Author: MarkH

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.

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.