Slaking the thirst of a nation

I was in Montreal last week and was fortunate enough to spend some time with the Société des Alcools du Québec (SAQ), see their facilities and meet some of their staff. Before I go any further, I need to state that I have never seen a government monopoly behave with such care, obsession and interest in serving its customers. SAQ is a behemoth. They are one of the worlds largest purchasers of wine, top three, maybe number one or two, and yet, they act more openly and nimbly than many startups I know. The complexity of their operations was riveting and I'm really glad to have their permission to share this with you.

SAQ is the government monopoly that serves as importer, distributor and retailer of beer, wine and spirits for the province of Quebec, Canada. With sales of $3 billion, they are a global force on the wine market, and because they buy as a single entity they are one of the three largest purchasers of wines globally. They import 10,000 containers of wine per year, manage a fleet of hundreds of trucks and delivery vans, and operate almost 500 retail stores.

$3 billion dollars of wine works out to approximately 16,000,000 cases of wine, all of which passes through their two distribution centers, which total 1,000,000 square feet. To put this in context, the mighty Zappos has a mere 800,000 square feet of distribution space.

Seeing 50 million bottles of wine stacked 35 feet high (above image) was awe inspiring.

What really intrigued me, was not just the scale of the operations, but also the knock on benefits of (benevolently) controlling the entire market from import to final sale. SAQ has huge buying power, so the end prices are reasonable. They have the clout to make sure that their containers are stored low down on the ships, so the wines are less affected by weather. Because importing is centralized, and SAQ offers a 1 year guarantee on all purchases (really!) they are able to have a chemical lab where they inspect bottles from each lot, and test them for sulfite levels, presence of toxins such as methanol, or most commonly the presence of yeast and sugar, which could lead to an undesired secondary fermentation. Its only after passing these inspections that they feel comfortable offering such a promise.

I wish I had a better picture of the labs, but felt a little awkward taking photos inside a government building. However, as someone who studied Chemistry to a graduate degree level, and who worked in several chemical labs, let me say that they had some slick machinery: filtration, titration, automated chemical analysis machines, reaction booths and so on. Every contaminated bottle is labeled and stored, available for inspection in case the case is reopened.

Next time I'll talk about their consumer facing operations - in particular the fact that they have an entire division which is focused on collector services. For, while the backend operations were impressive, they are also necessary, the consumer operations were where they differentiated themselves in my mind.