Quebec Distillers Welcome Ready-to-Drink Reform Amid Economic Uncertainty
Quebec's alcohol market, long regarded as one of North America's most tightly controlled, may soon witness a significant expansion. A proposed amendment to Bill 11 on regulatory relief, introduced in February and set for adoption this spring, would permit ready-to-drink cocktails made with distilled spirits to be sold in grocery and convenience stores across the province.
This policy shift marks a potential opening for spirit-based beverages to join wine and beer on retail shelves, a move broadly welcomed by the province's drinks industry. However, many producers express lingering concerns about the economic viability of the new framework, with questions about margins and implementation details remaining unresolved.
Current Market Landscape and Proposed Changes
Currently, Quebec grocery and convenience stores can only sell malt-based ready-to-drink beverages, despite these products containing the same maximum alcohol content (up to seven percent) as spirit-based drinks available through the Société des alcools du Québec (SAQ). This regulatory distinction has led producers to develop different recipes depending on where their products are sold.
Samuel Poulin, Quebec's minister for the economy and small and medium enterprises, explained that the reform reflects the rapid growth of the province's craft spirits sector. "There has been a strong increase in distilleries in Quebec, particularly those producing gin, and ready-to-drink beverages have been growing quickly over the past two years," Poulin said in an interview.
The minister highlighted the scale of the existing industry, noting that "there are currently 112 Quebec-made ready-to-drink products at the SAQ, and we're talking about an industry worth more than $450 million."
Industry Response and Economic Concerns
Nicolas Duvernois, founder of Duvernois Esprits Créatifs, which produces Romeo's Gin ready-to-drink beverages and Pur Vodka, welcomed the reform as "amazing news that someone finally wants to do something." However, he quickly added a note of caution: "Before we open the bottle of champagne, we need more details."
The primary concern among producers, particularly smaller distilleries, revolves around profit margins. The industry encompasses a wide range of operations, from businesses producing 500,000 cases annually to those manufacturing just 10,000. Many rely on third-party manufacturers for production and canning, adding additional costs to their operations.
According to industry insiders familiar with pricing models, establishing a production line for ready-to-drink beverages can require investments ranging from $400,000 to $1 million. Production costs per drink typically fall between 45 cents and $1.25, depending on scale and ingredients.
Under current distribution models, producers typically aim for margins of 30 to 50 percent, with distributors taking 20 to 25 percent and retailers another 30 to 35 percent. The SAQ maintains margins of approximately 40 to 45 percent on spirits.
Duvernois explained the potential problem: "If the SAQ keeps its current margin structure while distributors and retailers also take their share, it doesn't make sense financially for anybody. The devil is in the details."
Competitive Landscape and Implementation Challenges
Smaller distilleries express particular concern that if margins become squeezed, larger multinational beverage groups with established distribution networks and marketing budgets would gain a competitive advantage. "What we have to make sure," Duvernois emphasized, "is that this doesn't just help the big players with big money and big distribution."
Even major brewers have expressed reservations. Philippe Roy, director of L'Association des brasseurs du Québec, which represents companies including Labatt and Molson Coors, noted concerns that the change could introduce additional regulatory complexity, potentially driving prices higher to the detriment of both consumers and businesses.
Roy also questioned the consultation process, stating: "Everybody was surprised that day when he announced that. There should have been a consultation with the government beforehand before the decision was taken."
Government Perspective and Future Outlook
Minister Poulin pushed back against these concerns, asserting that the government's role is to open the market rather than negotiate margins. "When it comes to negotiations, when we want to have a free market and free enterprise, I am leaving it up to the distilleries, the grocery store chains and the SAQ to come to an agreement on that level," he explained.
Poulin expressed confidence in Quebec's small and medium enterprises, noting: "I am confident that our SMEs will be able to succeed. They did it at the SAQ. I am convinced they will do it in grocery stores."
The minister acknowledged that industry groups including the Union des microdistilleries, the Canadian Federation of Independent Business, and retail associations had long advocated for this change.
The SAQ, in a statement, acknowledged the proposed amendment and indicated it would "collaborate with the government to provide our expertise on operational issues and responsible alcohol sales." The crown corporation added that once the regulatory framework is finalized, it would "engage in the necessary discussions with our teams and stakeholders to determine the next steps."
As Quebec prepares for this potential market expansion, the drinks industry remains cautiously optimistic. While the policy shift represents a significant opportunity for growth and market access, the economic details will ultimately determine whether this reform delivers benefits across the entire industry or primarily advantages larger, established players.
