Since the summer, when this story was published, things have been shaken up in the world of Canadian wine. The anti-Cellared In Canada wine movement reached a fever pitch in British Columbia by September - and one of the surprising revelations out west was that CIC wines could contain as little as 0% BC wine. Provincial minister Rich Coleman, who is responsible for the BC Liquor Board, sprung into (modest) action by separating CIC wines from BC wines in the store. He does, however, acknowledge the importance of CIC wines to the BC industry.
In Ontario, things have moved even further, with Queens Park issuing some tough new regulations, including the boost in Ontario content long-demanded by the Grape Growers of Ontario and reductions in the taxation benefits for CIC wine. Here's the government's summary.
And here's my summary of the CIC situation in Ontario up until this summer:
(Originally a two-part series on www.gremolata.com)
Part 1
Cellared in Canada (CIC) wines have up to 70% foreign content and are a nine-figure business at retail. A handful of wineries are allowed to produce it as it was banned following a 1993 trade agreement in which existing producers were grandfathered. Now, after a couple of flare-ups, the knives are out.
Flare-ups
Over the past year a couple of issues have brought CIC under scrutiny: Ontario ponied up a $4 million bailout for grape growers who couldn’t sell about 2,500 tons of grapes in 2008 even as the equivalent of thousands of tons of similar grapes were imported. The province also had a $14 million program giving a 30% rebate on every 100% Ontario Vintners Quality Alliance (VQA) product sold at the LCBO up to March 2009.
Vincor’s decision to use import-blended wines in its Vancouver 2010 Olympic “Esprit” brand, which raises money for the Olympic team, caused a mini media flap and spawned the Facebook group Tim Hudak joined. Vincor did an about-face a few months back and has now gone for all-Canadian VQA grapes for Esprit.
Wine purists hate it and see it as fake, but CIC wines have one very attractive feature going for them: cost. With finished wine coming from Chile or Argentina at 60 or 70 cents a litre, or $1 a litre from Australia, there’s a lot of scope for lower prices while retaining healthy margins and, oenophiles be damned, the public laps it up.
Show Me the Money
The LCBO’s Chris Layton supplied the latest sales figures: VQA had a great year in 08, rising from 4.2 million litres to 4.9 million litres, generating $70 million in sales. But CIC sold 23.4 million litres for $193 million. Layton added that “Ontario winery store sales also account for more than 20 million litres and more than $200 million in sales.” Within those figures is a substantial amount of CIC.
It's a crowded market... and the best sellers are around $10
With these kinds of numbers, it's clear that CIC represents a huge percentage of the Ontario wine industry and underwrites a lot of winery buildings, equipment and jobs. It also provides pretty much all the really cheap non-import wine that the market so wants.
LCBO figures show a steady rise in the average shell-out for wine in Ontario, with 2007 at a record high of $12.42… per litre. That’s $9.32 per 750ml, and over half the wine bought cost less than that. The lowest priced VQA wine on the market: the entry level varietal series from Twenty Bees at $9.95 for 750ml. Twenty Bees went into receivership in 2008 but has since been bought by Diamond Estates.
According to Hilary Dawson, president of the Wine Council of Ontario, CIC delivers “popular priced wines” to compete with cheap imports. “Grape prices in Ontario are high,” Dawson says. “The price differential would cause the category to be unviable. If the content got pushed higher by regulation, there are producers who would exit the market. It’s not that we’d exit and the wine would then go into VQA, we’d exit completely and cede all those sales to imports.”
It’s Cheaper Abroad
It’s not just South America that kills on cost – even California delivers substantially cheaper grapes: while Cali pinot noir is about the same price as ours, chardonnay is around half and merlot just one third the Ontario price, according to USDA figures. “And they have high brix counts,” adds Dawson. Brix is a measure of sugar content in a grape and bigger, fruitier New World wines are made from grapes with higher brix, and that’s the most popular style at the entry level.
California vineyards: 860,000+ acres...
“We know through our research that the [value priced] customer wants the exact same flavour profile every time,” says Dawson. “That takes skill on the winemaker’s part, which is why the term Cellared in Canada makes sense. It’s not just bottled here, there’s winemaking involved.” Dawson added that CIC winemakers buy about half of all wine grapes in Ontario.
Ontario Quality
Debbie Zimmerman of the Grape Growers of Ontario acknowledges CIC is “part of our stability even as we grow VQA. But our question is can we adjust the content requirements over time, especially in a long-crop [i.e., surplus] year? We offer flexibility in a short-crop year, but what do you do when it’s on the flipside?” The Grape Growers would like to see the minimum Ontario content bumped up from 30%. Zimmerman says that the quality is there in Ontario and that the VQA is actually behind the curve even as VQA sales are rising: “We’re calling on VQA Ontario to raise the minimum standards as our growers are already exceeding them. We take some umbrage with the comments that we are not growing quality, because we are.” Zimmerman also acknowledged that the Grape Growers are open to the idea of a scale of higher prices for higher quality grapes, “We’re going to continue to push for compromise and cooperation because we’ve got a dynamic and growing industry,” she says.
Fermenting tanks at Jackson-Triggs winery, Niagara-on-the-Lake
Market Engineering
Asking the government-run LCBO to boost sales of Ontario product is a regular demand of the local industry and, in a joint communiqué issued by the Grape Growers and the Wine Council in April, among other suggestions are “an immediate increase in shelf-space and listings in the LCBO for Ontario wines,” and “performance goals for the LCBO management team and Ontario category teams related to Ontario wines.”
Meanwhile, even as importing agents and foreign producers fulminate against that same LCBO for its restrictive policies on their products – only about half of all imported wines on the Ontario market are available at the LCBO for retail purchase – the public dropped five times as much money on and drank three times as many litres of imported wines as it did CIC last year: 75.4 million litres worth $1.024 billion.
Making CIC wine
There’s a profile and a process, but what does it mean, quality-wise? Can cheap, generic product really ruin a region’s wine reputation? Tune in next week.
Part Two
Almost every wine region in the world produces low-priced wine because that's where most buyers are looking. Here, relatively expensive grapes mean we need a little help from elsewhere. And we're not the only country in that boat.
Pity This Country
A member of the G7, this country’s wine buyers are welcome guests in the big regions. It spends big bucks on fine wines and its citizens guzzle millions of litres from Europe, America and Australia. The local industry has been growing even though a British writer suggests it “is generally not considered to have a suitable climate for growing grapes.” A few big companies bring in lots of grapes, grape must and bulk wine, finish it and call it “domestic”. There are squabbles over labelling. While local producers now tout wines made from 100% local grapes, hold competitions to choose the best and true local wine commands a premium, it’s still tough to be a winemaker in Japan.
Not cheap labour in Ontario's Prince Edward County.
Meanwhile, Back Here
The Canadian industry may get more support, but the same forces are at work here in privileging imports: high local labour, tax, land and grape costs, small production numbers and a not ideal climate. Ontario has around 15,000 acres under vine and BC about half that. Chianti Classico, one of eight sub-regions within Chianti, has 17,640 acres of vineyards.
Ontario and BC produced just over 15 million litres of VQA wine in 2004. In 2006, Canadians consumed 405 million litres of wine. Ignoring the other nine provinces that account for over 70% of the wine sold in Canada, the 23 million litres of Cellared in Canada (CIC) sold in Ontario last year is about the same as the increase in overall wine consumption in Ontario between 2004 and 2008 (up 21.3m L). In Canada, CIC uses local grapes and then sells wine more cheaply than VQA: half of all wine grapes in Ontario end up in a CIC blend according to the Wine Council of Ontario. If CIC were banned, Hilary Dawson suggests the minimum profitable price for all-Ontario wines would be “12-13 dollars. We cannot make wine under $10. If prices came down for input costs, it might be viable for some producers, but you can’t mess with the consumer – you still need to meet their expectations.” More than half the wine sold in Ontario last year cost less than the current record-high average of $9.32 per 750ml.
Undercutting Hilary’s “$12” by five cents, Vincor has just launched a new line of all-VQA wines called “Open”. They look like stylish vodka coolers and retail for $11.95. No tasters have reported on it yet and there are no sales figures, but it’s still wine that will be considered “expensive” by over half the wine-buying public in Canada.
Canadian Connoisseurs' Heaven: Frank at the AGO.
Connoisseurs
When it comes to local wines, you can’t get more boosterish than the highest profile restaurant in the city to go all-Canadian. Courtney Henderson is the sommelier at swank Frank at the Art Gallery of Ontario. Her customers are sufficiently well off that they’ll pay $18 for a glass of Tawse Meritage, so the link to CIC buyers who won’t go above $10 for a bottle is perhaps tenuous. “Boutique wineries are trendy,” says Henderson. “If you say something’s organic or a new boutique that only makes 200 cases, it doesn’t matter if the price is higher, people lap it up.” She says there’s less interest in big wineries like Jackson-Triggs and Inniskillin “even though those wineries make some high quality wines – the Delaine Vineyards 2007 Sauvignon Blanc [VQA] is fantastic.”
Henderson also hits one issue that is if anything more pronounced at the entry level in Ontario: “You can’t just grab any bottle and expect it to be good, even from a winery you know. Consistency of product is one of our weaknesses.” When asked if better vineyard management or better winemaking would help, she said “how about a better climate?” and pointed out that vintage variation is a fact of life here. In a nod to the thinking behind CIC wine, Henderson conceded that “bigger producers are perhaps better able to produce a more consistent product.”
So How is CIC Wine Made?
“Finished wine” is imported then blended with Canadian product. You may have visions of a hose spraying Chilean cab until it fills a tank that’s 30% full of Ontario cab, but that’s not how it works. Heidi Montgomery is a winemaker at Peller Estates in Niagara and has been with the company over ten years. She’s businesslike, confident and knowledgeable. She juggles big numbers in a balancing act across continents and manages a complex production cycle. “We deal with 8-10 wineries each year, in different parts of the world. Once a wine is approved for purchase, we will say ‘save us 100,000 litres of this’. We will then receive the wine over the next 6-8 months. This is the best part: we get to choose the best wines available in bulk. We get shiraz from Australia, sauvignon blanc from Chile, pinot grigio from Italy... we then follow certain formulations in order to keep our taste profile the same – fruity, soft tannins, no vegetal notes. We also ensure that no one wine is dominant – each wine has a set percentage, usually between 20 and 30 percent.”
Montgomery says pinot grigio is a big seller and while “we tend to grow pretty good pinot gris, we just cannot do 1.5 million litres of it in Ontario. The problem is winter kill – if we get one bad winter we can be wiped out, which doesn’t happen elsewhere. Also, we keep the best grapes for our VQA. There are times we cannot make a VQA because we need to keep enough Ontario product back to put into our blends. This year, we are pleased we have enough pinot gris for both programs. So as growers are producing more of varieties we can use, we’ll definitely use them.” But… “Will Ontario ever produce enough grapes to make 50 million litres of wine? I’m going to say probably not.” With the LCBO offering a range of imported wines at $7, even CIC can’t compete: “There’s no way we can make a profit at that level. Even as we are getting the benefit of less expensive foreign wine, we are still more expensive than the cheapest import wines.”
Sommelier Courtney Henderson says “there’s a place for CIC in the market I suppose. Do I like it? No. But a lot of people are still in the dark about Ontario wines in general. The government really needs to get behind the wine industry as they do in Italy or Australia. We’re not marketing wine the way we could be, with TV ads, magazine and other campaigns. You need to get people on board.”
Bad Wine Happens to Good Places
Care for some California wine?
In California, the Napa Valley accounts for just 4% of the state’s wine production – a rounding error on the millions of gallons of nasty “jug wine” Cali churns out. In Spain, supermarkets offer boxes and bottles of plonk that is cheaper than brand-name water, irrelevant to the fine wines of Rioja and Ribero del Duero. In France, vin de pays producers will sell you lousy wine for a couple of euros or less. In Ontario, some of the same companies that produce our best wines also churn out generic “cheap” product to capture market share, which muddies the waters. But that perhaps underlines the importance of the revenue generated – CIC producers also have VQA programs and invest in the staff training, equipment and marketing needed to take the industry to the next level. Debbie Zimmerman of the Grape Growers of Ontario suggests that “we’re in our adolescent phase and we need to start maturing. It’s got to be a partnership between the winemaker and the grower. We want to fix the structural issues that prevent us from selling more grapes and wine. We need to focus on collective efforts to move our industry forward.”
Let’s Pull Up Our Socks
Ontario ranks 5th in per capita consumption of wine in Canada. If it were to match Quebec (2nd place, after the thirsty Yukon), there would be a 46% increase in wine sales in Ontario. Without changing any of the percentages of VQA vs. CIC vs. imports, producers of both CIC and VQA could work flat out and still be unable to supply enough product. Quebec’s per capita wine consumption, incidentally, is below that of every single country in Western Europe, including Ireland and Denmark, which have scarcely a vineyard between them. Perhaps there should be more focus on wine across the board rather than on who makes it or how. The Ontario market alone is more than big enough.
This story also appeared on gremolata.com
Sources: Canadian wine production and consumption: WSSJV Database, Statistics Canada, LCBO Annual Report, SAQ Annual Report. Japanese wine: “World Wine Markets” edited by Kym Anderson, Edward Elgar Publishing, Inc., Cheltenham, England. 2004. Oxford Companion to Wine, Jancis Robinson, Oxford University Press, England. 2006
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