Tuesday, April 28, 2009

Ottawa ... We have a Problem ...

Ottawa ... we have a problem ...

It is not a secret that the Ontario, and for that matter Canadian wine industry overall has two faces to it. The problem is they look very much alike, and consumers cannot see the difference at times. Unless you’re seeing this from the perspective of the industry itself, it is hard to tell. In that case, there is nothing new here. But the possibility of a majority foreign owned and controlled wine industry is a real possibility, where Chilean grape is the predominant fruit in the wines, and Ontario, BC and Ottawa seem hell-bent to let that happen.

A couple of weeks ago I went out unexpectedly to a winery I had not been to as of yet. To my surprise I was informed they had just entered receivership. I am not going to call them out here, to avoid any negative publicity on my part. I mentioned what I learned being the first to get the word amongst wine consultants and several of the wine writers simply were not shocked. They knew it was going to start someplace. It was just a matter of time, and which one would fail first. This is a winery that by all other accounts should be solidly successful. But this is where the very government that should be helping this industry succeed has allow policies to go on, that have done the very opposite.

It is anyone’s guess if this particular winery will survive and it’s simply too early to know where that will go. But it not the first, and from what I have gathered, will clearly not be the last. The amazing 2007 season, and subsequent wines, may postpone the fallout, but we are clearly approaching a cliff, that will either define the industry, or see it fall over it, possibly to be changed for the worse forever.

In a day when big corporations are vilified for irresponsibility, like selling Cellared in Canada illegally, the government has had an opportunity to fix some of the wrongs they have clearly party to; i.e. allowing things to happen that should never have gone on. Soon, unless the government takes actions soon, it will simply be too late to undo the damage. Ottawa, and the provincial government’s ignorance, arrogance and lack of accountability will bring to an industry that can rival that of California, France and anywhere else, to its knees or worse.

A few things have to happen, and happen soon to save this important economic industry. By my count, and I have talked to a lot of the wineries, as much as 45% of them, are financially distressed. As many as 1/2 of those are heading towards the cliff I talked about. Give it 3 more years. If nothing changes, the failures of the wineries will start to escalate. The result will be more Corporate wineries, more Cellared in Canada, vs. VQA, and a general deterioration of the world view of Ontario and Canadian wines. A new winery opening today has about a 15% chance of surviving to its fifth year, a year that usual signals profitability or doom.

So what needs to be done?

  • A reduction in the fee structure for grape growers, and wineries that can make them competitive with the imports, which do not have such costs to bear.
  • A property tax reduction or exemption from them, in the early years, to assist the wineries in getting started, similar to farm tax structures.
  • A removal of the burdensome VQA fees, and review structure that is adding cost to the wineries needlessly. This can simply be reduced to a certification of 100% Canadian grape content. Some wineries that are 100% Canadian content, and would qualify for VQA, simply cannot afford the cost of becoming VQA certified. Yes it is that costly!
  • Elimination of Cellared in Canada, or at least an added fee for selling it that would price the wines higher than 100% Canadian content wines.
  • A tax credit for investments in the business for Canadian owned, VQA only wineries.

It may not amaze anyone to learn that all for the major foreign wine producers benefit from these very things. So again, Ontario, and Ottawa have missed an opportunity. But there is still time to right these wrongs. It is time to level the playing field.

But is the government even bothering to listen?

100% Canadian … All The Way, Anyday!!

The Ontario Wine Guy