Cover Story: Sour grapes in wine country
Tuesday, March 3, 2009
Straighten out the industry or we'll do it for you, says the province. Some growers say government policies make marketing wine harder than it needs to be
by DON STONEMAN
Thirty five years into his grape farming career, John Neufeld faces a triple challenge this year at Palatine Hills Estate Winery, established with his wife Barbara 10 years ago in Niagara on-the-Lake.
The Neufelds' 80-plus acres of vineyards produce the equivalent of 100,000 cases of wines of all kinds, but not nearly all of that goes into their own bottles. Some grapes are sold to other wine makers and that's a rub. Other wineries cite a surplus last fall and aren't buying grapes like they used to.
The ice wine crop is finally harvested, but reports indicate that ice wine sales are off because of the troubled economy.
And there's a mountain of paperwork associated with selling from the store, to the LCBO and to export markets. Every country's labelling requirements are different, Neufeld says.
"I can't sleep at night thinking how I'm going to get through this next season," Neufeld says. He's not alone.
A deep vein of discontent is running through wine country, particularly in Niagara. The maker of 20 Bees wine, a grower consortium called Niagara Vintners, went into receivership in February. The closure of the Cangro fruit canning plant in Niagara was another blow to growers fearful that tender fruit lands might get put into grape vines.
A wet summer led to a crop some say was too bounteous or of uncertain quality. The provincial government offered some relief with its Harvest Program, which paid growers $4 million to leave 2,700 tonnes of excess fruit on the ground, but it came with a quid pro quo. In late fall, the Premier's office issued growers and wine makers a stern directive: Settle long simmering issues or the government would settle for them. (The directive came after an arbitrator ruled in favour of growers in a dispute over grape pricing.)
The marketing board, processors and government have been in meetings since. "Our goal is to have some substantial progress by the end of February," says Hillary Dawson, president, Wine Council of Ontario. Grape board vice chair Doug Hernder says the facilitator of the discussions has imposed a news blackout and committee members aren't supposed to talk to the press.
The board's chair, Bill George Jr, was out of the country in late January.
The grape lands are a linchpin in the Province's Greenbelt plan to protect agricultural land around the Greater Toronto Area. Wine lovers were encouraged to consume locally produced wines long before locally produced food was a watchword.
Growing grapes takes planning. Four years pass between planting and first crop and Grape Growers of Ontario estimates that establishing an acre of vineyard costs $24,000. Marketing is a long term effort but plans have fallen short. Processors launched a 20-20 Strategy, through the Wine Council of Ontario in 2001 with targets to gain a particular portion of the province's wine market. Debbie Zimmerman, Grape Growers CEO, confirms that grape sales fell short of the 2008 target by 10,000 tonnes, more than enough to cover off last summer's surplus.
"It's not that we are over-producing," Neufeld says. Market share has "climbed a little bit," but plantings have increased faster.
Some growers blame the failed Niagara Vintners project for the grape surplus, a charge vehemently disputed by David Wiley, a principle and a former grape board member. He says Niagara Vintners "firmed up" the price of grapes and delayed the current surplus situation by several years.
He maintains the province has "mishandled" the grape file.
Outspoken Horst and Gabriella Werscht feel they were left out in the cold. The former 20 Bees investors were unable to sell half of their grape crop last fall.
Gabriella says she was surprised at how quiet producers were at meetings that the board held to get input before they went into talks with the wine council. She thinks either growers are intimidated because their contract buyers were in the same room, or they have long term contracts already and feel secure. Now is the time to ask for change, Gabriella says. "We are all in this together."
Why has growth of the market share stumbled? Growers point towards complex regulations. One target is that the biggest wineries making "Cellared in Canada" blended wines. Under The Wine Content and Labelling Act, "cellared in" wines, can contain as much as 70 per cent imported wines, mostly from low cost, warm season producing areas such as Chile.
Neufeld was an Ontario Grape Growers director in the mid-to- late 1980s when the Canadian government signed a free trade agreement, opened borders to imports, banned use of undesirable Labruscas grapes for wine making and encouraged growers to plant new varieties that produced wine that was drinkable.
Winemakers with licenses pre-dating 1993 were allowed to import and blend wines. The Labruscas are long gone but blends made with a substantial amount of cheap imported wine still dominate the Ontario market.
After two extraordinarily cold winters and a dry summer the 2005 grape crop was short. In a highly controversial move, the government relaxed the "cellared in" rules. "Cellared in" wine makers were allowed to add as little as one per cent Ontario grown grapes to 99 per cent imported wine for the 2005 vintage. The stated goal was to preserve Ontario grown grapes for the highly successful Vintage Quality Alliance (VQA) program.
VQA wines are strictly made with 100 per cent Ontario grown fruit. Outspoken Beamsville VQA winemaker Steve Kocsis thinks the one per cent solution in 2005 was better for the big wine makers than for anyone else. Kocsis says easing the regulations "short circuited" supply and demand that normally makes a vintage in a short year more valuable. He argues that if wineries got their way in a short crop year they should buy more Ontario grapes when there is a big crop, such as in 2008.
Grape Growers past chair Ray Duc describes the topic of Cellared in Canada wines as "very sensitive.
"There is a sense that these wines are taking away from VQA," Duc says, adding that cellared in wines are a "huge market" for Ontario grape growers.
"Any change (to the 30-70-rule) would have to done slowly, over time, to allow the market to adjust, to allow the industry to adjust."
Access to markets is another hot button issue for growers and small winery operators alike and dates back also to the advent of free trade. Wineries established after 1993 can sell product to Ontario consumers from their own farm store or through the LCBO. The pre-1993 licensed wineries, the same ones that can blend Ontario and imported wines, have their own stores, in grocerys for example, where they sell their own wineries products exclusively. If the province wants to boost the wine industry, says Kocsis, it should open more marketing channels.
"I could sell 20 to 50 acres of grapes for every 1,000 square foot store in Toronto," says Kocsis, a former Toronto furniture retailer.
"Wine is easy to make. The hard part of the business is selling it," agrees Vineland-based winemaker Moray Tawse.
Tawse, Kocsis, and Niagara-on-the-Lake winery operator Bill Redelmeier want to see LCBO stores change how they display wines during special promotions. The reason? They argue most wine drinkers don't know "Cellared in Canada" means that a substantial portion of the wine came from abroad. If they knew, they might make a different choice, especially since the wines are sometimes marketed under a "local product" banner in liquor stores. It's a practice Kocsis calls "misleading and intentionally confusing."
"I don't mind (Cellared in Canada producers) making wines," Tawes says. "I just don't want them hiding behind the veil that they are really Ontario wines."
Chris Layton, spokesperson for the LCBO, says a contentious "local" promotion last fall was designed, with the Wine Council, to promote Ontario wineries, which use Ontario grapes and provide jobs for Ontario workers. Hillary Dawson, president of the Wine Council of Ontario, asserts that cellared in wines are a locally made product and deserve the same "local" label as VQA wines. Layton adds that VQA wines continue to benefit from that promotion. VQA wine sales are up 16-17 per cent, year over year, compared to six per cent for imported wines. The LCBO does a lot of things to promote Ontario wines, he says, including putting its wines at the front of stores, but must mind trade rules.
Membership in the Wine Council of Ontario is another bone of contention for winery operators. Membership in the council costs $4,000 annually, plus a litreage fee based on marketing volumes. Only winery members get a spot on the council's Wine Route Map. Tawes feels he has to belong to the council even though its policies run counter to his interests and those of other small and medium sized wineries. He says there is little if any, opportunity to change those policies because the council's structure gives big wineries dominance.
The other wineries can make a decision and the big players, Constellation Brands and Andrew Pellor, can over rule that decision, says Tawes because of a "litreage veto." The Wine Council's Dawson says the veto power built into the Constitution of the 25-year-old Wine Council has never been used.
Tawes says the public perceives that all wineries are on the Wine Route map. He argues that because the council gets government funding to produce the wine map, Council membership shouldn't be mandatory.
The Wine Map is the trademarked property of the Wine Council, Dawson says, and the Council pays to distribute it.
In spite of the policy on the wine route map, or perhaps because of it, a couple of rival organizations have sprung up. The Ontario Wine Producers Association came into play in 2005 but is dormant now. "We just couldn't sustain it with volunteers, no money, and I think some folks were afraid to join for fear of incurring WCO wraith," president Seaton McLean wrote Better Farming in an email, adding that some former members have joined the Ontario Viniculture Association. (see story, page 20)
Tawse says the wine producers association was a thorn in the side of the big wineries and the partially public- funded council. "They put a memo out: ‘if you belong to the Wine Producers, you can't belong to the Council.'"
Dawson says she has never seen this memo. If it exists, it was before her time at the council and all winery operators are welcome to join regardless of other affiliations.
Not all growers think the big winery blenders are the enemy. Neufeld points out that Ontario can't compete with cheap, good tasting wine made in Chile, Argentina and South Africa, where wages are low and government sponsored export programs promote their products.
"We have to recognize that Ontario can't grow cheap grapes," says Redelmeier, who compared notes with a Chilean grower three years ago.
The Chilean paid 20 cents a kg for Chardonnay grapes, 25 cents for exceptional quality. Redelmeier pays five times as much for regular quality grapes, and twice that for high quality. A Chilean vineyard worker is paid a wage of $100US a month and sleeps in his own tent. Bill Redelmeier paid an offshore labourer $120 a day plus health benefits, provided a place to live and airfare to and from Canada.
"We can't compete at $8 a bottle. We can at $12-15 a bottle," says Redelmeier, who puts his money where his mouth is when he talks about buying local. He buys a Ford car because a Ford worker is likely to walk into his store. His winery's staff uniforms were sourced in Guelph. According to Redelmeier's thinking, "no one from Taiwan is going to buy my wine. Someone from Guelph might."
Bill Redelmeier's Southbrook Winery has a grandfathered license from pre-1993 but hasn't blended wines since 1994, when his customers told him they wanted wine made from all Ontario grapes. Redelmeier says his winery is certified organic and is also the first certified biodynamic winery in Canada. A former cash cropper from Richmond Hill who got into winemaking via a successful farmers' market business, Redelmeier stopped growing 20 acres of pick-your-own berries because people quit coming to buy them. Shoppers won't preserve berries in the summer when strawberries are available at Loblaws year round, he says. The time was likely past for the Niagara canning industry as well. "When is the last time you bought a can of peaches?"
Wine drinkers' tastes are becoming more sophisticated, Tawse says, and the market for cellared-in wines, while huge, is in decline.
The industry has changed, Tawse asserts. When free trade came into play, there were three large wineries, six to seven midsized wineries and 20 to 30 boutique wineries. Now there are fewer mid-size wineries and 130 to 140 in the boutique category.
Can the wine industry come together in a way that will satisfy Ontario's premier? Maybe. Maybe not.
Asked if there is a future for blended wines, former wine Czar Donald Ziraldo says growers should focus on VQA wines and get more into store shelves. They make up 20 per cent of sales in regular LCBO stores and one per cent in the special "Vintage" stores that carry high end products. If 40 per cent of the wine consumed was from grapes grown here farmers would have to plant even more grapes than they do now to meet demand. Ziraldo is one of the founders of the VQA appellation. The iconic Inniskillen winery he helped found is now part of Vincor, owned by Constellation Brands, one of the big multi-national wine blenders.
"We have the wine world divided," Tawse says. There are growers like him, who aim to grow high quality grapes and "bulk growers" who sell to Andrew Pellor and Constellation brands and last year they produced too many grapes. Tawse thinks he will be ok. "We have a good press following and a good clientele following so our sales are going up." The future of the rest of the grape industry, including long-time growers like the Neufelds, is not so clear. BF