A Perfect Storm for – and by – the B.C. Wine Sector
The B.C. wine sector is going through a tough time. But this is no time to retreat from institutional supports that will help it thrive, and strengthen it through the next crisis.
Reluctantly, I write this post about the perfect storm facing the B.C. wine sector. Warning signals about its health are flashing, and should be heeded if it is to resolve its issues and be resilient for the future. Several observers and participants have written on aspects of the present headwinds – from a December 2022 deep freeze that severely damaged buds or entire vines, to a financial crisis for a number of wineries in the Okanagan Valley and elsewhere, to existential decisions about future-proofing vineyards through varietal selection and location. My focus here is on the eroding institutional supports for the industry – notably through the loss of UBC’s Wine Research Centre.
Environmental/Climate
2023 will not soon be forgotten by B.C. wineries and vineyard operators. As was widely publicized, the December 2022 deep freeze in the B.C. Interior (particularly the Okanagan and Similkameen Valleys) decimated the production from many vineyards. It will take years for these vineyards to recover capacity – either through nursing damaged vines back to health, or replanting with new vines.
This spring and summer have also been unkind: a wet spring has enabled powdery mildew to affect the quality of the small crop. As is very widely known, wildfires in the late summer sent a blanket of smoke (and in some places ash) over the landscape. It won’t be known for some time whether, or by how much, the smoke has affected the grapes.
As I write, harvest is essentially complete in the Okanagan. Given the high temperatures through the summer, some producers have been picking since mid-August. I understand flavour profiles to be robust and ripe from vines that are healthy, from well-managed vineyards. A small but good quality vintage appears to be the top-line summary for 2023.
Business and Economic
2023 is a perfect storm in the realm of costs, business inputs and prices. Many wineries continue to carry the costs they bore during the pandemic: for expensive, delayed inputs such as glass bottles, to skyrocketing prices for grapes from the few contract vineyards operating in the Okanagan. Inflation is a factor in the cost of most inputs and services including transport, storage, fuel and so on. Rising interest rates have increased pressure on debt servicing costs. Labour continues to be scarce across most occupations including agricultural and hospitality.
Visitors and Consumers
After a pandemic bump in B.C.-origin visitors, the reality has set in that a) they are again travelling elsewhere, and b) the wildfires in the Okanagan put an abrupt end to the 2023 visitor season. Wineries up and down the Valley have reported a lower visitor count even before the Province of B.C. ordered tourists to vacate the central and south Okanagan for anticipated need by evacuees and first responders. By many accounts, wine club memberships have declined.
Elevated costs have led to many producers raising their prices, after trying for a couple of years to hold the line and limit passing these along to consumers. B.C. wine lovers are a loyal bunch, but they are also tapped out in grappling with cost of living pressures. The B.C. Liquor Distribution Branch’s Quarterly Report (author’s note: updated from original publication for Q2 2023 sales) – shows a decline in B.C. wine sales compared to the same period in 2022. In Q1 (April - June 2023) values were down 5.2% and volumes down 8.1%. The Q2 (June - September 2023) data tell a more concerning story, as economic and tourism factors, and general consumption trends played out over the summer: B.C. wine sales were off approximately 8% year-over-year for both value and volume.
In Q1 the entire wine category was down from the preceding year, but B.C.’s market share (all wine categories) held even at 49% of dollar value and 54% of volume (litres). In Q2, B.C. market share declined, as imports sales increased year-over-year by 21.9% in value and 12.7% in volume. While it is easy to interpret a shift in consumer purchasing from B.C. wine to imported wine, the refreshment category also plays a role: in Q2 (summer 2023), this category grew by 8.4% in value and 2.3% in volume over the same period a year ago. Refreshment beverage sales in B.C. now account for more volume than the entire packaged wine category.
Few of these factors are surprising to those who follow the sector. Various industry advisors hint that dozens of BC wineries are quietly or publicly up for sale, and in October alone, sales or curtailments of operations were announced by at least six Okanagan Valley producers.
Institutions
Every thriving wine industry around the world has a multi-faceted institutional framework that functions symbiotically with the sector itself. Think of it as the less-visible infrastructure supporting its business operation, conducting research and innovation, fostering leadership, and providing a supportive network in times of trouble.
Over the past month we have learned of several disturbing developments; on the commercial side, winery closures or sales. Others are reflective of the problematic relationship between the sector itself and the institutions or initiatives intended to foster its growth, maturity and quality. The news in September that UBC decided to close its Wine Research Centre may or may not be perceived as a significant blow to the industry. It should be.
Whatever UBC’s internal reasons (it has publicly stated the principal reason is financial) it sends a signal that either the institution doesn’t see a future in the wine sector, or that it has not received a sufficient signal from the sector that it values UBC’s contribution - present and future - to its own development. In the recent past, partly due to legitimate financial pressures, other industry-wide initiatives have either been wound down or never got off the ground.
My comparative research around the world indicates that academic institutions play a significant role in the local wine sector’s network:
· collaborative applied research with winemakers and viticulturalists
· education for a new workforce or up-skilling and best management practices for existing employees and leadership
· serving as a hub for international research and knowledge exchange
· perhaps least tangibly – serving as a convening or sounding board function for the industry as a whole
The B.C. wine sector network is capably served by several institutions populated by hard working and talented individuals, across the dimensions of coordinated research; viticultural, winemaking, culinary and hospitality education; and industry governance and coordination. This post is not intended as criticism of their role or their efforts.
A Tough Prescription
Without the intellectual connections and institutional weight of a UBC, the BC wine sector is more poorly positioned to grow and thrive. For many years B.C. wine sector champions and consumers (myself included) have enthusiastically supported the industry as being filled with potential. The Okanagan in particular has made great strides, and has achieved some remarkable international recognition and success for its wines. Why is the industry still viewed as “having potential”? Why are we still waiting to describe it as having achieved full recognition for its arrival on the international wine scene? In part, the reality is that B.C. is comprised of young wine regions, and a track record is built vintage after vintage, decade after decade. But in part, there is a dearth of collaboration, investment, and leadership, in key aspects of the sector that could turbocharge its future.
I now worry – a lot – about the sector’s future. A consistent pattern of a lack of industry cohesion, working at cross-purposes, avoidance of investing in or working with key institutions that could support the industry’s growth, will come home to roost. With few exceptions, the way the B.C. wine sector is going, it will remain on the superhighway to mediocrity: filled with potential, but without the industry will or investment to aim high, and achieve the next level.
What it will take is industry cohesion, strong governance, and a refreshed cohort of owners as industry leaders. There are strong signals that some of the most dynamic builders of the past two decades are getting ready to step back a little… and the enthusiasm and energy of newer entrants needs to be fostered and channeled.
Since you cannot wring additional funds from non-existent vineyards or production, in future the sector needs to commit to an appropriate level of investment in strong regulatory and geographic systems, all parts of wine/viticulture education and research, develop world class assets - and market them to the world of wine lovers and industry professionals alike - and foster a culture of self-reliance collectively as a sector, not as an atomized set of winery operators.
Government bailouts will not always be the stop-gap. Neither will endlessly rising prices for already- pricey BC wine (not when far cheaper international bottles beckon on the next shelf at your local store). The long-time reliance on the “domestic” B.C. market is a strategy filled with peril. Diversification is key. Pushing (in a concerted, sustained way) provincial governments in the rest of the country to open markets to direct delivery would help. Taking the courageous leap out into the international market - as some have done - should be considered by more wineries, perhaps in concert.
I could go on, and the list is long. The industry is at a precipice now. Look over the cliff, and then get to work. It’s not too late, but it’s also time for the B.C. wine sector to put its big girl/boy pants on and get really serious about its resilience and future.
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