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2024 Wine Law Conference in April – Toronto

The 2024 AIDV Canada wine law conference and annual general meeting will be held in Toronto on April 24th. There are options for in-person and virtual attendance. There is a great line-up of speakers covering essential topics such as interprovincial trade barriers, regulatory updates and the effects of Quebec’s language laws on labelling and marketing. If you are able to attend in-person, there will also be a lunch and wine tasting. Full details and registration information is here.

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Crisis Hits the BC Wine Industry

I have been involved professionally in the BC wine industry since 2008. Since that time, the industry has grown exponentially and has enjoyed considerable international recognition. While there have been some bumps and challenges along the way, the intervening years have generally been “golden” years of growth and expansion. Unfortunately, and mostly due to Mother Nature, the good times have come to an abrupt end. The industry is now in a state of crisis beyond anything that I could contemplate. I am gravely worried about the near future and almost as concerned about the longer term. Here’s why.

If you have not heard, the interior wine regions of BC experienced a deep freeze in December 2022. Generally, temperatures dropped below a danger zone for vines for about 42 hours. The resulting effect was primary bud loss of over 50% and vine death of about 30% for planted vineyards. This resulted in a dramatic reduction in the 2023 crop as well as a need to replant those affected vines that had died completely.  It generally takes 3 years for replanted vines to start producing in sufficient quantity and quality. 

On its own, this was a calamitous event as it seriously affects the economics of wine production. There will be a lag before the financial consequences kick in as it takes time between harvest (in the fall of a particular year) and the time when the wine is ready to be sold. This lag will vary between wineries and particular wine styles but is often about 1-2 years for white wines and 2-3 years for red wines. For example, as a result of the reduced 2023 crop, wineries could have about 50% less white wine to sell in 2024-2025 and 50% less red wine in 2025-2026. They would also have to pay for the unexpected cost of replanting vineyards which runs about $50,000 an acre … and wait for those new vines to start producing useable grapes.

Sadly, things have become much worse. In January 2024, another deep freeze hit which was worse than the first one (see this excellent presentation by Dr. Ben-Min Chang if you want the details). This time temperatures dropped further into the danger zone and for longer … for 57 hours. Initial assessments have catalogued primary bud loss at 90-100% with wide-ranging secondary and tertiary bud loss as well which will affect the next year. The extent of vine death is harder to measure until the weather gets warmer but it will be worse than the first freeze and could be extensive.  Cumulatively, this likely means the following:

  • More than 50% crop loss for 2023 
  • Close to 100% crop loss for 2024
  • Additional significant crop loss for 2025 due to tertiary bud damage
  • Additional significant crop losses for 2025-2027 due to vine death

It is hard to catalogue the extent of the consequences of the above for the wine industry and connected businesses, such as growers, workers, retailers and restaurants, but here are some possible effects assuming that no external assistance is available and that wineries do not take proactive remediation measures:

  • Extreme contraction in availability of VQA and 100% BC wine during the affected years.
  • Significant reduction in revenue for wineries and growers over the affected years.
  • Significant losses on the financial statements of almost all wineries and growers – most would be deep in the red over the affected years.
  • Layoffs and widespread cost-cutting.
  • Many wineries going out of business and/or for sale.
  • Inevitable loss of market share for BC wine to imports. 
  • Further reduction in vineyard real estate values and winery business values. 

There will also be “knock-on” effects for others in the supply chain. For example, some retailers are either legally restricted to selling only BC wine or have chosen to do so. For those retailers, there will be much less wine to sell.  Many will be forced to start selling other wines if they are legally able to do so. Similarly, some restaurants have created wine lists that are predominantly BC. Again, they will be forced to re-think and to start selling other wines.

It is my view that only the most well-capitalized wineries would be able to survive this tumultuous period without taking drastic proactive measures. I just don’t see how most small to medium sized wineries can survive such significant losses of revenue over such a protracted length of time. I am aware that there are efforts underway to form an industry-wide request for government assistance … and I am aware that government has indicated a general willingness to help. Nevertheless, individual wineries may wish to consider if some of the following proactive steps may be desirable:

  • For commercial wineries, import juice or grapes from elsewhere in order to have product to sell (albeit not 100% BC product). 
  • For land based wineries, consider converting to commercial categorization so that you can do the above. Conversion may not be as onerous as you believe, contact me if you need advice.
  • Advocate for temporary changes to the LDB’s land-based winery rules to allow some form of the above without losing land-based status.
  • Ensure that any labelling of non-BC product is not misleading and compliant with federal labelling rules.
  • Unify around a request for government assistance. Government will be more likely to act if the industry can provide options that have consensus or near-consensus.

I note that the Walla Walla region in WA state has experienced devastating freeze events from time to time, particularly in 1996 and 2004. This has resulted in some of its storied producers sourcing grapes from outside the appellation (and even from outside the state). See this news story for details and this resulting “Appellation American” wine from prominent producer, Leonetti Cellars.I note that the above applies to the interior wine regions of BC. Coastal wine producing areas thankfully escaped the extreme temperatures. As such, wineries in these regions will be able to continue business pretty much as normal (likely with increased demand for 100% BC product). Regrettably, it will likely take years before the interior wine producing regions can recover fully from these tragic climate induced events.

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Don’t Let Anti-Alcohol Grinches Ruin Your Holidays

As the holiday season approaches, most wine lovers will look forward to socializing with friends and family in the days ahead. For many of us, these valuable social interactions will include a glass of wine. Such gatherings have been part of civilization for thousands of years. They provide pleasure and community connection which is vital for individual well-being. Nevertheless, many of us may be thinking twice about drinking during the holidays, even in moderation, due to the recent efforts of anti-alcohol advocates who claim that there is “no safe level” of consumption and that “alcohol causes cancer”.

Such statements are wild exaggerations of reality. Here are some reasons why you should ignore the fear-mongering and carry on enjoying a drink in moderation if you choose to do so. Firstly, the science related to safe levels of consumption has not changed. Hundreds of studies, and decades of scientific research, have consistently shown that those who drink in moderation live about as long (or even slightly longer) than those who don’t drink at all. The reality is that moderate drinking provides some cardiovascular benefits while slightly increasing the risk of certain cancers, some of which are very rare (see this article with comments from physician and winemaker, Laura Catena). For most people, there is little or no effect on overall health and mortality. Unbiased science continues to demonstrate this including work done in the past couple of years.

The claims related to cancer are also exaggerated and simplistic. In reality, nearly all cancers (96%) are not caused by alcohol. Of the 4% that are, most of these are related to drinking in excess. Indeed, if you want to confirm this … ask someone whose business revolves around life expectancy … the life insurance business. These folks will lose a lot of money if they get this wrong. There’s a reason that life insurance premiums are higher if you are a smoker … because there is a direct causal link between smoking and a shorter life. However, life insurance premiums are not higher if you are a moderate drinker … because, in actual fact, responsible drinking has very little to no effect on average life expectancy. You can see this for yourself if you play with the life expectancy calculator created by Sun Life Insurance. For example, smoking will shorten life expectancy by about 5 years or so. Moderate drinking will either have no effect or slightly increase life expectancy

Yes, those who choose to drink should do so responsibly and in moderation. But wine lovers should not worry about having a social drink while they mingle over the holidays. We all know family and friends who have safely consumed in moderation for decades and lived to a healthy old age. Now more than ever, it is important to enjoy the benefits of friendship and social interaction … and, if you want to have a glass of wine while doing so … don\’t let those who have built their careers on anti-alcohol advocacy scare you from enjoying yourself. Happy Holidays.

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Canada’s Drinking Guidelines Have NOT Changed

The mainstream and industry media continues to report that Canada’s “low risk drinking guidelines” have changed and that they have been reduced to “two drinks per week”. If true, this would be a dramatic reduction from the previous guidelines which were 15 drinks per week for men and 10 drinks per week for women.

Many stories have reported this, a few of them are here: Wine Spectator, Wine Enthusiast, and NY Times.

However, the stories are NOT correct. Canada\’s drinking guidelines have NOT changed and remain the same as they were in 2011. The official guidelines, from Health Canada (a federal government agency) are still located here and are unchanged: Health Canada Low Risk Drinking Guidelines.

Unfortunately, what has happened is that an advisory group has recommended that Health Canada lower the guidelines. Health Canada has neither accepted nor rejected that recommendation. I note that the title of the report containing the recommendations (“Canada’s Guidance on Alcohol and Health”) is misleading as it implies that Health Canada has already accepted the recommendations when it has not.

The group that I lead believes that these recommendations are flawed and should not be adopted. There is more information on our web site located here (Canadian Assoc. for Responsible Drinkers) including our analysis of why the recommendations contained in the report are flawed.

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Canadian Alliance for Responsible Drinking Launches to Provide Sensible Info on Alcohol/Health Issues

The Canadian Alliance for Responsible Drinking (CARD) has officially launched to provide sensible information on alcohol & health issues. CARD\’s mission is to provide unbiased information and education that encourages responsible consumption and reduces harmful consumption. It’s an important objective during a time when exaggerated claims are circulating and when Canadians are likely confused about conflicting information from various levels of government. I am the Executive Director of the informal alliance which includes concerned citizens and businesses. There’s a short launch message located here that explains what we’re about. CARD’s web site is now live and provides plenty of information and resources on these topics. I hope that it will prove to be useful and will enable you to make smart and informed decisions about alcohol consumption.

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Global Wine Law Experts Coming to the Okanagan

It\’s been a tough year in the Okanagan for multiple reasons (winter freeze, wildfires). Wineries continue to struggle with these and other challenging issues. However, on the positive side, Kelowna will be hosting an international gathering of wine law experts at the end of September. For the first time ever, the International Wine Law Association (AIDV/IWLA) is holding its annual conference at the Delta Grand Okanagan from September 28 to October 1st. There\’s an impressive line-up of speakers who will be discussing an exciting range of topics: see the conference details here. But, there\’s also a related (less legal) seminar at Okanagan College on September 28th which is designed specifically for the BC wine industry. It features some great speakers from the main conference and highlights topics that will likely affect the operations of BC wineries. The details are in this promo flyer. You can get tickets here, with all proceeds benefiting students at Okanagan College. Please take advantage and chat with international experts while they are here … hope to see you there!

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BC Extends TESA Authorizations until End of 2024

In news that will provide relief to many BC liquor licensees, the BC LCRB announced today that they will extend TESA authorizations until the end of 2024 unless local governments have concerns. This will enable TESAs (temporary expanded service areas which are often outside) to continue for the foreseeable future. This is very good news for wineries as it continues to allow flexibility for tasting areas. Hopefully, a permanent solution will be found prior to the expiry date. The news release is here: TESA Authorizations Extended.

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Get the Inside Scoop on Opening a Winery

Ever dreamed of owning a winery? Join AIDV Canada on January 17th for this 60 minute webinar and hear from four independent winery owners who produce wine in BC\’s Okanagan Valley. This promises to be a fascinating session in which you will get the “inside scoop” on the issues related to entering the wine business. Full information and registration is here: Issues Facing Canadian Independent Winery Owners

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Are You Still Making Money Selling Your Wine?


Recent substantial increases in the input costs for producing wine have caused consternation and concern for most wineries in North America. There will be obvious and consequent effects on the bottom line for producers when they look at their annual financial statements. But should wineries wait to assess the impacts? We believe that wineries should take more proactive steps to ensure that their business models are not being quietly eroded. One useful metric is for a winery to calculate its per bottle production costs for each product in its range and ensure that pricing and production strategies are still sound given increased costs. 

Our consulting work often provides us with visibility into the financial statements of wineries. While larger wineries have accounting departments that constantly monitor financial issues, many smaller producers do not. Recently, we have noticed that some wineries do not regularly track the “per bottle” production cost metric. In some cases, we have observed that this information can be useful in revealing surprising realities regarding the profitability of certain products and growth strategies. 

The basic idea is to conduct an accounting exercise that will identify “direct costs” (e.g. grapes/juice, bottle, label, cork), “indirect costs” (e.g. winery overhead such as rent, labour, utilities, administrative costs) and “selling costs” (which may vary depending upon what channel the wine is sold in but for on-site sales would include the costs of running your on-site store) and then allocating these costs amongst your production such that you can generate a cumulative cost of production for each wine product. There may be some arguments about how to allocate certain costs, but with some creative math, you should be able to divide all of the costs of running the winery amongst your annual production such that you can see how much revenue is needed from each product in order for you to break even. 

A few years back, I asked one winery owner about this. He ran a local winery that would be categorized as small to medium sized in BC (which means small on a global scale). He had tracked this metric and provided the following information that showed the profitability of one white wine that they produced:

Retail Price (DTC)   $22.00
Profit   $2.59
Taxes   $2.64
Selling Costs   $3.86
Indirect Costs   $6.20
Direct Costs   $6.72

As you can see from the above the “direct costs” for this wine were $6.72. The “indirect costs” totalled $6.20 and the selling costs were $3.86. The profit margin for the winery was slim, only $2.59. Other products in the winery’s range were more profitable and the winery was profitable overall. In our recent experience, these numbers have been quite typical for smaller producers located in BC. We have seen a number of wineries where the calculations ended up in a similar range (e.g. about $10 per bottle for combined indirect and selling costs). The numbers may well be lower (or a lot lower) in other places since BC’s production costs are generally quite high and production is small, but the principles will be the same. 

Nevertheless, in this example, you can see that even a small increase in the winery’s costs would have rendered the production of this particular wine unprofitable at this price point. We are concerned that this may be happening surreptitiously for many wineries since significant input cost increases have occurred in the past year or so. A relevant analogy may be that of the frog who placidly sits in a pan of water while the heat slowly rises. The frog does not notice the gradual increase in temperature until it is too late and it has expired. Similarly, while wineries will be well aware of increased costs, they may not have tracked the effects back to individual products and may discover rather late that they could have changed pricing or production strategies to minimize the damage.

More broadly, this metric can be useful for a winery’s strategic planning. Obviously there will be tensions and adjustments related to production levels for each product and an assessment of pricing tolerances within the consumer marketplace as well as how a particular product fits within the winery’s overall growth strategy and production. However, if indirect costs are relatively high at a particular annual production level, then it may not make sense to focus on low margin products … the path to profitability may lie only in products which produce better margins or for which you can, at least, cover your costs. 

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BC Wine Industry Report Spring 2022


An updated and expanded version of our BC Wine Industry Report for 2022 has now been published on the related TTGV Advisors web site. This report covers off the 2021 vintage as well as industry developments and insights for 2022 including investment activity, winery/vineyard sales and pricing, growing season conditions, input costs, regulatory changes and market observations. 

See: BC Wine Industry Report Spring 2022. Also available in PDF version.