Nova Scotia's offer to wine sector didn't follow report recommendations, says co-author

A proposed support package from the Nova Scotia government for the province's wine industry did not follow recommendations in an expert report and was offering too much money to commercial wine bottlers, according to one of the authors of thatreport.

Last week, members of the farm wine sector walked away from a working group with the government in protest of the offer. While it would have meant an increase in funding, they arguedadditional money for the two commercial bottlers in the province,which import grape juice, ignored recommendations in the expert report and would have created an unfair competitive advantage.

That prompted Finance Minister Allan MacMaster to write to Acadia University associate business professor Donna Sears, asking her to clarify portions of thereport she wrote with fellow professor Terrance Weatherbee.

• N.S. wine growers walk away from government working group

In her response to MacMaster, which was shared with CBCNews and other media outlets, Sears wrote the report provided recommendations and accompanying caveats or provisos, as required.

"It was expected that both would serve to inform decisions regarding support to the sector. It was never envisioned that any of the recommendations would be adopted independently of its associated caveat."

How to calculate any additional support

The government's offer to the sector was to increase a subsidy based on sales at Nova Scotia Liquor Corp.stores to 65 per cent from 50 per cent for farm wineries.The subsidy for commercial bottlers, meanwhile, would go up to 35 per cent from seven per cent.

• Nova Scotia government defends funding offer rejected by wine industry as 'fair'

Sears told MacMaster, however, that thereport does not call for a replacement of the existing support programs. Instead, she advocated for maintaining the 50 per cent and seven per cent subsidies, and said any further support should be split 65/35 between the farm wineries and commercial bottlers based on the economic contributions they make to the province.

"This ratio was intended to be exclusive of the sale of wine through the NSLC and only applied to support other value-added activities," Sears wrote.

"Indeed, during the discussions with the [farm wine] working group, there was consensus that while the [commercial wine bottlers] did deserve provincial support such support should not be based upon the use of previously subsidized inputs sourced from outside the province."

Consider what other provinces do

Finance Department officials said last week that it would be too difficult to calculate subsidies received by commercial bottlers for the materials they import, and instead proposed a cap on support of $1 million per year per operation.

Sears said that cap might address concerns about a "blank cheque" for commercial bottlers, but "the government's proposal does not actually address the central and most critical objection made by the [farm wineries], which is the 'double subsidy.'"

Instead, Sears wrotethat any additional support for commercial bottlers should be based on things such as employment creation and other "non-wine direct value-added activities."

Sears concludedher letter by recommending the government look at what provinces such as Ontario and Quebec are doing to support their wine and grape sectors, including creating a clear distinction on store shelves for wine grown in the province, imported wines bottled in the province, and all other wines.

"It would seem to me that these are several no/low-cost initiatives that could be easily replicated here in Nova Scotia, and which would clearly demonstrate the government's commitment to the sector as a whole."

Opposition leaders allege political favouritism

MacMaster told reporters on Thursday the government's next step would be to meet with the wineries, a meeting he saidwould include Premier Tim Houston.

For now, said the minister, the original funding support model will be maintained and the government's offer is on hold.

MacMaster said the response from Sears was helpful, but added that the government "wouldn't take the report and do exactly, necessarily, what she's saying."

"The report is to inform discussions and to come to some resolution," he said.

Opposition leaders said the government needs to do a better job of listening to the farm wineries and they took aim at the fact that Carl Sparkes, the owner of commercial bottler Devonian Coast,has been connected to the premier.

"[The farm wineries] have been very clear that they want a level playing field and they don't want to be underpriced on the shelf because the premier wants to do a favour for another friend," NDP Leader Claudia Chender told reporters.

Liberal Leader Zach Churchill said the government's efforts to date seem mainly focused on trying to get more money to the commercial bottlers and Sparkes in particular.

"There's no economic reason to be doing this," he told reporters, adding that the government's proposal could hurt the people who invest in farm wineries.

"Because it's going to give a real cost advantage to those that bottle wine that's produced elsewhere around the world or import juice. They already have a cost advantage now."