I am a charlatan and this is my chateaux

Explorations and Musings from an Un-Controlled Appellation

2012

charlatan noun 'someone who professes knowledge or expertise that he or she does not have' - Collins English Dictionary

Why BC Wines will Increase in Price with Passing of Bill C-311

First off, the time has come to open provincial borders to transporting and shipping Canadian wine throughout the country. I strongly support the Alliance of Canadian Wine Consumers (ACWC) and their Free My Grapes campaign. I very much hope that Bill C-311 (An Act to amend the Importation of Intoxicating Liquors Act) gets passed. But it will have some unwanted consequences for those, outside of British Columbia, hoping to have easier access to the fine wines being produced in BC. As well for those in BC that already have access to these wines.

Prices Will Rise!

Not all wines will increase in price, but those already expensive, limited production, finer quality wines will see more pressure from the demand side. Think wines in the $35 plus range. Wines many wineries consistently sell out of every year, or very nearly so, often times before the next years vintage gets released.

There are lots of great $15 to $25 wines being produced in BC, but these wines are often produced in much higher volumes and priced to target certain market price points. A $20 wine needs to remain at $20 to satisfy those buyers who tend to mainly buy $20 wines. Unless demand picks up rather significantly on those wines they probably need to remain at that price.

Supply is Increasing – Slowly

BC wineries are growing. New acreage is being turning into vineyards every year and production is growing. From 2008 to 2011 grape acreage increased from 9100 acres to 9866 acres (8.4%). And BC VQA wine sales increased from 6.59 million litres to 8.35 million litres (26.7%). (source BC Wine Institute from data from the BCLDB)

This supply growth largely feeds the bigger market of low and middle end wines. Mostly the middle as the lower end wine market is largely filled by “Cellared in Canada” (CIC) wines from imported grapes and there will not be a tidal wave of new buyers rushing to have those wines shipped to another province. In fact most CIC producers have production facilities in most provinces to supply those markets and as such already avoid inter-provincial shipping issues.

Production will likely continue to meet demand and keep the lower and mid priced wines at their respective price points.

Higher end wines won’t/can’t increase in production to the same levels but demand from the rest of the country will soon flood into many wineries online shops (if/when the bill is passed). Visiting wine tourists will choose to have a case or two shipped home, once that option is available to then. Fine restaurants across the country will want some of these wines on their wine lists. Prices have to rise.

Take for example Mission Hill Oculus. This stunning wine, one of the best produced in BC and Canada for that matter, retails at $80 a bottle. A steep price for most wine drinkers. Yet according to John Schreiner, who got to sample the 2008 release just a couple weeks ago, “most of the wine has been allotted for collectors and restaurants although there usually are some bottles on sale at the winery“. Total production, 1100 cases. At what price could Mission Hill still sell out on Oculus when all of Canada has equal access to it? $100? $120? $160? 200?

And what of those $25 to $35 wines? The transition zone. This price point is just beyond the ‘everyday wine’ for most drinkers. But many who generally buy $15 to $20 wines will once in a while treat themselves to something a bit more expensive. Perhaps for a special holiday meal or the occasional luxurious treat. In this price range too, perhaps still a bit limited in quantity than lower priced wines yet not to the extent of the very expensive icon wines, many wineries sell out before the next vintage is released.

Moon Curser is Sold Out

Price list on Moon Curser Vineyard website - May 5th 2012

Moon Curser’s 2009 Border Vines, for example, retails at $25 at the winery (but costs me $28 at a local private liquor store) is sold out ( I have a few bottles tucked away :) ). In fact, at time of writing, visiting the Moon Curser website right now, 7 of their 8 wines are currently sold out.

Moon Curser should be thinking about raising prices now, even before the rest of Canada can knock on their door. There are other wineries in, or nearly in, the same position.

These $25 to $35 wines will see demand pressures as well and prices will rise. Maybe not quite to the extent of many of the more expensive wines but rise they will.

That all said, there is over priced wine on the market in BC. Some producers may have overpriced themselves and the wine does not quite live up to market expectations, and they get stuck with excess stock that does not sell. These wineries may benefit from the coming demand- allowing them to keep prices where they are and become lucky enough to sell the majority of their stock. A rising tide floats all boats.

Over the past 2 years prices have stagnated and even declined very slightly, on average, for BC VQA wines. This is largely due to the global recession but those effects were slight in Canada compared to the USA. Napa Valley took a beating over the past few years and prices declined dramatically. However, wine economist Mike Veseth is seeing a major upturn in the US wine market coming on the horizon. Canada may see the same, though maybe to a lesser degree, even if Bill C-311 does not pass.

Just How Much More Demand Could we See for BC Wines?

In a post on sustainability of the Canadian wine industry, Sandra Oldfield, winemaker and CEO at Tinhorn Creek Vineyards, says Canada has the ability to absorb all of what is produced in Canada while still bringing in huge amounts of import wines. Canadians consume 334,000,000 liters of wine yet only produce 50,000,000 liters and barely any of that gets exported outside the country.

If all of Canada had access to BC wine, they would certainly drink it. I think ‘explode‘ would be how you could best describe the coming growth in demand.

It’s Not Just BC Wines

Ontario wines will see the same effects of cross-Canada demand. The small wineries of Quebec and Nova Scotia may as well (especially some of the Nova Scotia bubblies). And it’s not just internet sales and shipping direct to consumer. At some point in the future the wine racks in liquor stores will no longer just have a BC wines section in BC liquor stores, or an Ontario wine section in Ontario liquor stores, plus the sections for France, Italy, Australia, USA, Spain, Chile, Argentina, etc. They will have a Canadian wine section featuring cross sections of the wines of Canada.

That is the future Canadian wines need and deserve. It is the future Canadian wines will eventually get- even if this bill does not pass at this point in time. Someday it will happen. But we will pay a little extra for the good stuff. Some of us very happily so.

Everyone Benefits from Higher Wine Prices

Yes, I said it. Everyone benefits from higher prices on BC (and Canadian) wines. Wineries become more profitable and that’s a very good thing. Good for those businesses and the wine industry in general. Believe it or not, consumers will benefit too. As I said above it is largely the already higher priced wines that will see price increases. For the most part this has little effect on the average wine consumer. Those who do tend to drink and collect higher priced wines will see the pinch but they are a small part of the overall market. They also tend to be in a better financial position to absorb such costs. Where the benefits come for the rest of us is in increased production of everyday great quality $15 to $20 wine. Remember, these wines are priced specifically to hit certain price points and need to keep targeting those same price points.

Wineries with their increased cash flows and profits will invest more in planting new vineyards. Most of that increase in grape production will go towards the higher volume low-mid priced wines as that is really where the bulk of the money is for those businesses. Also, higher end wines are always more exclusive as they are only selected from the very best of the best grapes, or those few barrels that turn out better than the rest. Grape production increases tend not to increase those premium lots of grapes by all that much.

Really good BC wines for the most part start at about $20. There are some great ones to be found below that price level now but with increased grape production over time we may also get to see more $15 wines that are reaching higher in the quality spectrum. That is something most wine drinkers will love to see. Bill C-311 may very well help get us there.

Do you agree? Disagree? Tell me why in the comments below.

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