The Enormous Opportunity for Canadian Whiskey and Other Spirits

The Empire Club Presents

Jan Westcott: President & CEO, Spirits Canada/ Association of Canadian Distillers:

The Enormous Opportunity for Canadian Whiskey and Other Spirits

April 5, 2016

Welcome Address by Dr. Gordon McIvor, President, Empire Club of Canada

Good afternoon, ladies and gentlemen. From the Arcadian Court in downtown Toronto, welcome, to the continuation of the 112th season of the Empire Club of Canada. For those of you who are joining us either through our webcast or our podcast or on Rogers Television, welcome, to our meeting. Now, before our distinguished speaker is introduced today, it gives me great pleasure to introduce you to our head table guests.

Head Table:

Distinguished Guest Speaker:

Mr. Jan Westcott, President and CEO, Spirits Canada/Association of Canadian Distillers

Guests:

Mr. Neil Currie, General Manager, Ontario Federation of Agriculture

Ms. Barbara Jesson, President and CEO, Jesson + Company Communications Inc.; Director, Empire Club of Canada

Mr. Davin de Kergommeaux, Author and Writer

Ms. Anne Leonard, Executive Director, Arrive Alive, Drive Sober

Mr. John Maxwell, Owner, Allen’s Restaurant

Mr. Don McCabe, President, Ontario Federation of Agriculture

Dr. Gordon McIvor, Executive Director, National Executive Forum on Public Property; President, Empire Club of Canada

Ms. Leslie Smith, CEO, Smart Serve Ontario

Mr. Joel Toguri, Director of Operations, Glazers

My name is Gordon McIvor. I am the Executive Director of the National Executive Forum on Public Property. Ladies and gentlemen, your head table.

Introduction

Many Canadians can recount at least one story relating to the legendary drinking bouts of our first Prime Minister, Sir John A. MacDonald, who had a voracious and unwavering devotion to alcoholic beverages of all kinds. Far fewer are aware of the importance of whiskey in the early history of our country, including the financial importance of distilled products. There is an entire period before Confederation during which whiskey and products like that were actually paying enormous amounts of taxes. In fact, pre-Confederation, a single distillery, Gooderham & Worts, paid more tax es than any other body in all the territories that would later become Canada. In Toronto itself, this distillery was one of the largest commercial enterprises in the city. So it begs the question, Did people consume more spirits back then? The answer appears to be an unequivocal, “Yes,” and statistics show us that during Sir John A. MacDonald’s time, every living soul consumed on average four gallons of alcohol each year in the young nation. And one can assume that women and children drank less than the men folk, which means that the number would have been far higher for them.

Now, being large consumers led to a wide variety of high-quality products emanating from J.P. Wiser’s, Hiram Walker, the aforementioned Gooderham and Worts and many others. Throughout this history, Canadian whiskey always occupied a very special place as it was universally recognized for its distinctive taste and its high-quality smoothness. This is in part due to the practice adopted very early of adding small amounts of highly flavourful rye grain to their mashes, leading people to refer to the product as “rye whiskey” or just plain “rye.” Soon this distinctive taste has fans all over North America and, eventually, across the entire world as referenced in countless historical speeches from this very podium at the Empire Club. For example, in 1970, we had a rather famous address by the marketing guru of Canada back then. His name was John Straiton. He was the President of Ogilvy & Mather. Some of you may remember that, and this gentleman, as one of the leading consumer product experts of his era, surprised his audience by informing them that rye was a very big deal for our American cousins south of the border. Here is the quote from that speech in 1970:

We once tested some advertising ideas for a stereo set in Toronto and in Chicago. The phrase “Made in Canada by Canadian Craftsmen” was actually rated better in Chicago than it was in Toronto. I know that Canadian whiskey is the biggest selling whiskey in the U.S. They like our spirit, somehow.

Not surprising then that Barack Obama made sure that there was some Canadian whiskey used in preparing the steak dinner he recently offered for our Prime Minister and his delegation, a fact that was certainly not lost on Canadian media, nor is it surprising that Canadians, now better understand the importance of distilled products and how their country has excelled at this from the very beginning culminating this year when a Canadian whiskey, Crown Royal Northern Harvest Rye, was honoured all over the world when it was named the 2016 World Whiskey of the Year. To mark this occasion and to recognize the historical, financial, and cultural significance of Rye, a quintessentially Canadian product of iconic status, the Empire Club is absolutely delighted today to welcome to its podium, Mr. Jan Westcott, the President and CEO of Spirits Canada, who will explain how we got to being distillers who are now beating out the Irish and the Scots at their own game in the awards department producing what is now officially considered the best whiskey on the planet.

Now, for the skeptics, there was tasting earlier on, and I heard nothing but extremely positive results as a result of that, and, of course, it is for those who are history buffs we will toast to another supreme Canadian success story that is all too often more known in other countries than right here at home in Canada. Canadian whiskey has been an important part of our history, our politics and our identity. And while few would want to indulge in the excesses of some of our forefathers, it deserves to be appreciated by far more Canadians than it is at the present time.

Jan Westcott has represented the Canadian distilling industry since 1998 and was a key player during three major milestones for Canada’s beverage alcohol business. As President of the Canadian Wine Institute, he was part of key negotiations with the U.S. and Europe which set the stage for greater access to imported wines. He also represented the industry during the Canada/U.S. Free Trade Agreement, helping to lay the groundwork for the enormous success currently enjoyed by the Canadian wine industry.

During a U.S. dispute before the WTO over Canada’s protectionist practices, as CEO of the Brewers of Ontario, he participated in negotiations that led to significant changes to the availability of imported beers. He may well know more about the importance of the spirits industry to Canada’s economy, jobs and wealth creation and its integral role in Canadian agriculture than anyone else alive today. And his message is an important one for all those Canadians who think about Canadian brands and products in the international marketplace and how one goes about making these brands and products, not only highly appreciated here at home in Canada, but out in that much tougher and more competitive international marketplace.

So, ladies and gentlemen, it is with great pleasure that we welcome at the Empire Club today, Mr. Jan Westcott.

Jan Westcott

Canadian whiskey is poised to claim a much more prominent, potentially dominant, global position. The only thing standing in the way are our own structural impediments, self-inflicted wounds of the worst kind.

Good afternoon, head table guests, Empire Club Directors, ladies and gentlemen. Today I am going to talk about the enormous opportunity for Canadian whiskey and other spirits produced in Canada, the obstacles that Canadian distillers face and what we must do to eliminate those obstacles, the structural impediments of our own making so that we can together maximize the opportunity for the benefit of all Canadians. As has been alluded to earlier, a few short months ago, Jim Murray, author of the renowned U.K. Whiskey Bible 2016 recognized Crown Royal Northern Harvest Rye as the world’s best whiskey for 2016. Yes, you may certainly applaud, and I hope you enjoyed your taste of Northern Harvest Rye in our toast to the Queen.

All of a sudden, a category, “Canadian Whiskey,” long taken for granted here at home, is being discussed in every corner of the global, anywhere and everywhere that whiskey is consumed. Whiskey lovers of the world are asking, “What is this? Who makes it? Where can I get some?”

Coinciding with Murray’s declaration about Crown Royal Northern Harvest Rye being the world’s best whiskey has been a huge upsurge in overall consumer interest in brown spirits, especially, whiskey and, most particularly, rye whiskey. Distillers everywhere are responding to meet the exploding consumer desire for classic rye whiskey as well as innovative new styles.

Now, rye has been the forte of Canadian distillers for more than a century. And our distillers are creating a whole new generation of exciting brands with Northern Harvest Rye as just one example, and we are not alone. Whiskeys distilled outside of Canada are capitalizing on modern consumer trends to grow their own sales and popularity. One example is Irish Whiskey, a category that emerged from the shadows to take a major global position. Led by Jameson, Irish Whiskey has seen phenomenal growth over the past fifteen years jumping from less than $100 million in export sales to half a billion. Every distiller in every market wants to take maximum advantage of this surge in consumer-driven demand.

In Ireland, there is a tangible reawakening in the whiskey sector. New distilleries are being built. New brands and new companies are being launched, and there is an impressive upsurge in business investment. This is great for Ireland—more jobs, economic growth, more opportunity for people looking for work and to learn a craft.

Okay, how about Canada? Whiskey and whiskey-making are older than Canada itself. For two centuries, distillers in Canada have been actively contributing to the economic well-being of this country, and the business of whiskey is interwoven into the very fabric of Canada. Bold claim: “Interwoven into the very fabric of Canada.” Two quick examples: You are all no doubt aware of the global insurance behemoth, Manulife. Manulife was created by two Canadians, one was also the principle founder of our country, Sir John A. Macdonald. The other founder was Henry Corby, who built and ran Corby Distilleries near Belleville.

Now, I will let you in on a little secret: I and others suspect Sir John A. provided the idea for the then Manufacturers Life Insurance Company, and Corby provided the financing and the business know-how. Corby Spirit and Wine today operates the Hiram Walker plant in Windsor, North America’s largest distillery.

My second example involves a group of renegade Americans who in the 1860s illegally sold cheap, low-grade whiskey in southern Alberta. These hooligans were not shy about what they were doing, not at all. Their headquarters, situated in what is now Lethbridge, Alberta, was called by these American bandits, maybe appropriately, “Fort Whoop- Up”—and it was. Ottawa sent a detachment of horsemen to drive out the renegades and put an end to their illegal trafficking. That group of horsemen came to be known as the “North-West Mounted Police,” the forerunners of today’s RCMP. So our country’s founder, Sir John A. Macdonald, the RCMP, interwoven into the very fabric of Canada, is no exaggeration, and there are many more examples.

However, the whiskey component of that Canadian fabric is in danger of fraying or completely disintegrating. I tell you, ladies and gentlemen, we are at a critical crossroads nearing crisis in fact. The Chinese do not have one single symbol for crisis and must, therefore, use two. You may have already heard this before—if you have, bear with me, but it is so relevant to my topic that I think it is worth repeating here. To express crisis, the Chinese use two symbols. The first symbol represents danger. The second symbol represents opportunity. Canadian distillers today face genuine, real and present danger, but if we recognise the danger and rise to the challenge it presents, we can leverage it and convert it to become a powerful opportunity.

So who exactly are Canada’s distillers? Partnering with farmers across Canada, we convert high quality grains into world-class branded products exported to more than 160 countries around the globe. We make iconic brands recognizable worldwide: Canadian Club, Crown Royal, Wiser’s, V.O., Alberta Premium, Black Velvet, Canadian Mist, Gibson’s and, more recently, Forty Creek.

Canadian Club and Wiser’s have been produced and sold continuously for 160 years. Think about that. Think about any other retail brand you could think of that has been here for 160 years and still going strong. Crown Royal, created in 1939, originally to mark the first ever visit to the country by its reigning monarch, King George VI, just celebrated its 75th anniversary.

Distillers have a powerful and enduring relationship with Canadian farmers, our partners. Allow me for a moment to recognize our partners and my friends from the Ontario Federation of Agriculture here today and our sponsors. Thank you. Distillers are significant users of Canadian grain. We are exceptionally proud of the fact that almost all of the grain, virtually all of the grain, used in our distilleries, comes from Canadian farms and Canadian farmers. This means 320,000 metric tons of Canadian grain every year are used by distillers. We are the biggest buyers of rye in this country, and we are one of the top purchasers of corn in Ontario and in our neighbour next door, Québec. Canadians want Canadian businesses to do more here in Canada with Canadian materials and Canadian resources, and distillers are doing just that.

Some statistics: Distilling contributes $5.8 billion to Canada’s GDP. They employ 8,000 skilled Canadian workers in good, high paying jobs in twelve plants across the country. And last year, the spirit sector generated nearly $700 million in exports for Canada. In fact, spirits represent two-thirds of Canada’s alcohol exports with beer and wine combined responsible for the other third. That surprises a lot of people. I mentioned a moment ago that we partner with farmers. Distillers are dependent on farmers doing what they do, so we can do what we do. These farmers are in Ontario, Manitoba, Saskatchewan, Québec and Alberta. In fact, in every single province where we produce spirits, we buy from farmers in those provinces. Incredibly, once we have used the starch in those grains, they then provide cattle, hog, and dairy farmers with high protein distiller- dried grains, an environmental and economic win/win, for sure.

In 2015, the world whiskey market was worth $8 billion. Whiskey and other spirits, by their very nature, are high value goods. They create jobs, significant economic activity, sizable tax revenues and economic growth potential. Scotch, the world’s leading selling whiskey last year, exported $6 billion.

Earlier, I mentioned Ireland and the tremendous growth that Irish whiskey has achieved in pretty short order. Relative newcomers, Japan and Korea, are also making great whiskeys and gaining standing. Bluntly put, if Canada does not change its course and improve its ability to participate in this global business, we are in danger of being overtaken and relegated to the history books. This would be a travesty and a tragedy.

Today, we are exporting almost $700 million worth of spirits, most of that whiskey. Based on what we project and the massive surge in world-wide demand and popularity of our truly world-class product, I am convinced we should be well over a billion dollar exporter if not much, much more. This is a time of immense opportunity, but we must act on that opportunity before it is lost. I have a vision of Canadian rye whiskey ultimately becoming a $2 billion exporter.

Imagine the benefits if that vision was attained. It can be done. Davin De Kergommeaux, who is with us here today, wrote in his book Canadian Whiskey: A Portable Expert Canada rightly lays claim to being one of the world’s eminent whiskey-producing countries. We are responsible for many advances in the nature and quality of whiskey, not least the fact that Canada legislated aging distillate and wooden barrels long before any of its competitor countries.

J.P. Wiser, Henry Corby, Hiram Walker were famed in their day for bringing quality improvements to whiskey far ahead of their competitors elsewhere. As you heard earlier, Canadian whiskey was, for decades, the whiskey most consumed by Americans. Beginning in the late 1700s, thanks to different European wars, Britain suffered shortages of spirits, shortages that the Scots and the Irish just could not meet. Fortunately, during this difficult period, Canada helped keep the Brits sane by providing a plentiful supply of Canadian whiskey. You know, for a time, Canadian rye was among the leading selling whiskey in the United Kingdom. We have done it before; we can do it again.

Iconic brands, centuries of experience, refined craftsmanship, unique and distinct Canadian style and taste, the world’s best whiskey, global recognition of our superior quality, surging world interest, the best grains and water anywhere and an evolving open trading environment giving us access to foreign markets once closed off to us. It is a perfect storm. We have every element necessary to succeed and ensure that Canadian whiskey rises to meet this burgeoning opportunity. So what is the catch? The catch is shackles here in our own home market that threaten opportunities for achieving major success on the world stage. With clarity, vision, strong leadership, increased government and industry collaboration, we can undo these impediments and leapfrog into a much more prominent, potentially dominant global position.

Here are some of the structural impediments we face, relics of an earlier age: Governments impose a hugely disproportionate fiscal burden on spirits by taxing them at far greater rates than taxes on beer and wine. And more restricted access of consumers to spirits despite overwhelming evidence that modern consumers regard all alcohol beverages as virtually the same. That is a viewpoint supported by scientific data and opinion.

Last year, the U.K. Chancellor of the Exchequer in his formal budget address in Britain stated, and I quote: “To further support the Great British success story, the Scotch whiskey industry, the duty on spirits will be cut by 2%.” When was the last time any Canadian elected official made similar statements as to the value and importance of Canadian whiskey to our economy? Seldom, if ever, do we hear a political leader speak to the value that spirits bring to Canada, the jobs they create and support, the role spirits plays in helping agriculture, farms and farmers and other suppliers, the value generated in earning much needed export dollars. Politicians are not talking spirits or doing anything about the structural impediment. This has to change.

We have to address the highly tilted playing field that spirits face, and yet there are small, encouraging signs that the change has already begun. New, small boutique distillers are popping up across the country for the first time in generations and are gaining attention. The emergence of small distilleries is positive, and there is no doubt that these new, small spirits producers will help increase consumer interest in spirits. We wish them well, but we must also focus on the bigger picture and bigger obstacles and getting rid of bigger impediments for all spirits.

Like most countries, beverage alcohol sold in Canada attracts specific taxes, simply because they contain alcohol. These take the form of federal excise duties and taxes and, in the provinces, Liquor Board markups and commodity taxes. In virtually every jurisdiction, governments levy far higher taxes on spirits than they do on beer and wine, and I will give you a couple of examples: Federal excise duties on spirits are 200% of those imposed on the same amount of beer and wine—twice as much tax on the identical amount of alcohol. In fact, in a flat market, federal excise revenues from spirits have soared 40% since 2006 in a flat market. The second example: In 2006, Canadian wine made from 100% Canadian fruit was completely exempted from excise duties. Now, we appreciate the desire to aid Canadian vintners. I was a vintner for a long time. We appreciate the supports that are being given, but we and our farming partners, remain perplexed why wine products would receive such strong support for 100% Canadian fruit while distilleries failed to receive similar support for 100% Canadian grains. Structural impediments are not only or even predominately a federal issue: Every province taxes spirits far more heavily than they tax beer and wine, including—and this I find enormously ironic—beer and wine from other countries.

In Nova Scotia, the posted mark-up on spirits is a whopping 160%, but in some cases, the total provincial load in that province is over 200% due to some highly questionable pricing policies that impose higher rates. In addition to lining its pockets at the expense of its own citizens, Nova Scotia is also diverting significant investment out of that province with its off-the-chart mark-ups. Keep in mind that it is not like distillers can sell to Nova Scotians at a fair price. The only way to consumers is through the Nova Scotia Liquor Board. Nor should other provinces be smug. Every province follows a similar pattern of imposing discriminatory taxes on spirits compared to lower taxes on beer and wine.

Now, to be fair, we are seeing encouraging signs in Ontario and in Alberta where for the first time government leaders and officials seem sensitive to the unfair fiscal burden. In its last two budgets under two very different governments, Alberta very significantly closed the gap between spirits, beer and wine, and much to its credit, Ontario’s recent budget froze its mark-ups on spirits, a development for which we are most grateful.

We are encouraged that Ontario and Alberta are listening. It is a great start. We must do more. Why? Because we continue to see provinces provide easier, more convenient access to consumers for our competitors’ products. B.C. and Ontario’s decision to exclude spirits from sale in farmers’ markets is a good example. Another is beer and wine on sale on Ontario grocery store shelves—an option specifically ruled out for spirits in both B.C. and Ontario. Similarly, almost every province has given its local producers tax breaks and wider access to consumers, incentives systematically denied for producers in a neighbouring province. These inequities further tilt the playing field against distillers and spirits, and these local advantages confer to what many call “favourite sons” are creating a whole new class of interprovincial barriers, structural impediments right across this country.

There is more. Our Canadian web of tax structure and overregulation results in Canada’s distillery sector having the lowest gross margins for spirits anywhere in the world. When you sell spirits in Canada, you make a lot less money than if you sold them elsewhere, dramatically less. We have a significantly weakened competitive stance: We are weak in competing with beer and wine and are particularly weak in competing against our international whiskey competitors.

Canadian governments appropriate so much of the spirits transaction that Canadian companies have far fewer dollars to invest. Money just is not there to upgrade plants, to develop new products, to expand export markets or to simply promote their products at home, never mind across the globe. Attracting investment capital to the Canadian spirits business is tougher than ever before. Our inability to match marketing dollars of leading competitors has already affected Canadian whiskey’s position. After dominating the U.S. market for nearly eighty years—eighty years—in 2011, Canadian whiskey dropped to second place as American straight whiskey brands, like Jack Daniel’s and others, ramped up their promotional activities and squeezed Canadian whiskey brands down. We may be down; we are not out. But—and it is a big but—we must face reality and we must act. For things to change we must change. If we keep on the current path, if we are unwilling or unable to begin to fix the inequities, to begin to eliminate the impediments, the opportunity to grow and prosper will be lost, potentially forever. Business does not stand still; neither must we.

I want to take a moment here to publicly reinforce our industry’s strong commitment to ensuring our products are used in the right way by the right people at the right time. Some of our partners in these efforts, Anne Leonard from Arrive Alive DRIVE SOBER, and Lesley Smith from Smart Serve are with us today. Thank you for your good work. Keep it up.

Okay, you are sitting out there saying to yourself, “These comments: Pretty typical, self-centered, biased business complaints. Heard them all before. Why should I pay any attention?” Or you might be wondering how this doom-and-gloom picture fits with my earlier statement that Canadian whiskeys are poised to jump into a much more prominent, potentially dominant global position. Joined as I am by our agriculture partners today, we prefer to look at the brighter side, the side of optimism and draw on Canadian resiliency, grit and determination. We can reorient our approach. We can again be number one—and more. We can rise to the prominence that our world-class products fully deserve. It would be a travesty and a tragedy not to do so.

The solution requires change. More government and industry collaboration. Strong, intelligent leadership in business and in government—and let us be real—good, old fashioned common sense. Imagine for a moment what a billion dollars in exports would mean, not only for our industry but for the country and all Canadians. Imagine a return to being the most popular whiskey in the United States, the world’s largest beverage alcohol market. Imagine catching up with scotch, single malt, Irish and going toe- to-toe with bourbon. Imagine a return to the habits of the ‘50s and ‘60s and ‘70s when prime ministers and premiers never left Canada without taking along a case of Canadian whiskey. It was a way to showcase Canada and a token of Canada’s esteem and friendship. We need to return to those days when we were truly proud of Canadian whiskey and what it said about Canada and Canadians.

So where do we go from here? Well, for starters, we are stepping out publicly to talk about the opportunity to highlight where we can go and what we can achieve if we work together. Today is the first time this industry has addressed these issues and these impediments publicly. There will be many more. And you have a role to play: We need your help in spreading the word and conveying to governments, legislators, and regulators the risks and consequences of continuing on the path that we are on. Canadians value highly those things they see as distinctly Canadian. Canadian whiskey is one of those distinctly Canadian tangibles that help describe and define our country. We have a world- class product recognized at home and all around the globe. Americans have patronized our whiskey from the days of the Civil War through prohibition right up to the present day. Canadian whiskey and Canadian spirits are an element of Canadiana that all Canadians would lament losing. We have a fantastic opportunity to reposition Canadian whiskey on the world stage. It is an opportunity that would see Canadian resources, Canadian talent, and Canadian products marshalled to the maximum benefit of all.

Ronald Reagan is well known for his statement, “Mr. Gorbachev, tear down that wall.” Today, I make a similar call to action: Prime Minister, provincial premiers, tear down those structural impediments. Working together, let us elevate Canadian whiskey to world-wide prominence. It is too good not to. Cheers.

Questions & Answers

Q: Thanks very much, Jan, for the speech. Curious from the perspective of political leadership and will in the country and, more specifically, curious about your comment on prime ministers who used to always travel with cases of Canadian whiskey. Why did it stop, and can we find a way to make that happen again?

JW: Well, the first answer is probably airport security. The second answer is I am not sure. In truth, a little secret: Canadian prime ministers and many other political leaders in this country did take Canadian whiskey with them when they traveled. It was a great ambassador to travel along with them. In fact, the former Emperor of Japan, known in Canada, traveled to Japan without taking a case of Crown Royal because the favourite whiskey of all time of the former Emperor of Japan—not the current one—was Crown Royal, and if you wanted to make a good impression in Japan, you took the Emperor some Crown. You did not take him a bottle. You better take him a case.

But it is a true story and that was pretty common. You have to remember that if you go back to the ‘60s, two Canadian companies dominated the world spirits industry, Seagrams with the Bronfmans and Hiram Walker with Harry Hatch. Those two companies controlled 70%, 80% of the world’s spirits business— tremendous amount. Had a little cash coming out of prohibition obviously so, yes, we were major players.

Q: Great presentation. My question is why do you stop at $2 billion? Scotland has got a fifth of the population, a sixth of the population as we do. What is it that they have that we do not right now in the industry? There is diversity, but the grains, the water—whatever Canada has, it seems like it could absolutely compete with that market.

JW: If you are asking what they have in terms of competitiveness, we do not have margins which is the short answer. We lack margins in this country. It is not a new problem. It has been around for a while. But as I say, it is amazing that we have so much going for us, and, being recognized frequently, as I said, most recently with Northern Harvest Rye, as producing these fantastic products. The explosion that is taking place in the Canadian whiskey business—as it is in many other whiskey businesses—is fantastic. The quality, the range of products, the innovation that is taking place are terrific. I picked $2 billion because it is a nice round number, but I am happy to go higher. Thank you.

Q: You did not talk a lot about demographics. Who is consuming whiskey now in Canada? And I know when I was growing up, I always thought about it as kind of an older guy’s drink. Are women drinking whiskey now in a much greater amount than they did when I was a kid?

JW: Absolutely. They are not drinking it the same way. There are no rules, so you have all been hearing about millennials and their attitudes and behaviours. There are no rules. What we did in our generation, what we felt was appropriate to consume at a particular occasion, that stuff is all gone. Women are drinking whiskey. We just came from a tasting last night that we did—Michael and I—and women were at the front edge of the crowd wanting to try things. Educated palates, keen interest in understanding it, and lots of interest. Spirits skipped one or two generations during the ‘60s, ‘70s, maybe into the ‘80s or past that. The new generations are discovering spirits and experimenting and having a lot of fun with them—and to the earlier comment, doing so much more responsibly than you and I probably did.

Q: Hi, Jan. Thanks for inviting me today. Well, we know about the burgeoning micro-brewery industry. You made mention of the so-called boutique distilleries, micro distilleries. Can you make a comment about that, what the size of that is now, where you see it going and how you see you working with the larger brewers? Boutique distilleries.

JW: Boutique distilleries?

Q: Yes, where do you see them going? Where are they now? I imagine a lot of people do not know that they are even in the province.

JW: So when I joined the wine industry in 1984, ’83, ’84, something like that, Don Ziraldo and Karl Kaiser were just starting Inniskillin. Paul Bosc was just starting des Charmes; Klaus Reif was starting; John was just starting to build Hillebrand. We watched the explosion of small wineries and the fantastic impact that they had on the business. I got recruited by the brewers. Just as I joined the brewers, we saw the creation of Toronto’s own Upper Canada. John Sleeman was just in the process of opening Sleeman, so I have been at a very interesting point in a number of industries. I see no reason why small craft distilleries, boutique distilleries—I do not like the word ‘craft’. If you go into any of our distilleries, they have been working on developing this craft for hundreds and hundreds of years, so I think ‘boutique distilleries’ is a great name, and I think they are going to do well. They are going to add a lot to the category. They can innovate. We are seeing interesting new products, so I am kind of excited about that development. We say two things to ourselves in our business, in the spirits business. One is “We believe in competition.” Competition makes everything better. You do have to have a level playing field in order to have real good competition.

The second thing we say to ourselves is—and I stole this from Rick Fitzgerald— “Stand with the consumer.” What that means is the closer you are to your customer, the more attention you are paying to the customer. Life may not always be rosy, but you will probably come through okay, and so those are the two things that with which we guide ourselves in the spirits business—competition and pay attention to your customer. Those will keep you out of trouble and probably deliver you a pretty good business. I have been sitting beside a restaurateur, a famous restaurateur, and I am sure he breathes those things every single day. So those are good things in business, but those are what we do. Great future for small distilleries working together with everybody else. Thank you.

Note of Appreciation by Don McCabe, President, Ontario Federation of Agriculture

Head table guests, Empire Club, thank you very much for this opportunity to be here today and to everyone in the room. I think we all had an opportunity to learn a few things here today. And I think we have all had the opportunity to explore the bounty of the Province of Ontario. As the Ontario Federation of Agriculture, we, too, are very proud to stand with our consumer. You are a consumer. There seems to be a couple connecting spots between us and you. From at the farm, we are very proud to stand with Jan Westcott and Spirits Canada in extolling the messages going forward. The Ontario Federation of Agriculture has the opportunity to represent 36,000 farmers across this entire province. We feed into the Canadian Federation of Agriculture which represents over 200,000 farmers. So the distilleries that Jan has alluded to and the market potential that he has is a definite need for Canadian farmers to stay in that issue of sustainability.

For farmers, it is a very simple equation: Profit, planet and people. If we are not making profit, you are not going to find that grocery store quite as friendly as you do now. If we are not taking care of the planet, you would have been hungry a long time ago. And if we are not able to bring the goods out, you are not going to be able to employ the people that you do and explore the opportunities you do in other ways. So as an Ontario farmer who is proud to be the President of the Ontario Federation of Agriculture who is part of the number one industry in this province because I stress that if you think it is the automobile industry, go home and boil your bumper and enjoy the meal.

We are very proud to stand with Spirits Canada, have our voice heard through the Empire Club. And, in closing, I want you to make one more connection that you never would have thought of: The opportunity to consume Canadian grains and the roots that those plants put down because that white stuff is out there now, but, next month, we will be employing technologies that are exceeding what is taking off from Pearson Airport right now in the form of an airplane. To plant one corn kernel. That one corn kernel will, hopefully, be able to present itself in the form of about four to five to six hundred to seven hundred kernels of corn on a cob. There will be roughly 30,000 of those cobs to every acre. Bottom line at the end of the day is that it is that bounty that allows us to stand with you having the best food source in the future and the best product to enjoy while doing it.

Thank you, Jan, for the hard work you do. Thank you, Empire Club for the opportunity today and the connection between all of us is when we put those roots in our country and those plants suck up that carbon dioxide, drink whiskey to battle climate change. Thank you.

Concluding Remarks by Dr. Gordon McIvor

Well said, Mr. McCabe. Thank you, and thanks again to the Ontario Federation of Agriculture for being our event sponsor today. We would also like to thank our national media sponsor, the National Post and, of course, Rogers Television, which is our national broadcaster. We would also like to thank Mediaevents.ca, which is Canada’s online event space, for live webcasting today’s event at a global level.

Please, follow us on Twitter at @Empire_Club. We are also on Facebook, LinkedIn and Instagram, and we hope you will join us in the coming days. We have got some fantastic events coming up in the coming weeks. This coming Friday we have our Finance Minister of Canada, who will be talking about the recent budget, of course. That is on Friday, April the 8th, at the Toronto Convention Centre. Next week, we have Andy Byford speaking to us on Friday, April 15th, a week from this Friday, about, obviously, the TTC and what is ahead for that institution. And we just booked the Chief Justice of the Supreme Court of Canada, Beverley McLachlin, who will be speaking to us on June 3rd and kicking off our sesquicentennial celebrations. As you know, next year is Canada’s 150th anniversary, and the Empire Club will, of course, be a part of that. So thank you all. We hope to see you in the coming days and weeks, and thanks for your attendance today. People who have the code on their coaster can take this book home, so, every one, look under your coaster. You may be taking a book home. Thank you, ladies and gentlemen. This meeting is now adjourned.