Sharing the Harvest:The success of Canada’s Grape & Wine

Industry – A British Columbian Prospective

BC’s Grape and Wine Industry: introduction

an emerging force

over the past decade, the BC grape and wine industry has emerged as a significant new force in BC’s economy …lean…clean…and green.

BC’s Grape and Wine Industry: a profile

at a glance (fiscal 2002) 82 wineries

$800m capital investment

$230m annual sales

$100m tourism revenue

$110m direct contribution to province

$543 million in planned investment over next 5 years

BC’s Grape and Wine Industry: history

the free trade paradox Prior to Free Trade the Canadian Wine industry supplied low cost, volume based wines primarily from imported juice

Late 1980’s Free Trade suggests future of BC’s grape industry in doubt growers and estate wineries opt to restructure and focus solely on quality. 1990 creation of British Columbia Wine Institute to set quality standards and supply generic marketing. 1991 BC adopts Vintners Quality Alliance (VQA) program which sets quality benchmark industry must achieve

provincial initiatives are launched to shift industry to quality focus and encourage VQA participation Grape Marketing board eliminated to allow free market pricing 1992 VQA sales grow double digits for next decade1994 wine world is stunned when Mission Hill’s Okanagan Chardonnay takes top place in London, UK2001 Industry plantings of premium viniferia exceeds 5,500 acres2002 investment in capital exceeds $800 million

BC’s Grape and Wine Industry: history

shift to quality

BC’s Grape and Wine Industry: the results

progress made

1990 2002

wineries 18 82

Viniferia acreage

695 5,500

VQA Sales $9.8 million $95 million

crop value $4.4 million $24.5 million

Canada’s Grape and Wine industry will only be successful as a niche producer of top quality wines

BC’s Grape and Wine Industry: the futuremarket realities

niche marketing strategy focused on: relentlessly pursue premiumization strive to educate domestic consumers continue to develop Wine Country seek niche premium export markets

BC’s Grape and Wine Industry: the futurefinding our niche

$4.16VQA wine

$0.51imported

wine

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

economic value created per litre sold

BC’s Grape and Wine Industry: the future

capturing the domestic market

improved domestic sales help all Canadians

the greatest opportunity to increase sales rests in our ability to sell more wine in our Domestic Markets

2001 Capture of Domestic Market

99%98%

97%

89%86%

84%49%

14%

0% 10%20%

30%40%

50%60%

70%80%

90%100%

SpainItaly

AustraliaFrance

USANZBC

BC VQA

BC’s Grape and Wine Industry: market strategy

capturing the domestic market

BC’s Grape and Wine Industry: market strategy

Keys for Continued Success

VQA sets the minimum standard our industry can deliver

Wineries continue to develop their individual brand

Increasing the value of VQA wines by delivering better value between $15 and $25 per bottle

the Industry continues to invest in R & D to improve the quality of our products

BC’s Grape and Wine Industry: market strategyKeys for Continued Success

Develop, promote and enhance VQA wine sections and stores in Canada

Create a Wine Country experience that caters to the 6.0 million residence within an hours flight that rivals Napa.

Continue to demonstrate to the consumer Canadian wines deliver better quality to value than most other premium wine producing areas.

BC’s Grape and Wine Industry: conclusion Policy Considerations for Government

Excise Duty Relief

The current excise tax on Canadian Wineries is inconsistent with other wine regions and in particular the US. Subsequently, as a small emerging niche wine region small wineries are even less competitive. The Canadian Wine Industry seeks equal treatment with the US.

BC’s Grape and Wine Industry: conclusion Policy Considerations for Government

Domestic Marketing Support

The Canadian Wine Industry can be a catalyst for other agricultural products to adopt change and promote themselves in an effect way. Through the reinstatement of the Canadian Wine Market Development Program our entire agriculture sector can benefit.

BC’s Grape and Wine Industry: conclusion Policy Considerations for Government

Research & Development

Establish R&D endowments in each of Canada’s major grape growing regions that are matched with industry and lead by industry.

BC’s Grape and Wine Industry: conclusion Policy Considerations for Government

Other issues

Support the recommendations as laid out by the Canadian Vintners Association

Agriculture Policy: Points to Consider

• Historically the branding of agricultural products are by country or province. Eg. Canada Grade A, Canada Extra-Fancy

• Consumers see little or no difference between these products

• Lowest common denominator sometimes sets the standard

• Consumer concerns or questions not always taken into consideration

Agriculture Policy: Changes taking place

• Increase in Organic food sales• Consumer willing to pay more to ensure quality

and perceived health benefit• Increasing public concern over GMO’s and Protein

supplements• New Standards being set by consumers, Capers,

Urban Fair, Organic Sections• Maple Leaf Foods changes policy to only allow

vegetable based meal proteins. • Export markets considering setting new standards

for agricultural products

Agricultural Policy:

• “Canada’s policies in agriculture have allowed us to produce some of the highest quality, best value agricultural products in the world. However, our market is changing and if we fail to recognize this we will be left far behind.”

Agricultural Policy: A new approach

Farmers broaden their brand association and engage their customers

Reduce tendency to reject consumer concerns with science and economics

Establish standards that promote producers and processors branding to a higher standard

Development of new industry practices that will allow for greater segregation of products. Branded approach.

Set the standard for the world, based on quality not cost