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The B.C. Wine Industry - A Look Ahead

04/03/2010


The start of a new year brings out the fortune teller in many of us. The start of a new decade makes “crystal ball gazing” even more enticing. How far have we come in the last 10 years and where will we be in 2020?

The past decade was one of incredible growth for the B.C. wine industry. In 1999, the B.C. Grapegrowers’ Association survey reported production of 11,284 short tons of wine grapes. In 2010, the BCGA estimates a possible crop of over 34,000 short tons – a 300% increase over 1999. B.C. Wine Institute statistics report there were 171 licensed wineries in 2009 compared to just 60 in 2000, a 285% increase.

So what does the future of the B.C. wine industry hold?

Here are a few trends to watch for:

1. Growth in culinary tourism
Fine wine and fine cuisine go hand in hand. Much like California, the Okanagan was well established as a producer of fresh agricultural produce before its growth as a wine region. If we use the Napa Valley as a predictor of things to come, we can expect growth in fine dining opportunities, and in the hospitality industry in general, to catch up to the growth in wineries. The Okanagan has the climate, wineries and natural beauty to earn the title of “Napa North”.

2. Domestic consolidation
The B.C. industry will to continue to face strong competition from low-cost, good-quality international wines. The pressure to control costs is even more intense when a high Canadian dollar makes imported wine comparatively cheap. In addition, decreasing availability of usable vineyard space will continue to keep land costs high. How does a small producer survive? We see a growing trend toward the consolidation of ownership to gain economies of scale when it comes to pooling capital and resources. This consolidation will be somewhat invisible to the consumer as established boutique brands and wine shop facilities will remain in order to maintain the perception of small lot quality and local charm.

3. Geographic expansion
Demand for grapes, the natural attraction of the industry and lifestyle and high costs for established vineyards will force growers to continue to expand the frontiers of B.C.’s grape growing regions. Climate change may actually help this process as a warming environment combined with scientific advances make it possible to grow quality wine grapes in areas previously ignored such as Lillooet, Kamloops and the Kootenays.

4. Downward price pressure on wine
So far, the B.C. wine industry has enjoyed a loyal domestic market. Canadian consumers have been willing to pay a premium for quality domestic wine, particularly if they live in, or have visited, one of Canada’s wine producing regions. This loyalty will only carry so far, however. New world producers such as Australia, the US and Chile continue to produce more and more high-quality, low-cost wines in the $8 to $14 range. If the price separation between Canadian and import wine becomes too great, consumer patriotism will be supplanted by pure economics. A high Canadian dollar only serves to compound this issue.

5. Home-grown talent
Oenology and viticulture education programs are now well established in both Ontario and B.C. Graduates from these programs have had time to gain experience. As the Canadian wine industry grows and matures, expect to see more and more locally trained winemakers and vineyard managers filling higher profile jobs.

6. Investment opportunity
Demographics tell us that there will be a significant changeover in both land and winery ownership in the coming decade. There will be opportunities for both domestic and international purchasers to gain a foothold in the B.C. industry. The wine business is capital intensive and raising funds to purchase or lease land will be a priority for those wineries intent on growth. While we don’t necessarily see any wineries going public a la Robert Mondavi, we do see growing opportunities for private investors eager to own a piece of a B.C. winery or vineyard.

Naturally, no one can truly know what the future will bring. But understanding what has happened in the B.C. wine industry in the past and the current trends helps give us a relatively clear picture of what is likely to occur in the future. The upcoming years present many exciting opportunities for winemakers and grape growers willing to consider current trends as they plan for success in the upcoming decade.

Geoff McIntyre, CA is a Business Advisor with Meyers Norris Penny in Kelowna. He can be reached at 1.877.766.9735 or [email protected]