Media Releases

September 19, 2011 (Kelowna, BC) – The recently released Association of Wine Economists report by Andy Hira and Alexis Bwenge “The Wine Industry in British Columbia: Issues and Potential” makes some legitimate points; however, it should be not be considered exhaustive or an authority on the BC wine industry. The business, the organizations, and the associations are all part of a multi-faceted, complex set of interactions that require significant understanding of the overall business and industry to accordingly present a realistic view of the future.

Below are a few of the excerpts from the report along with commentary about the realities of our industry:

Increasing costs of land and inputs:

“Good vineyard properties sold in the early 1990s for as low as $2,000/acre. By 1993-1994 the price had increased to just over $4,000/acre for raw vineyard land. In 2002, the price in the south OKV had increased to about $40,000/acre (planted). It peaked in 2008 at about $120,000/acre (planted) but has settled back now to an estimated $80,000 – $90,000/acre (planted)…An influx of Albertan money ‘willing to purchase at any price’ was responsible for the rapid inflation.”

Many business models across different industries are multi-faceted and can have different interpretations on the valuation of the asset base. In this case, the market value of some of the vineyard lands cannot always be strictly attributable to the wine business, and at times is about creating a personal lifestyle.

Winery owners are finding the business more difficult than they anticipated:

“Already there are rumours of many (up to 30) wineries being put up for sale, including one long-time family business with several wineries declaring bankruptcy. And there is certainly a gradual recognition by entrants about the arduous and tempestuous nature of the business. Several interviewees remarked that it is really more like farming than winemaking, and subject to all the volatilities (weather, pests, disease, etc.) of that occupation. One interviewee, coming from the financial sector, remarked, ‘I’ve never worked so hard in my life. I had no idea it was going to be this labour-intensive.’ This has led several of the smaller wineries, as well as a growing proportion of absentee investors, to hire consultants to run their wineries.”

Rumours and anecdotal information are simply not facts. All new businesses face unexpected challenges in a competitive business climate. A good business model and a keen understanding of the industry are the first two steps to success in the wine industry. Owning a profitable winery requires solid abilities in farming, winemaking, marketing, fiscal responsibilities and much more. As in every industry, there is no substitute for hard work.

A winery is a long term capital investment requiring solid financial backing, dedication of time, skilled workers, necessary equipment and good cash flow. There are two to three years between planting a vineyard and producing wine and all the vital steps in between.

The industry is in danger of overproduction, with no market for excess wine:

“Longtime industry insider Bill Collings states, ‘There are about 10,000 acres planted to grapes in the province, most in the Okanagan Valley. At 12 million litres, this means that on average, each acre yields only about two tons per acre. Normal production per acre I estimated at between 3 and 4 tons per acres. At 3.5 tons per acre, the wine yield would be 21 million litres. Full grape production would be a disaster for the BC industry. The industry is currently having difficulty selling 12 million litres; 21 million litres will result in huge unsold inventories.’”

The majority of wineries currently only sell in British Columbia, some only direct from the winery. Over the past years, the industry has sold the majority of its production within BC. There has generally been insufficient supply to require seeking out additional markets; however, as more wineries and vineyards begin to produce wines, so too will new markets begin to flourish. The Wines of British Columbia are world-class, piquing the interest of international markets wanting to sell our wines abroad.

For example, we have recently moved into Alberta and the response has been fantastic. In order to put our industry into perspective, see the chart below of the world wine growing regions. We are truly small in the scale of world production.

Grape Acreage by Region

• Spain 2,990,000
• France 2,134,000
• Italy – 2,110,000
• United States – 935,000
• Argentina – 520,000
• California – 477,000
• Chile – 465,000
• Australia – 440,000
• Napa – 40,000
• British Columbia – 9,866

There is little support from the provincial government:

“There is currently only one employee from the Ministry of Agriculture, Food and Fisheries (MAFF) involved in the industry, and he covers both grape and fruits. He spends most of his time on R&D (research and development) and other industry boards.”

The BC Government is very supportive of the BC wine industry. The BC Wine Institute was originally formed by the provincial government to help the wine industry better establish itself and this support continues today, particularly with regard to policy and tourism initiatives. The two government legislated organizations that work hand in hand with the BCWI are the BC Wine Authority and BC Wine Grape Council for enforcing standards and promoting research, respectively.

For further information on the current state of the BC wine industry, please contact Miles Prodan, Executive Director of the BC Wine Institute.

For further information:

Miles Prodan
Executive Director
mprodan@winebc.com
tel. 250-762-9744 ext. 101
cell. 250-863-9379

Lindsay Kelm
Communications Manager
lkelm@winebc.com
tel. 250-762-9744 ext. 103
cell. 250-317-8688

British Columbia Wine Institute
Suite 107 – 1726 Dolphin Avenue
Kelowna, B.C. V1Y 9R9
www.winebc.org
twitter.com/winebcdotcom
phone. 250-762-9744
toll free. 1-800-661-2294
fax. 250-762-9788

About the BC Wine Institute (BCWI)
Since 1990, the BCWI has played a pivotal role in taking BC’s wine industry from a vision to an internationally recognized niche region producing premium wines and providing quality wine tourism experiences.

Representing 120 member wineries throughout the province, the BCWI supports and markets the Wines of British Columbia (BC VQA), which gives consumers assurance they are buying a wine that is 100% from BC. The BCWI also markets the Wine Regions of BC; delivers quality trade, media and consumer tastings; and acts as the voice of BC’s wine industry by advocating to government on behalf of its members.

About BC VQA
BC VQA = 100% BC Wine. BC VQA is an appellation of origin system that guarantees authenticity of origin and stipulates minimum quality standards for BC wines. Please visit winebc.com to learn more.