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B.C. wineries plan survival strategies following deep freeze

Some urge controversial regulatory changes, such as to allow them to import foreign grapes.

Business owners in B.C.’s wine sector are plowing new ground in an effort to survive the consequences of a severe cold snap in mid-January that devastated Okanagan Valley grape buds and vines.

Some expect the Okanagan’s 2024 grape harvest to be a near total write-off, while other winery principals in the Fraser Valley and on Vancouver Island told BIV that they should be able to grow grapes as usual.

Even Fraser Valley wineries could suffer a hit, however, as some buy Okanagan grapes to make their wines. 

“I buy about 500 tonnes of grapes from the Okanagan each year,” Brian Ensor, general manager at south Langley’s Chaberton Estate Winery, told BIV.

“This deep freeze is affecting everybody.”

Ensor said he grows about 200 tonnes of grapes at his 50-acre vineyard, which his website touts as being the Fraser Valley’s oldest.

That production should be enough for Ensor to make about 130,000 litres of wine – far more than the 4,500 litres that he is required to make each year from his own grapes as a requirement of his land-based winery licence.

Many, if not most, land-based winery owners in the province could struggle to make 4,500 litres of wine from their grapes because they expect to grow few – or none.

Land-based winery principals told BIV they believe the province will grant them widespread exemptions and allow them to go a year without any production because they cannot make wine without grapes.

Wine Growers British Columbia CEO Miles Prodan told BIV that while he believes the province will accommodate wineries that are not able to meet this threshold, winery executives must apply to the Liquor and Cannabis Regulation Branch to get an exemption so they can stay in compliance with licensing requirements.

Prodan has for more than a year been leading lobbying efforts to get the provincial government to provide $50 million to the sector to help finance winery owners’ costs to replant grape vines following a similar deep freeze in December 2022.

The B.C. government on March 13 promised up to $70 million, but that is not only to replant vineyards, but also to replant orchards. The money is also on top of its existing $15 million Perennial Crop Renewal Program.

Victoria also plans to create a task force that would develop plans to help growers and winery owners stay profitable and able to weather climate change.

Prodan said he is happy with the funding announcement and is not currently seeking more money from the provincial government to help the sector. 

"We're just celebrating what we got," he said. 

To help sustain themselves following the more recent and more destructive cold snap, some winery owners and winemakers are urging the B.C. government to change regulations to allow them to import grapes or juice from outside the province.

That proposal is controversial, as some say it could confuse consumers about which wines are from B.C. grapes, and therefore diminish the value of the B.C. Vintners Quality Alliance designation.

Save-On-Foods president Darrell Jones told BIV that his grocery chain only sells wine from B.C. producers. He said that he would work with the wineries and sell their wines even if they are only able to make wine from foreign grapes this year. He was not sure whether special signage would be needed for a section of the store where those wines might be placed.

Marquis Wine Cellars owner John Clerides said he would place all wines made by B.C. wineries in his store’s B.C. section even if the wines contain foreign juice.

“I would then instruct staff to explain to customers what has happened and why the wines are there,” he said.

One thing that is clear is that there will be a lot of anticipation for bud-break season in late April. Many winery principals have already inspected buds and cut into them to see if they can see any green – a sign that the buds are alive.

The proof, however, will be when the buds break, or fail to sprout.

Importing Washington state or Ontario grapes

Some winemakers want to be able to import Washington state grapes or juice so they can keep their winery operations going and their staff employed.

Others would prefer that government tweak regulations to instead allow grape or juice imports from other Canadian provinces.

“Our preference is to look at Canadian solutions,” said Hester Creek Winery president Mark Sheridan.

That could mean enabling him to import Ontario grapes or juice so his staff could make wines at his Okanagan winery.

Theoretically, a pro-Canadian regulatory change could be to enable B.C. wineries to contract Ontario wineries to make wines on their behalf and to their specifications, and then allow B.C. wineries to have their branding on the labels.

One thing winery principals tend to agree on is that the geographic region where the grapes are grown should be prominent on the wine labels.

“We would like to bring in Washington state grapes,” Blasted Church winemaker Evan Saunders told BIV.

“I want to keep my team employed, and the only way to do that is to make wine.”

He said three or four Mexican workers are set to arrive at the winery to work in the vineyard, alongside a couple other workers.

Another six individuals usually work in the winery’s tasting room in the summer.

“We still have work in the vineyard,” Saunders said. “We still have to be putting on sprays. We would still, hopefully, have to be setting up the vineyard for next year. In the worst-case scenario, where there is a lot of vine death and we have to be ripping vines out and preparing for the replanting, there would be a lot of work.”

Saunders floated the idea that his winery would apply to change its licence class so it could be a commercial winery, and not a land-based one.

That would allow Blasted Church to import U.S. or Ontario grapes or juice without needing the B.C. government to change any of its regulations.

Unfortunately for the winery, Blasted Church is on the province’s Agricultural Land Reserve (ALR).

Commercial wineries are allowed to operate on ALR land, but they are still bound by Agricultural Land Commission rules for wine production, such as the rule that at least 50 per cent of the wine produced on ALR land must come from grapes grown in B.C.

“Those restrictions would make it difficult for any winery to operate in the current environment because there’s going to be virtually no B.C. grapes,” said Mark Hicken, a retired lawyer who specialized in wine law.

“I think there will be a request to have the government bend those rules.”

BCLDB discounts help B.C. wineries stay viable

Even if rules are changed and Saunders is allowed to temporarily make wine using foreign juice or grapes – and no B.C. grapes – he will face another business challenge.

It is less financially viable for B.C. wineries to make wines with foreign grapes or juice because those wines are not eligible for British Columbia Liquor Distribution Branch (BCLDB) kickbacks or subsidies.

The BCLDB’s discount system is complicated and is calculated using two formulae: One for selling B.C. wines directly to customers, stores and restaurants, and one for selling to the BCLDB.

B.C. land-based wineries must only use B.C. fruit in their wines, so they are eligible for both sets of discounts.

The first subsidy system happens if land-based wineries sell 100-per-cent B.C. wine directly to customers, or to wine stores or restaurants. They are then eligible for a discount that equates to the full value of what the BCLDB would charge as a mark-up on the wine.

If a winery were to price its B.C. wine at $15 and sell it to the BCLDB, the BCLDB would charge a mark-up equivalent to 89 per cent on the first $11.75 per litre of value, and 27 per cent on the remainder.

The mark-up would work out to $9.51 on this 750-mililitre bottle.

The result would be a $24.51 wholesale price.

A winery that sells direct to customers, restaurants or stores would be able to pocket $9.51 for each bottle sold through that channel.

The second kickback system is for when these wineries sell wines to the BCLDB for resale. The winery is eligible for a 50-per-cent discount on its supplier price or $7.50 on that $15 bottle of wine, which had a $24.51 wholesale price, Hicken explained.

Land-based wineries get those kickbacks on all of their wines because they must use only use B.C. grapes. Commercial wineries are also eligible for the subsidy, but only for wines that qualify as BCVQA wines. Commercial winery wines that do not exclusively use B.C. fruit and do not conform to the BCVQA system do not qualify for those discounts.

This subsidy system is largely what prompted New Westminster-based Pacific Breeze Winery to start producing mostly BCVQA wine made from grapes it buys from Okanagan growers.

More than a decade ago, Pacific Breeze was known for primarily importing California juice or grapes to make its wines.

Devon Hamilton said her winery has shifted so that last year about 70 per cent of its production was BCVQA wine made from Okanagan-grown grapes.

The remainder of its wine is made with grapes imported from Washington state.

Because Pacific Breeze has a commercial winery licence and is not on the ALR, it is legally able to shift 100 per cent of its production this year to Washington state wine, without any exemption or regulatory changes.

Whether its executives decide to do that depends on how many Okanagan grapes they can buy from growers.

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