To understand the distribution and sale of beverage alcohol in Canada, imagine a tray of ice cubes: each cube looks basically the same but each is completely autonomous and has no interaction with its neighbours. Now consider each cube to be a Canadian province jealously guarding its right to control and tax wines, beers and spirits.
In Canada we have Free Trade with the United States and Mexico but we still don’t have free trade between Canadian provinces. This, in spite of the fact that in June 2012, Royal Assent was given to a private member’s bill in the Canadian House of Commons that went some way to addressing this anomaly. The government’s press release announcing a victory for common sense over blind bureaucracy, stated: “Effective immediately, the amendment to the Importation of Intoxicating Liquors Act (IILA), removes the federal restrictions prohibiting individuals from moving wine from one province to another when purchased for personal use. The amendment to the IILA covers all wine, including wine made from grapes, apples, berries, honey and even dandelions (!).”
This amendment addressed a long-standing grievance that consumers in, say, British Columbia could not order a case of Ontario wine without having to pay an ‘import’ duty to their provincial liquor board. Dan Albas, the Conservative MP who introduced the bill, pointed out the benefits to the local wine industry in its David and Goliath confrontation with imported wines. “Given that most of the Canadian wine market is catered to by foreign imported wines, there is a huge potential for growth in our Canadian wine-producing regions,” said Albas.
The big players, Ontario, Alberta and Quebec, fearing the loss of tax revenues, have so far resisted the change in legislation. These jurisdictions fear that the movement of Canadian wine through Internet sales across provincial borders could open the door to direct sales to consumers of wines from outside the country, which would further erode their profits.
The LCBO, Ontario’s mammoth, government-controlled liquor board (one of the world’s largest beverage alcohol retailers) insists that its consumers can access any wine not sold in their stores by simply placing a ‘private order’ with them for a minimum case lot. But this case lot would be subjected to a mark-up. John Skinner, the proprietor of one of British Columbia’s leading small wineries, Painted Rock, says that his Red Icon blend would sell in Ontario for nearly C$100.00 ($90.87), compared with his listed price of C$55.00 in BC. Yet the precedent for direct sales in Ontario is already there: Ontario residents can buy wine directly from Ontario wineries without going through the Ontario liquor board.
Drinking trends
According to Shari Mogk-Edwards, vice president products, sales & merchandising at the LCBO, “The overall trend in the beverage alcohol industry in Canada is that wine is taking over from both spirits and beer.” For the LCBO, C$2bn of C$4.8bn sales is spirit sales. When those sales start to decline that has a huge impact on our profitability. Beer and cider is a C$1.1bn business for us. That’s up year over year 3.1%. Vintages (the specialty wine stores) and the general list stores are up over 2%. Cider is driving a lot of the growth here.” Last month, she says, a cider was number eight in the best selling beer category. “That’s unheard of. It’s a small base but it’s growing very, very quickly.
Originally I thought that women were driving the sales, but it’s not. It tends to be a younger consumer.” And where do these younger consumers get their information and recommendations? Not from professionals – wine writers and sommeliers – but from social media. From people they don’t even know. They look for guidance and advice on Twitter and Facebook. “There’s a big intimidation factor for wines,” says Mogk-Edwards. “The average wine consumer doesn’t want to make a mistake. They’ll go into a grocery store and pick up relish or cheese or something and it’s no big deal but when it comes to wine they’re terrified of making a mistake. Those (shelf-talker) endorsements really do help consumers navigate their way through.”
Canadians currently consume 15 L of wine a year on average. According to a Vinexpo marketing study, Canadian wine consumption rose by 14.5% between 2007 and 2011. This meant that in 2011 the liquor control boards and Alberta (the only province where liquor sales have been privatized) moved over 43m 9-L cases. Predictions are that by 2016 Canadian wine consumption will increase by 14.3%, eventually reaching 50.7m cases annually. This is three times greater than the global average. Canadian consumption figures for spirits, though less dramatic than for wine, are rising moderately, with vodka as the drink of choice.
Growth in spirit consumption is expected to reach an increase of 3.7% between 2014 and 2016. Also the consumption of sparkling wines is predicted to grow, with an 8.5% increase between 2014 and 2016.
In line with international trends, the consumption of rosé wines in Canada shot up 38.24% between 2007 and 2011; and the Vinexpo study forecasts even greater growth of 45.4% between 2014 and 2016. Admittedly this is from a small base but these growth numbers are impressive. “There was a time when you would never see a man caught dead drinking a glass of rosé,” says Mogk-Edwards. “It’s totally different now.”
According to Vinexpo, Canada will become the fifth fastest growing wine market worldwide – behind China, the US, Russia and Germany.
Canadian wine
And that leads me to ICBs – International Canadian Blends – a contentious issue between the large commercial wineries and the mid-sized and boutique houses. According to the website of WGAO (the Winery and Grower Alliance of Ontario) “International Canadian Blends wines represent 73% of all Ontario wine sold and accounts for more than 54% of the (Ontario) grape crop. VQA (Vintners Quality Alliance), which insists on 100% locally grown fruit) accounts for 27% of volume sales and 46% of the grape crop.” ICBs can contain up to 70% off-shore wine blended with Ontario wine. The presence on the shelves of these crypto-blends that sell at the bottom end of the market has been a bone in the throat for local winemakers who labour to make wines that express their terroir.
Canadian wines occupy an important role in the wine trade. According to ‘Canada’s Wine Economy – Ripe Robust Remarkable’, a research study of the Canadian grape and wine industry:
Canadian wine industry production has an annual national economic impact of $6.8 billion. Specifically, for every bottle of wine produced in Canada there is $31 of domestic economic impact generated in the country.
The wine and grape industry is responsible for more than 31,000 jobs in Canada from manufacturing, agriculture, tourism, transportation, research, restaurants and retail.
Wine-related tourism welcomes more than 3m visitors each year, generating more than C$1.2bn annually in tourism revenue and employment.
The wine industry generates C$1.2bn in federal and provincial tax revenue and liquor board mark up.
Canadians enjoy over 1bn glasses or 220m bottles of wine produced by the Canadian wine industry each year.
Canadian winemakers support a broad network of related industries in urban and regional centres across Canada through significant investments, long-term jobs and market opportunities in rural communities.
Wine consumption in Canada continues to grow as many Canadians are reaching for a glass of wine over spirits or beer. With Canadian wines presently representing only 30% of total wine sales across the country, and imported wine at 70%, there is enormous potential for Canadian wine growth and the entire national economy.
The Chinese discover Canadian wine
“There’s a lot of interest from China right now,” says John Skinner. “I’ve just got a wonderful contract from a Chinese group. It’s large and what it will do is ensure the long-term stability of Painted Rock [winery].” The Chinese are not only buying wine in Canada; they’re also buying wineries:
Chinese investors paid about C$20m for Eagle Point Winery, with 600 acres of land located on the St. Lawrence River in Ontario’s Thousand Islands tourist region – an hour’s drive south of Ottawa.
- In 2007, one of the oldest wineries in China, Tonghua Grape Wine Co. in Jilin province, bought a 70% share of Niagara’s King’s Court Estate Winery for C$6.6m.
- In 2010, British Columbia’s First Estate Winery in the Okanagan Valley, literally the first estate winery in the province, dating back to 1978, was purchased by a group of investors from China.
- In 2011, Bravo Enterprises, a company owned by Chinese mining executive Yong Wang, bought winery Lang Vineyards on the Naramata Bench in British Columbia.
- In 2012, Marynissen, the first winery to plant Cabernet Sauvignon in Ontario (in 1978) was sold to Chinese interests.
- In the same year Bruno and Elyane Moos, who came to Ontario from Tuscany and spent 10 years building up Alvento Winery, sold it to Zhao Yan.
Interesting newcomer
One of the most interesting winery operations in Canada is Okanagan Crush Pad in British Columbia, established in 2011. Not only do they make their own wines under their Haywire label, but their resident winemaker Michael Bartier will make wines for anyone who will bring grapes there; or they will allow other winemakers to crush on the premises. The company purchased 317 acres of raw ranch land in Summerland’s Garnet Valley where they are planting Pinot Gris, Pinot Noir and Cabernet Franc on the advice of their Chilean terroir expert, Pedro Parra, and their Italian consulting winemaker, Alberto Antonini. Planting of the initial 60-acre plots began in the spring of 2013. Talking about the new vineyard the winery’s co-owner Christine Coletta said, “We practice extreme viticulture, thinking outside the traditional boundaries of what we previously planted. Our new Garnet Valley Ranch vineyard is at 2,300 ft. We planted the first 15 of 60 acres this spring.”
