in the provincein 2011, while there are nearly 70 today, according to the Quebec Union of Microdistilleries.

A boom in the production of Quebec spirits

Quebec spirit sales grew by 75 per centbetween 2019 and 2022, according to the SAQ.

"However, the decline over the past year shows a certain slowdown in local purchasing in our network and online onSAQ.com, combined with the more difficult economic context," the SAQ said in a statement.

Now, with more than 600 Quebec spirits available, the SAQ says its shelves are overrun andsales have declined overall since the height of the COVID-19 pandemic. It plansto cut back what's on offer by withdrawing up to 200 products.

"The withdrawal of these products will allow us to redistribute 15 per cent of the shelf space toward products more sought-after by customers," a spokesperson for theSAQ said in an email.

The change has left producers such as Gaudette worried about which products will be cut, and what they will do if their gins, whiskeys or vodkas are pulled from store shelves.

"We're kind of hitting a wall now with the law and the government," he said.

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Few options beyond the SAQ

As it stands, Quebec distillers can only sell their products in SAQ stores, from their own facilities, or by exporting them to other provinces or countries. Unlike several other provinces, they are not allowed to ship directly to Quebec customers through online sales.

With the SAQ now planning to limit products, calls are mountingfor the provincial government to change the rules andgive producers more pathways to sell their goods such as to restaurants, at festivals and farmers' markets, and through direct sales online.

"None of these channels exist in Quebec, and this problem is unique to Quebec," said Vivek Astvansh, an associate professor of quantitative marketing at McGill University in Montreal.

Paul Cirka, founderand master distiller of Cirka Distilleries, which produces whiskey, vodka and gin, said those alternate sales channels are crucial to keep the industry that the government helped build alive.

Cirka said while the SAQ has used local producers to its advantage in the past to drive sales and bring in customers, it is now prepared to leave some of them behind.

"They were encouraging us to produce products because they were interesting, high qualityand consumers couldn't get enough," said Cirka.

"And now they're going, 'Well, we have too many.' So guess, you know, guess who's going to suffer? It's local producers."

Claudia Loupret, a spokesperson for theoffice of Quebec's finance minister, said in an email that the government has already granted accommodations to producers by allowing them to sell their products from their production facilities.

Producers, however, say that pathway is limited because they still have to hand over more than half of the sale price to the SAQ.

The Quebec Union of Microdistilleries saidit is working with the SAQ to determine which products will go and which ones will stay on store shelves. The SAQ saidits plan involves withdrawing those with fewersales, leaving room for remaining products to get noticed.

The union's vice-president, Madeleine Dufour, said if the government doesn't change the laws, the industry could be at risk.

"Let's open up other ways to sell our products. This is what we've been waiting for a long, long time for," said Dufour.