Schedule 1 - Snapshot of the Okanagan Valley
A PDF version of this report (including the Schedules) is available for download here.
“The collaborative and creative spirit that fuelled Napa’s pioneers is certainly very evident in BC today” – Jancis Robinson
Of the nine distinct wine regions in British Columbia, the Okanagan Valley represents 86% of local wine production and is the most advanced with “premiumization”. At just under 10,000 acres under vine, its production is tiny on the global wine map but the pioneering passion and huge potential of this spectacular area has caught the eye of local and international investors and observers alike.
“Canada’s Napa Valley” - There’s a huge latitudinal stretch of almost 200 kilometers from north to south, offering a wide range of diverse terroirs suitable for many grape varieties. Okanagan Valley sub-regions have comparable growing degree days to Burgundy, the Yarra Valley, Yakima and Napa Valley.
Cool climate grapes such as riesling, pinot gris, chardonnay and pinot noir shine in the northern and mid-parts of the Okanagan Valley. Hotter conditions and climate change has allowed late ripening varieties such as cabernet sauvignon to be viable and succeed in the southern part of the region near the Washington State border. Syrah and cabernet franc are coming on strong as future BC signature varieties.
Located in the Cascade Mountains rainshadow, the South Okanagan Valley and neighbouring Similkameen Valley (a separate region with less than 1000 acres under vine) have the warmest average temperatures in Canada. During their short, hot growing season they receive 2 more hours of sun per day than Napa and little rainfall. Increased activity here with focused investment and conversion of existing fruit orchard lands.
There’s been a population influx as more people move to the Okanagan region to embrace wine country life- style and retreat from big city life on the Pacific Coast or colder parts of Canada. Kelowna or Penticton are
the two main urban hubs, are serviced by airports and about a 1 hour flight from Vancouver. There’s a growing vibrant foodie and culinary adventure scene specializing in premium “farm to table”, local and organic products. “Vineyard inspired” dining experiences and “supporting local” have continued with domestic consumers during the pandemic and are part of broader agri-tourism.
Schedule 2 - The BC Wine Industry - Rapid Growth & Increased Global Recognition
Three Decades of Growth
Over the past thirty years, BC vineyard plantings have increased almost 10 times. The number of wineries has leapt from about 20 and is now closing in on 300. The market share of local wine has increased exponentially from 3% to almost 20% (by volume). The local wine industry has risen from being a tiny part of British Columbia’s economy to a critically important part having an estimated $2.8 billion annual economic impact, with strategically important growth focused on agri and wine tourism.
Influx of International Expertise & Global Recognition
BC wineries have engaged international winemaking and viticulture expertise to create a dramatic increase in quality and recognition. The following are just a few of the international luminaries who have been retained by BC wineries.
Michel Rolland (Bordeaux)
Olivier Humbrecht (Alsace)
Alberto Antinoni (Tuscany)
Pedro Parra (Chile)
Alain Sutre (Bordeaux)
Veronique Drouhin (Burgundy/Oregon)
Increased Focus on Agri-Tourism and Wine Travel
In addition to vineyard plantings, resources have been spent creating wine travel destinations and developing tasting rooms and experiences to cater to increased visitor interest. This ties into the broader movement and focus on agri-tourism and culinary adventure. BC wineries receive an estimated 1 million visitors per year.
With increasing global attention and media coverage on the region, expectations are that this will increase when more domestic and international travel resumes.
There have been numerous recent transactions in the last few years including:
Burrowing Owl purchasing Wild Goose
Barbara Banke and Julia Jackson (of Jackson Family Wines from California) purchasing Unsworth Vineyards
Changing of hands or investments at Stags Hollow, Stoneboat, Joie Farm, Sea Star, Mount Boucherie, Foxtrot and Time Family Wines
Multiple vineyard purchases including rapid expansion by Frind, Phantom Creek and O’Rourke
Peller buying Gray Monk, Tinhorn Creek and Black Hills
Arterra buying Culmina and Laughing Stock
- Von Mandl Family Estates buying Road 13, Liquidity, Cedar Creek and opening CheckMate and Martin’s Lane
Please contact us for more detailed information.
Schedule 3 - Examples of Average Grape and Bottle Prices
According to the BC Wine Grape Council, in 2020 the two highest volume red grapes produced in BC were merlot and pinot noir, and the two highest volume white grapes were pinot gris and chardonnay. While prices will vary widely depending upon varietal, vineyard and farming practices, generally, the average prices were in the range
of $2900-3200 CDN for most red vinifera varieties and in the range of $2200-2700 CDN for whites. Note however that these averages are skewed in that they include pricing for the largest producers. Practically speaking, smaller producers are having to source in the $3500-4000 CDN range and even higher (depending on the variety and amount purchased).
The average retail price for BC VQA wine (i.e. wine made entirely from BC grapes) in 2021 was about $21 CDN (based on an average wholesale price of about $16 CDN (WGBC) and retail markup of 30%). However, this number would include a large amount of wine produced by the large wineries who have significant vineyard holdings of their own and/or long term leases (and thus who would be less affected by grape price changes).
In contrast, more detailed market analysis by Paul Rickett (of VARketing!) indicates that the average current price for 100% BC wine produced by independent wineries is somewhat higher: $18.19 CDN wholesale (estimated $23.65 CDN retail with that same 30% markup). More specifically, it breaks down for BC red wine to $21.70 CDN wholesale (estimated $28.21 CDN retail). And for white wine it is $15.68 CDN wholesale (estimated $20.38 CDN retail). Please contact Paul directly for more detail on this.
Local products made with 100% BC wine have relatively high average wholesale prices which have been steadily increasing (and will likely need to increase to meet input cost pressures).
There is a “rule of thumb” in the North American wine industry that in order to recover production costs and generate a reasonable return for the winery, 1 ton of grapes ought to be priced at 100 times the retail price of the wine bottle that those grapes produce. So for example, a purchase of pinot gris grapes at $2300 a ton, should produce wine that retails for about $23 a bottle. If one uses that test on the grape cost averages above, it indicates that most BC reds should retail between $29-32 and whites between $22-27. Those projected prices are higher than the actual averages just noted. Although there may be some economic effect from “vintage lag”, this suggests that some, or perhaps many, BC wineries are not obtaining the pricing for their wines that would put them in line with North American winery average returns.
As discussed above, increased input costs, the application of excise tax and “short crop” issues will likely have a widespread effect on winery profitability in the next year. Indeed, anecdotal evidence from many wineries is confirming that these issues are of great concern within the industry and that price increases will be inevitable. Producers that own their own vineyards will continue to have an advantage in controlling their production costs.