BC Wines remain bullish

There may be oceans of wine and grapes left rotting on the vine in other wine regions, but in this province, sales of B.C. wines are still on the rise—and so is production.

Prices for grapes on the open market may have softened somewhat this year, but since most grapes are contracted to wineries ahead of time, that’s not expected to have much impact on either wineries or grape growers here.

In fact, many wineries contract with growers on a price-per-acre basis rather than a price-per-pound basis so the winemaker can work with the grower to ensure the vines are not over-cropped. Over-cropping may be tempting because it produces more grapes, but it also results in less complex flavours in the grapes and the wines they’re made into.

In Ontario, for instance, grapes are purchased through a marketing board and growers are paid by the tonne, so there isn’t the incentive to crop low to improve the quality of wine grapes.

Lisa Cameron, the new general manager of the B.C. Wine Institute, notes that Ontario’s marketing board system results in the wineries having less say in the quantity of grapes grown per acre, and and thus the quality for winemaking.

As well, she notes that in B.C. 70 per cent of the vineyard acreage is owned by wineries so they have complete control over how those grapes are grown, while in Ontario, only 30 per cent is.

There are, of course, many other reasons why the wines produced in the two provinces are very different, including the climate and soils and the varietals grown. G eography and weather alone result in huge differences.

“We’re blessed with a great climate so we can use fewer sprays, and our vintages can be more consistent than in many wine regions of the world, because our weather is more consistently warm and dry through the growing season,” she commented.

Perhaps that’s partly why industry growth has continued—albeit not at as rapid a pace as earlier in this decade. “Obviously local consumers are still very supportive of B.C. VQA wines,” she said.

Growth of sales of B.C. wines, in dollars, has flattened out in the past year or so, but it’s still increasing rather than decreasing, recession or not, says Cameron.

That, despite the competition from countries like Australia, Italy, Chile and Argentina where over-production has driven prices down, and led to masses of exports to countries like Canada.

“Competition is fierce because of the economy and overproduction in other countries; they’re trying to muscle into our marketplace,” she commented. “Global brands are slashing their prices because of the over-supply.”

So, consumers are trading down. Local wineries say the average amount spent by consumers dropped 10 to 30 per cent this summer over the previous one.

However, provincial stats show that while B.C. VQA retail sales were flat for the 12 months ending in August this year, compared to the previous 12 months, the retail sales of wine in B.C. overall, were down even more, from $818,077,795 in 2008 to $818,908,707 this past year.

There’s also been increased quantities of fruit available in B.C. as new plantings of grapes come into production—and there are lots of new wineries.

For instance, there was a 53 per cent increase in the number of vineyards in the province between 2006 and 2008. In 2006 there were 2,700 hectares of grapes grown in the Okanagan, while in 2008, there were 3,600 hectares.

Just since 2007 there are 30 new grape wineries, for a total of 160 wineries in B.C., compared to 118 in 2006, 61 in 1999, and 17 in 1990.

And, there will be an increased amount of juice available again this year, unless winter damage reduces that significantly.

Restaurant sales provide the highest profit margins for wineries, yet that’s one area there’s been a definite decline, she noted.

Happy wine drinkers

Consumers should be happy about it all, because as a result of increased competition and the recessional impacts, prices have dropped somewhat.

Tony Stewart of Quails’ Gate Estate Winery says they have abandoned their $40 price point wines in favour of those in the $20 range.

Gordon Fitzpatrick, of CedarCreek Estate Winery, says they’ve undergone a re-branding and simplified their tiers of wines in the process, collapsing the three tiers—classic, estate select and platinum series—into two tiers—estate wines and platinum.

In the process, he says the $30 estate select wines will be combined with the classic tier, which usually sell in the $20 range.

“Consumers will get the best merlot available at under $20,” he commented.

Wines in that price range are selling well.

“We want to be the reliable, go-to brand that people can find easily. We want to build on our customer loyalty,” he explained.

One adjustment the winery’s had to make is due to the impact of the recession on restaurant sales of wine, which had amounted to about a third of CedarCreek’s business.

People still drink wines, but they drink differently. Instead of buying them in restaurants as much as they did, they’ll opt to buy a good bottle of wine to take home and have with a nice meal, he figures.

Scott Fraser, vice-president, estate wines, Western Canada for Peller Estates, has also seen that shift in wine sales, with restaurant purchases soft, particularly on the Lower Mainland and in Victoria.

However, he says retail sales have offset the drop in restaurant sales.

He agrees with Fitzpatrick that it’s likely that the restaurant mark-up on wines has led to more consumers buying the same wine retail, at half the price, and taking it home to have with a nice meal.

Sandhill’s Small Lots wines sell out, so there’s not an issue with their top tier of wines, he noted.

While total sales are flat or up, he notes that tourism numbers have been soft this summer, so there were fewer visitors in town.

Despite that, he said lots of wineries report they had the same number of visitors out and about touring wineries.

But, wineries who depend on restaurant sales traditionally may be finding it tougher in these times.

Peller Estates is a diversified company which sells through many outlets, he noted.

For instance, its Calona Vineyards Artist Series, a reasonably-priced, premium quality wine, which consistently wins awards, he says,

“We have to over-deliver at that price, but it pays off in sales,” Fraser said.

Kim Kapoor, vice-president, marketing for Mission Hill Family Estate Winery, says they are bucking the flattening sales trend with overall VQA wine sales up 25 per cent over last year.

“Consumers are supporting B.C. wines,” she commented.

At the top end, she said the winery’s Legacy series of wines, which retail from $35 to $70 a bottle, are experiencing an increase of 170 per cent in sales.

Perhaps, she commented, people are delaying the purchase of more expensive luxuries, but are opting for a nice bottle of wine instead.

At the same time, wines that deliver good value for the dollar are also doing well, with sales of the winery’s Five Vineyards series, which retails for $16 to $19, up 25 per cent.

Also owned by Mission Hill is the Artisan Wine Company, with labels such as Ganton and Larsen Prospect Winery, Rigamarole, Fork in the Road, White Bear, Painted Turtle, Sonora Ranch, Mission Ridge, Wild Horse Canyon, Forty Nine North and B3.

Sales of the Ganton and Larsen wines, which she describes as “affordable VQA” in the $13 to $17 range, are up 80 per cent in the past year, while Rigamarole wine sales are up 30 per cent.

Stephen Cipes, of Summerhill Pyramid Winery, says they were, “braced for severe losses,” from the recession, but sales this past year have been on a par with the previous year, he says.

As well, he says his on-site restaurant has been packed and they’ve hosted 150 weddings.

“Organics is the fastest growing sector,” he noted.

The winery has had fewer bus tours from Asia, and fewer U.S. visitors, but wine production was down last year as well.

He doesn’t ship any product through the Liquor Distribution Branch because he says it takes too big a bite.

“They’re greedy middlemen,” he commented. The mark-up for wine sold through the LDB is 117 per cent including sales taxes.

Despite the successes some wineries relate, B.C. Grape Growers’ Association manager Connie Bielert admitted it looks as if wineries are not contracting with as many growers as usual because of stagnant wine sales, but she says there’s always the occasional grower who doesn’t pick.

Local grower Doug Sperling says last winter’s harsh cold left him with half the usual quantity of wine grapes to pick, but he says they are of fabulous quality.

The size of this year’s crop will vary with the grape varietals grown by different vineyard operators and on what sites in the valley.

Some sites are more prone to frost than others, just as some varieties are more vulnerable to frost damage than others.

He speculates that production in the valley is likely to be down a bit this year because of last winter’s extreme cold and because there are some vulnerable varietals being grown here now.

Even though some wineries aren’t buying as many grapes as usual since their existing stock of wine hasn’t sold, he expects there is currently enough demand to cover any extra fruit that’s made available.

“Maybe we’re fortunate we don’t have a large crop this year. That way, we don’t have to deal with the same issues they have in Ontario—and yet our quality is as good or better than normal,” he commented.

In future years, that could change, as more newly-planted vineyards come into production.

It’s a delicate balance between the amount of grapes grown and their quality; how many grapes winemakers need to make wine and whether the quality is acceptable; and what consumers want to buy.

When it’s out of balance, there can be lakes of unwanted wine on the market or a shortage of grapes with which to make wine to supply a thirsty market.

The Okanagan Wine Festivals are a good indicator of the success of the burgeoning wine industry in the province.

So far, there hasn’t been a year that the Fall Okanagan Wine Festival, which kicked off Thursday and runs until Oct. 11, hasn’t set a new record for popularity, in both attendance and money attracted to the valley—and this is its 29th year.

Some 15 years ago it was decided to ride on the coattails of that very-popular festival and add a spring event, just for three days to begin with—to bring people to the valley during the tourism shoulder seasons.

A couple of years later, an icewine festival was added, at Sun Peaks Resort near Kamloops in mid-winter; and five years later, a summer winefest completed the four seasons, with an event at Silver Star Mountain Resort.

There were 600 in attendance for this year’s summer festival and each of the other seasonal festivals have become rapid successes as well, with the spring festival now held over 10 days instead of the initial three.

One of the festival coordinators for the past 15 years is Blair Baldwin, who answers to a board of directors called the Wine Festival Society, made up of representatives from industry.

He attributes the festivals’ success to the strong corporate involvement in sponsoring key events and to the cooperation of the 92 member wineries in making everything happen.

“We’re asking our sponsors to open their wallets up more and they are because they feel they’re getting value,” commented Baldwin.

Members too, have to design events for their customers in order to gain entry to the events guide, widely distributed to advertise the 180 or so events.

“You can no longer just say ‘our doors are open’ in order to be listed in the guide with details of your event,” noted Baldwin.

This year, there are fewer expensive events, due to the economic times. Wineries realize they have to be innovative to distinguish themselves from the others.

“People can be picky now. They’re very conscious of the need to get value for their money,” he said.

“Wineries need to have a marketing approach. They can’t just hang a shingle and expect the world to bang down the doors. It’s becoming more competitive.”

He recalls there were 16 wineries in the valley when he began with the wine festival society 15 years ago.

There are now 160 in the province, with a number of the newest ones on Vancouver Island and in the Fraser Valley.