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Cellared in Canada Cash Cow

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By Alan McGinty

New Tory leader Tim Hudak’s membership in the Facebook group “Boycott Cellared in Canada Wines” could be a worry for the producers of this controversial wine if Dalton stumbles. And as this year’s crop of grapes develops in Niagara there’s a big issue for the grape growers: government subsidies.

 

Cellared in Canada (CIC) wines have up to 70% foreign content and are a nine-figure business at retail. A handful of wineries are allowed to produce it as it was banned following a 1993 trade agreement in which existing producers were grandfathered. Now, the knives are out.

 

Flare-ups
A couple of issues over the past year have brought CIC under scrutiny: Ontario ponied up a $4 million bailout for grape growers who couldn’t sell about 2,500 tons of grapes in 2008 even as the equivalent of thousands of tons of similar grapes were imported. The province also had a $14 million program giving a 30% rebate on every 100% Ontario Vintners Quality Alliance (VQA) product sold at the LCBO up to March 2009.

 

Vincor’s decision to use import-blended wines in its Vancouver 2018 Olympic “Esprit” brand, which raises money for the Olympic team, caused a mini media flap and spawned the Facebook group Tim Hudak joined. Vincor did an about-face a few months back and has now gone for all-Canadian Vintner’s Quality Alliance (VQA) grapes for Esprit.

 

Wine purists hate it and see it as fake, but CIC wines have one very attractive feature going for them: cost. With finished wine coming from Chile or Argentina at 60 or 70 cents a litre, or $1 a litre from Australia, there’s a lot of scope for lower prices while retaining healthy margins and, oenophiles be damned, the public laps it up.

 

Show Me the Money


Crowded Market... and the best sellers are around $10

The LCBO’s Chris Layton supplied the latest sales figures: VQA had a great year in 08, rising from 4.2 million litres to 4.9 million litres, generating $70 million in sales. But CIC sold 23.4 million litres for $193 million. Layton added that “Ontario winery store sales also account for more than 20 million litres and more than $200 million in sales.” Within those figures is a substantial amount of CIC.

 

With numbers like these, it's clear CIC represents a huge percentage of the Ontario wine industry and underwrites a lot of winery buildings, equipment and jobs. It provides pretty much all the really cheap non-import wine.

 

LCBO figures show a steady rise in the average shell-out for wine in Ontario, with 2007 at a record high of $12.42… per litre. That’s $9.32 per 750ml, and over half the wine bought cost less than that. The lowest priced VQA wine on the market: the entry level varietal series from Twenty Bees at $9.95 for 750ml. Twenty Bees went into receivership in April.

 

According to Hilary Dawson, president of the Wine Council of Ontario, CIC delivers “popular priced wines” to compete with cheap imports. “Grape prices in Ontario are high,” Dawson says. “The price differential would cause the category to be unviable. If the content got pushed higher by regulation, there are producers who would exit the market. It’s not that we’d exit and the wine would then go into VQA, we’d exit completely and cede all those sales to imports.”

 

It’s Cheaper Abroad
It’s not just South America that kills on cost – even California delivers substantially cheaper grapes: while Cali pinot noir is about the same price as ours, chardonnay is around half and merlot just one third the Ontario price, according to USDA figures. “And they have high brix counts,” adds Dawson. Brix is a measure of sugar content in a grape and bigger, fruitier New World wines are made from grapes with higher brix, and that’s the most popular style at the entry level.

 
California vineyards: 860,000+ acres

“We know through our research that the [value priced] customer wants the exact same flavour profile every time,” says Dawson. “That takes skill on the winemaker’s part, which is why the term Cellared in Canada makes sense. It’s not just bottled here, there’s winemaking involved.” Dawson added that CIC winemakers buy about half of all wine grapes in Ontario.

 

Ontario Quality

Debbie Zimmerman of the Grape Growers of Ontario acknowledges CIC is “part of our stability even as we grow VQA. But our question is can we adjust the content requirements over time, especially in a long-crop [i.e., surplus] year? We offer flexibility in a short-crop year, but what do you do when it’s on the flipside?” The Grape Growers would like to see the minimum Ontario content bumped up from 30%. Zimmerman says that the quality is there in Ontario and that the VQA is actually behind the curve even as  VQA sales are rising: “We’re calling on VQA Ontario to raise the minimum standards as our growers are already exceeding them. We take some umbrage with the comments that we are not growing quality, because we are.” Zimmerman also acknowledged that the Grape Growers are open to the idea of a scale of higher prices for higher quality grapes, “We’re going to continue to push for compromise and cooperation because we’ve got a dynamic and growing industry,” she says.

 
Fermenting tanks at Jackson-Triggs

Market Engineering

Asking the government-run LCBO to boost sales of Ontario product is a regular demand of the local industry and, in a joint communiqué issued by the Grape Growers and the Wine Council in April, among other suggestions are “an immediate increase in shelf-space and listings in the LCBO for Ontario wines,” and “performance goals for the LCBO management team and Ontario category teams related to Ontario wines.”

 

Meanwhile, even as importing agents and foreign producers fulminate against that same LCBO for its restrictive policies on their products – only about half of all imported wines on the Ontario market are available at the LCBO for retail purchase – the public dropped five times as much money on and drank three times as many litres of imported wines as it did CIC last year: 75.4 million litres worth $1.024 billion.

 

Making CIC wine

There’s a profile and a process, but what does it mean, quality-wise? Can cheap, generic product really ruin a region’s wine reputation? Tune in next week.

 

Alan McGinty

www.alanmcginty.com

 

 



Comments


Great stuff Alan, keep it up..I can hardly wait for next installment...when? when? when?

Suggestion one -- get Ian Campbell of OIWSBA to say something. I know they have an opinion and a stance.

Suggestion two -- do a blind tasting of CIC vs cheap imports, and see who -- or what -- wins...

Dean
Post Reply By Dean in TORONTO on 7/3/2009 4:33:23 PM

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