Prices are expected to rise at the LCBO as freight costs for importing wine rise

Despite significant price hikes at the gas pump, in grocery stores and elsewhere, the cost of wine has remained pretty stable over the past two years. Sure, there have been moderate increases here and there, but nothing major.

That is about to change in mere months, according to industry insiders. So you’ll want to stock up now on your favourite bottles.

The LCBO sent Ontario wine agents a letter July 8 announcing new freight costs for importing wine to the province. And the new rates are unusually high for wine imported from areas outside North America.

“Generally, for every six-dollar increase in freight per case, the price on the shelf for that wine goes up about one dollar,” said one agent who spoke to the Star on condition of anonymity. “So you’re going to see increases of one to three dollars per bottle on a lot of wine from outside North America, for sure.”

In Ontario, every winery outside the province is represented by a wine agent who works with the LCBO to secure listings. The LCBO then imports the wine and sells it. The LCBO’s recent letter to agents cites freight increases of more than double the current rate for wines coming from such faraway places as Europe, South America and South Africa.

To name a few examples, freight rates for a particular wine coming from Spain will rise to $15 per 12-bottle case up from the current $7 per case. A certain wine from Italy will rise to about $20 per case from less than $10. And a specific bottle from Argentina will cost $20 per case up from about $9 now. Some increases are even more dramatic.

The new rates are calculated to a standard formula applied equally to all wineries, according to the LCBO letter. The new rates will affect all wines coming into Ontario, with the biggest hikes on wine from places farther afield.

The Star reached out to the LCBO via email asking if they anticipate price increases flowing from the new freight rates and the liquor giant replied: “Suppliers set their own pricing — subject to minimum retail prices — and have the option to adjust their pricing up or down throughout the year in response to currency fluctuations, freight rate changes or price changes by their competitors.”

Wineries, which the LCBO refers to as suppliers, and their agents try to keep prices as stable as possible on shelf, often absorbing slight increases in freight from time to time. But industry sources agree these new freight rates will be difficult to absorb now that margins have already been eroded from costs rising in the background for more than a year.

Wineries all over the world have suffered from steep increases in production costs, including oil, gas, electricity, glass bottles, labels and more. Weather events, such as the current drought in northern Italy, which the government declared a national emergency this month, exacerbate the situation. And supply chain issues, such as last year’s strike by dockworkers at Canada’s second largest port, the Montreal Port Authority, add to the strain.

The Star asked the LCBO why freight rates are rising, to which it replied by email: “In response to global supply chain issues over the last two years, production and transportation costs have increased for many consumer-goods businesses, including the beverage alcohol industry. This is a contributing factor to Canada’s inflation rate, which is at a 40-year high.”

Jim Lisser, executive director of Drinks Ontario, an industry association of wine agents and other beverage alcohol stakeholders, told the Star in an email: “Similar to most industries, higher freight costs could initiate price increases for consumers.

“The LCBO supply chain team and our members have worked closely together to limit supply challenges over the last year, and we have already initiated discussions to develop strategies to mitigate freight costs and price increases.”

Just how much they will be able to mitigate freight costs and price increases remains to be seen. Wine drinkers in Ontario will want to stock up now on their favourite wines from outside North America.

The new rates take effect Sept. 12. It is expected to take at least 12 weeks for the LCBO to process new purchase orders, organize shipping and receive the wine based on the new rates. Prices of affected wines are likely to rise in December at the earliest, but certainly in January.

See you at the LCBO.


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