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Understanding the Société des alcools du Québec (SAQ)

Québec has an estimated 8.6 million inhabitants. It is the second most highly populated province in Canada, after Ontario. The Société des alcools du Québec (SAQ) is a government-owned, crown corporation that holds a monopoly on the importation, distribution, and retail sale of beverage alcohol. The entity provides an important provincial revenue stream from taxes, duties, and dividend payments to the Québec Ministry of Finance.

The SAQ was created after the repeal of prohibition to combat illegal trafficking and alcohol abuse via the control of alcohol distribution and sales. This year, 2021, marks the 100th anniversary of the SAQ.

In the 2019/2020 financial year (ending March 28, 2020) SAQ sales grew by almost 6%, to $3.489 billion, generating a net income of $1.226 billion for the Québec government. The SAQ has a province-wide retail network of 410 stores and 430 agency stores (food retailers licenced to sell SAQ products).

Wine sales account for 72% of SAQ revenue (76.9% in volume terms). Indeed, Québec is Canada’s largest wine importer, bringing some 38% of the nation’s wine imports. Over two thirds of imported wine in Québec comes from France, Italy, Spain, or Portugal.

The SAQ also acts as wholesaler for a growing grocery channel, as well as the restaurant and hotel sector. All alcohol beverage producers who wish to sell their products into the province of Québec must deal with the SAQ. It is important to note that the SAQ does not pay in advance of shipment. Their standard terms are 30 days after receiving goods.

The SAQ at a Glance:

  • 7,082 employees
  • 35,700 products and 3,700 suppliers from 82 countries
  • 840 sales outlets and 7,384 authorized vendors
  • An e-commerce platform (SAQ.com) with 37.2 million annual visits
  • The world’s largest purchaser of French wine (outside of France)

The Essential Role of the Agent

As a general rule, the SAQ does not deal directly with suppliers. The business relationship between the SAQ and its suppliers is developed by promotional agents. These agents must be licensed by the Régie des alcools, des courses et des jeux du Québec (RACJ) and formally appointed by the supplier, to the SAQ. There are several hundred of these agents; the majority of which are privately owned companies. Some have national coverage with operating permits in each market, others work exclusively in Québec.

In most cases, agents are paid on commissions included in the supplier’s sale price to the SAQ. The supplier is responsible for paying the agent, according to terms set by the two parties. This commission constitutes the agent’s revenue. They receive no direct financial benefits from SAQ transactions.

It is vital to choose the right agent to ensure long term sales success in Québec. Suppliers should commit time to researching different agents to determine the best fit in terms of portfolio, sales targets, values, and so forth.

Distribution Channels

There are several different ways to develop business in Québec. As the province’s sole importer and wholesaler, the SAQ is involved in all wine transactions. However, alternative retail options (other than selling via SAQ stores) do exist.

SAQ

The term “supplier” designates all companies that supply the SAQ with alcoholic beverages and non-alcoholic products. The SAQ interacts directly with its suppliers, however suppliers can (and are strongly encouraged to) engage a local intermediary, called “agent”, to carry out its promotional activities, determine best distribution channels, and sales strategies to employ.

To become an SAQ supplier, a producer must sell at least one product through the SAQ retail network. To do so, suppliers must submit their products to the SAQ’s “Catalogue of Offers”. This system allows suppliers to propose their products; with access to visualize and modify offers at all times.

For more information, consult the following web page: How to Become an SAQ Product Supplier on the SAQb2b.com website.

General Listings

The SAQ carries approximately 1,100 regular products which are available at all times in several hundred SAQ retail stores. Most of these products are large brands that can be found in major retailers around the world. Competition in this category, which accounts for 80% of SAQ sales, is very high.

New, regular products are automatically distributed to approximately one hundred SAQ stores. It is then the responsibility of the agent to grow distribution, by convincing SAQ store managers to list the product in their outlets, and potentially, by developing restaurant sales. The supplier is also required to invest in SAQ promotional activities. Many of these regular product listings generate tens of thousands of annual 9L case sales; some sell several hundreds of thousands of cases each year.

Wines in this category must meet ambitious sales quotas based on their retail price and sub-category (wine style, type, and/or region). Products that fail to meet their quotas may be de-listed. Suppliers are charged indemnities on remaining stock if significant quantities of inventory remain.

Speciality Products

The SAQ catalogue also includes a wide array of wines and spirits categorized as specialty products. These – often more premium – offerings are generally sold in a separate space within larger SAQ outlets (SAQ Sélection). The reserved section for specialty items in these stores is called the CELLIER. It is the equivalent to the VINTAGES section in LCBO stores. Specialty products are selected by the SAQ’s marketing department. They are divided into two segments: continuous replenishment products and occasional buys (spécialité par lot).

Specialty products are generally first purchased as an occasional buy. Depending on the speed at which initial orders sell through, the volumes available from the producer, and various other factors, occasional buys can become continuous replenishment products over time.

However, rapid sell-through of an occasional buy product is not always a guarantee of a re-order from the SAQ. These wines tend to be purchased sporadically, from one to four times a year, according to consumer demand and SAQ needs. Occasional buys are ordered in far smaller quantities than continuous replenishment and regular products.

New batches of specialty products are released for sale each week. SAQ store managers receive a circular letter informing them of selections available for order. Over the course of a year, the SAQ sells approximately 6000 different occasional buy, specialty wines. Some are new to Québec; others have been selling in this category for decades. Whereas the LCBO makes regular, one-time buys, the SAQ tends to focus on establishing long term product availability for consumers.

SAQ Agency Stores

Agency stores are food retailers authorized to sell SAQ products. They service remote areas lacking the population density to warrant stand alone SAQ stores. There are currently 430 of these agency stores. Grocery and convenience stores holding agency permits purchase products from the SAQ at a rebate. They are required to retail merchandise at the same prices as SAQ stores.

E-Commerce

The SAQ operates a high-performance e-commerce platform optimized for desktop, tablet, or smart phone viewing. Consumers can order product for home delivery or specify a store for pick-up. The website’s geolocation tool also allows consumers to check product availability in store. Online sales grew by 20% to $55.5 million in the 2019/2020 financial year. With over 37.3 million unique visits last year, saq.com is one of the most heavily frequented e-commerce websites in Québec. The SAQ mobile application also saw double digit growth, with over 1.3 million visitors in 2019/2020.

With the COVID-19 measures in place over the course of the 2020/2021 financial year, online sales have reportedly sky-rocketed, allowing the SAQ to remain robust overall sales despite reduced in-store traffic.

Private Imports

While the name would indicate otherwise, private import wines are, in fact, imported by the SAQ. However, agents are responsible for selling wines in this category. Before the pandemic, over 90% of private import wines were destined for the restaurant and hotel sector.  Since 2020, many agents have re-focused their efforts on direct to consumer selling, with variable success.

The supply chain process for private imports is the following: the agent asks the SAQ to order a specified volume of product(s) from their supplier. The SAQ places the order then stores the received product in a dedicated SAQ private import warehouse. Suppliers are paid by the SAQ. The products are made available to the agent, who brokers sales to the on-trade and/or consumers. The SAQ applies its mark-up, to which the agent adds its service fee. The agent also receives commission for product sales from the supplier.

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