Holiday Flashback: How the U.S. and Canada Almost Destroyed Wine

June 30, 2020 By Mike Veseth in Canada, economic crisis, wine, wine history 6 Comments

These are tough times for many people in the wine industry, especially those who depend on bar and restaurant sales for much of their income. The restrictions necessary to address the coronavirus pandemic have had many unintended consequences.

The wine industry has been shut down before and took decades to recover. But the story isn’t exactly what you might expect. This special holiday week flashback column takes us back to 2015 to tell the story of how, in very different ways, the U.S. and Canadian governments almost destroyed their respective wine industries.

The U.S. government is considering imposing 100% tariffs on some wine imports from Europe, an act that would hurt both European producers and many in the U.S. wine trade, too. The unintended consequences of acts like this are serious business.

Have a happy and safe 4th of July holiday.

Unintended Consequences: How the U.S. & Canada Almost Destroyed Wine

March 17, 2015

At one point in Kym Anderson’s new book about the Australian wine industry he reflects on what can be done to shorten that country’s current wine slump and to get things sailing again on an even keel. One of his suggestions caught my eye:

“Governments need to keep out of grape and wine markets and confine their activities to generating public goods and overcoming market failures such as the free rider problem of collecting levies for generic promotion and R&D.”

This is more than the simple Adam Smith “laissez-faire” idea. Anderson’s book clearly demonstrates the law of unintended consequences — how well-meaning government policies sometimes have had unexpectedly negative side-effects. No wonder he recommends a cautious approach to wine and grape policy.

I was reminded of this when I was researching the history of the Canadian wine industry for a recent speaking engagement in Ontario. I was struck by Canada’s experience with Prohibition in the 20th century, how it differed from the U.S. experiment, and how both ended up crippling their wine industries but in very different ways. Here’s what I learned.

How U.S. Prohibition Crippled the Wine Industry

The great experiment in Prohibition in the United States started in 1920 and lasted until 1933. The 18th Amendment outlawed the manufacture, sale or transport of intoxicating beverages, including wine. Most people assume that the wine industry collapsed as legal wine sales and consumption fell and this is partly true but not the complete story. Commercial wine production almost disappeared, but wine consumption actually boomed.

How is this possible? There were three loopholes in the wine regulations outlined in the Volstead Act. Wine could still be produced and sold for medical purposes (prescription wine?) and also for use in religious services (sacramental wine). This kept a few wineries in business but does not account for the consumption boom, which is due to the third loophole: households were allowed to make up to 200 gallons of wine per year for “non-intoxicating” family consumption.

Demand for wine grapes exploded as home winemaking increased (but not always for strictly non-intoxicating purposes). Total U.S. vineyard area just about doubled between 1919 and 1926! But the new plantings were not delicate varieties that commercial producers might have chosen but rather grapes chosen for their high yields, strong markets.

Thus did Prohibition increase wine consumption in the U.S. but it also corrupted the product by turning over wine-making from trained professionals to enthusiastic amateurs working in often unsanitary conditions. The home-produced wine sometimes had little in common with pre-Prohibition commercial products except its alcoholic content.

Americans drank more wine during Prohibition, but it was an inferior product. No wonder they dropped wine like a hot stone when Prohibition ended. That’s when the real wine bust occurred and it took decades to fully recover. Do you see the unintended consequence in this story? But wait, there’s more …

How Canadian Prohibition Crippled Its Wine Industry

Prohibition started earlier (1916) and ended earlier (1927) in Canada and took a different fundamental form. With support from temperance groups, consumption of beer and spirits (Canada’s first choice alcoholic drinks) was banned as part of war policy with the stated intent of preserving grain supplies for vital military uses. Consumption was forbidden, but production of beer and spirits was still allowed for export, which accounts for the boom in bootleg Canadian whiskey in the U.S. in the 1920s.

Neither production nor consumption of wine was included in Canada’s ban on alcohol, although wine sales were limited to the cellar door. What made wine different? Maybe grapes were not as vital to the war effort as grains, although John Schreiner cites the political influence of the United Farmer’s Party in his account of this period in The Wines of Canada. Wine became the legal alcoholic beverage of choice for Canadian consumers and production boomed. By the end of Canadian Prohibition there were 57 licensed wineries in Ontario (up from just 12) to serve the big Toronto market.

Wine sales increased 100-fold, according to Schreiner, but “It would be charitable to describe the quality of the wines being made in Ontario during this period as variable,” he writes. The market wanted alcohol and set a low standard of quality, which many producers pragmatically stooped to satisfy. No wonder wine production collapsed at the end of Prohibition as consumers went back to spirits and beer.

Unintended Consequences

Thus did government policy in both Canada and the United States create wine booms during their respective Prohibition eras, but the worst kind of booms: bad wine booms. Quality suffered as quantity surged. It is no surprise that consumers turned away from wine once other beverages were available. It took decades for these industries to recover.

Both the Canadian and U.S. wine industries are vibrant and growing today, having recovered from the crippling effects of poor quality wine. But they both are still hampered by other policies — especially regarding distribution and sales — that date back to the end of Prohibition. Economic policies can obviously have unintended effects and the shadows they cast can be long indeed.

No wonder Kym Anderson is skeptical about government interference in the Australian industry. Prohibition is an extreme case, to be sure, but such cases clearly show the unintended consequence potential that exists even with other seemingly harmless proposals. A cautious approach makes sense.

Three Perspectives on Canada’s Okanagan Valley & Its Wine

August 27, 2019 By Mike Veseth in Canada, emerging wine regions, wine 1 Comment

Every time Sue and I visit the Okanagan Valley in British Columbia, Canada we find something new that makes us rethink what we thought we knew about this beautiful (and somewhat still undiscovered) wine region. Here are three perspectives taken from the field notes from our July 2019 visit for the B.C. Wine Grape Council Enology & Viticulture Conference.

#1 Follow the Money

If you drive around the long, narrow valley you cannot avoid the impression that there is a lot of recent investment in the wine sector here. So many pretty vineyards and stylish wineries, many with ambitious restaurants and hospitality venues. Where is the money coming from? And how is it being spent?

There is no simple answer to this question. There are two large players working to build the regional brand and a lot of smaller operations, some well-financed by outside money while others look like classic family wineries.

The big players are Andrew Peller Limited and Arterra Wines Canada. Peller has wineries in both Ontario (including Thirty Bench, Wayne Gretzky Estates) and British Columbia (including Calona Vineyards, Sandhill, Red Rooster). Calona Vineyards was established in 1932 at the end of Canada’s prohibition era.

As you might guess, the early focus was not exactly fine wine, but Peller has moved successfully into the quality era. Sandhill’s founding winemaker Howard Soon built a flagship brand of single-vineyard wines that seems intended to mark Peller’s path into the future.

pin Arterra has a complicated history, but is headed the same direction. It was already a going business when I first encountered it years ago as Vincor, which owned a collection of wineries in Canada and elsewhere including Hogue Cellars in Washington State and New Zealand’s Kim Crawford.

Vincor was purchased by Constellation Brands, which both developed the wineries and expanded the distribution network to include other Constellation wines. Constellation sold the Vincor operations (retaining Kim Crawford, of course, part of its continuing effort to redefine its business model) to the Ontario Teachers Pension Plan in 2016.

The resulting firm, Arterra, still distributes some of the Constellation wines including Woodbridge by Mondavi, Ruffino, and Kim Crawford, as well as wines from its iconic Canadian wineries including Jackson-Triggs, Sumac Ridge, Inniskillin, Nk’Mip Cellars (in partnership with the Osoyoos Indian Band), and See Ya Later Ranch.

Large wine companies always draw suspicion because of their ability to throw their weight (money) around. But I think they are useful because they can have the breadth and scale to promote the regional brand better than other groups with fewer resources can do.

seven The Okanagan has benefited from several waves of outside investment in vineyards and wineries over the past 25 years. City money from Vancouver, oil money (now in shorter supply) from Alberta. Chinese-Canadian and mainland Chinese investment, too.

Our group stopped at Le Vieux Pin on the Black Sage Road near Oliver. The winery’s owners are Iranian. Their talented French winemaker, Severine Pinte, crafts wines that are all about elegance and balance and it is easy to fall in love with them, especially over an improvised lunch of gourmet deli-sandwiches. Mary McDermott, one of our hosts and the winemaker at Chinese-owned Township 7, brought her delicious sparkling wine to complete the feast

Perhaps the most exciting new project we saw is Phantom Creek Estates. Bai Jiping and his family are investing C$50 million in vineyards and C$50 million in a showstopper winery on the Black Sage Bench. The vineyard was already well known (it supplied grapes for Sandhill) and now the big facility on the hill, with its 120 seat restaurant and hospitality space, is nearing completion. When it opens in September (by appointment only during the phase-in) it will provide a destination winery in the south of the valley to book-end famous Mission Hill in the north.

#2 Creative Destruction

Climate change is an issue here as it is almost everywhere else in the wine world, and it may provide an interesting “Back to the Future” moment for this region. Hybrid grape varieties dominated here until the 1990s, when increased import competition fueled by the NAFTA trade agreement forced growers to upgrade their plantings.

Not all the hybrids were removed, however, and one of the questions during the Q&A session was whether there was any future for these grapes and the wines that are made from them? The knee jerk answer would be no — not much market value in these vines any more. Better to move on to more consumer-friendly vinifera vines. But this might be a rush to judgement.

The day before we attended a talk by Greg Jones, the world’s foremost viticultural climatologist, on the impact of climate change on wine around the world and in British Columbia. One of the points he made was that hardy hybrids can be very useful because of their ability to span a range of climate conditions (compared with the more narrow growing windows of some vinifera grape varieties).

That thought was in my mind at lunch the next day when someone said that Sperling Vineyards was pouring their Old Vines Foch Reserve, made from vines planted in the 1960s. We already had the delicious Sperling Old Vines Riesling in our glasses (vines planted int he 1970s in the same vineyard as today’s Tantalus), so we snagged more glasses and tasted the Foch.

It was terrific. Different, as hybrids are, juicy, aromatic. Nothing like the last Maréchal Foch I tasted years ago, benefiting no doubt from improved vineyard and cellar practices. And maybe climate change, too? Dunno.

The Sperling Foch is exceptional and it is dangerous to generalize from exceptional cases, but it made me reconsider the viability of hybrids. Given climate change threats, I said in my reply to the question, maybe we need to change the way we think about hybrids — something that is happening in Europe according to a recent Decanter article.

Are hybrids the bad old days to be forgotten or are they part of our heritage that we need to remember and maybe turn to once again? Hybrids aren’t the answer to climate change– there isn’t any one answer — but maybe they can be part of the adjustment process.

#3 The Undiscovered Country

There is a lot going on in the Okanagan Valley, but it is just one of nine designated wine regions in British Columbia. There are smaller but active wine groups on Vancouver Island, the Gulf Islands, the Fraser Valley, the Kootenays, Lillocet, Thompson Valley, Shuswap, and the Similkameen Valley.

The Similkameen Valley is next on our list. Rugged, rocky terroir — not much of what you might call dirt in some places for a vine to take root. And it’s warm, too — more heat units than Napa. When Howard Soon retired from Sandhill (and collected the Order of Canada honor) he linked up with Vanessa Vineyards so that he could explore the possibilities of this unusual terroir.

We’ve tasted some of Howard’s Vanessa wines and also those from nearby Clos du Soleil and they are simply fantastic. Similkameen Valley — must be a magical place. Can’t wait to go there.

And for the present visiting these regions is the surest way to find the wines, at least for those of us in the U.S. market. Distribution in the U.S. is limited and very hit-and-miss. I searched the Total Wine website for Romanian wine and found a dozen different wines, many of them available at the nearest store. A search for “Canada wine” turned up three Icewines ranging in price from about $25 to nearly $80 per slender bottle with only one (the most expensive, of course) available locally.

I hope things will change and some of these wines become more available here, but I don’t have to tell you that the politics of international trade are hotly contested these days. For the moment, the best way to taste and acquire these wines involves going to the source.

The good news is that a visit is richly rewarded. There are winter sports venues nearby, but the best times for wine tourism are probably spring through fall when the winery hospitality rooms are geared up for visitors. Sue and I spent a memorable early fall weekend at a lakeside resort in Summerland back in 2010. Here is a report of our wine tourism experience.

The Okanagan Valley is on the move when it comes to wine in more ways than one. It will be interesting to return in a few years to chart the changes … and sample more of these exceptional wines.

Tundra Red? Tundra White? Reimagining Wine in Canada & the Okanagan Valley

August 20, 2019 By Mike Veseth in Canada, emerging wine regions, wine 1 Comment

Sue and I were recently in the Okanagan wine region of British Columbia, Canada, for a winegrowers conference. We had a great time — smart people, exciting discussions, interesting wines. Lots to see, hear, and learn.

If you haven’t visited yet, this region should be on your wine tourism radar. The Okanagan Valley is about 5 hours by car (or a short plane flight) from Seattle or Vancouver. A bit out-of-the-way, but so are Napa and Walla Walla and that hasn’t stopped you.

Reversed New Zealand?

The Okanagan is sort of like an reversed image of New Zealand. New Zealand is a rugged island surrounded by water, oriented north to south, with constantly changing wine terroirs as you move from one place to another. Endlessly fascinating if you have the time to explore.

The Okanagan, on the other hand, is rugged land that surrounds deep lake waters oriented south to north, with constantly changing wine terroirs as you move from place to place (and one side of the lake to the other).

Great place for a casual visit, but more serious study is richly rewarded. The Okanagan even has a legendary sea monster — Ogopogo. Not sure if the Kiwis can top that.

Pinot Noir and Riesling are here in the cooler spots, a bit of Sangiovese and lots of Syrah there, Tempranillo and Cabernet around the bend, Pinot Gris in many places. Even Sauvignon Blanc, which is appropriate since some of the winemakers hail from New Zealand.

More Than You Might Think

Many of our friends are surprised that there is wine (and very good wine) in the Okanagan. When they think of British Columbia their thoughts turn to cosmopolitan Vancouver or rugged wild Vancouver Island (which has wineries, by the way). Wine? Do Canadians even make wine?

So they are surprised to learn that wine is not just a thing in Canada, it is an important thing. According to the annual industry review issue of Wine Business Monthly, there were 745 wineries in Canada at the start of 2019. British Columbia tops the table with 317 wineries followed by Ontario (242), and Quebec (130).

Since wine is made in all 50 U.S. states, you won’t be surprised to learn that Canadian wine also comes from Nova Scotia (21 wineries), New Brunswick (15), Saskatchewan (9), Alberta (5), Prince Edward Island (4) and Newfoundland & Labrador (2). Manitoba? No wineries … yet!

Changing Times

Years ago Sue and I were visiting Vancouver and tried to order an Okanagan wine from the list at an upscale restaurant. The waiter refused to take the order on account of his assessment of the wine’s low quality (we ended up with something from France as I recall). I think the wine was made from hybrid grapes, which was the norm for years and probably accounted for the waiter’s negative review.

I cannot imagine having a similar experience today. The best of the wines today are made to a high standard and local chefs are keen to pair them with their farm-to-table menus. Sue and I were fortunate to attend a promotional dinner in Seattle where B.C. chefs (plus Seattle’s iconic Tom Douglas) paired Okanagan wines with local seafood. Terrific.

Tudra Red? Tundra White?

How you see the Canadian and British Columbia wine industries depends on your point of view. If you take the global perspective, for example, you see only Icewine, Canada’s most valuable wine export.

B.C. Icewine is so good that I think it is actually worth its high price, but it inevitably defines Canada as a cold, dark place (the grapes for Icewine are harvested in the dark of night, frozen on their vines). What else could Canada possibly produce? Tundra Red? Tundra White?

This narrow perspective is even true here in the Seattle area, not so far from the Canadian border. The sight of a B.C. wine on a store shelf (apart from Icewine) is rare indeed. We have a distorted view of Okanagan wine because, Icewine aside, production is aimed at the domestic market and exports are limited.

The Rivals?

The perspective shifts inside Canada, where Ontario and British Columbia are seen as strong rivals for consumer hearts, minds, and dollars. Or at least that’s the impression I got from a CBC radio interview that my Canadian friend Joel sent me a few years ago. Click here to listen (do it — really — it is hilarious). A discussion of BC vs. Ontario wines quickly degenerates into name-calling and worse. I didn’t realize that it was meant as satire until Joel clued me in.

In fact, however, Ontario and B.C. wineries have bigger enemies than each other. The challenge, in my opinion, is help make the pie larger rather than worrying about how it is divided. The Canadian market is highly regulated, especially at the provincial level, so selling wine can be as difficult as making it. This is changing, but for now the scale of most Okanagan Valley wineries is relatively small, limited to a certain extent by their cellar door and local market demand.

Take a Closer Look

Now zoom in closer to the Okanagan Valley and neighboring wine regions. What you see are confident winemakers working diligently to understand their varied terroir and take their wines and wineries to the next level.

When I first heard that local groups were busy proposing sub-appellations in the Okanagan Valley I scratched my head in puzzlement. Hardly anyone outside of Canada has even heard of the Okanagan. Shouldn’t you be building the big Okanagan Valley brand instead of dividing it into smaller and smaller regions and sub-regions with little apparent economic value?

I am still suspicious of the movement to make every wine region as complicated as a map of Burgundy terroirs, but I appreciate that local wine industry leaders feel they are ready for that next step. It seems a little crazy from my U.S. perspective, but the U.S. market isn’t (yet) extremely relevant to Okanagan producers. That could also change — some of the winemakers at the Seattle dinner were looking for U.S. importers. Fingers crossed they made the connections they were seeking.

Things are changing fast, so perhaps these perspectives will converge. Come back next week for our take on where B.C. wine is today and where it might be heading.

Wine Book Reviews: Kiwi Revolutions and British Columbia Icons

November 7, 2017 By Mike Veseth in book reviews, Canada, New Zealand 2 Comments

Warren Moran, New Zealand Wine: The Land, the Vines, and the People (Hardie Grant, 2017).

John Schreiner, Icon: Flagship Wines from British Columbia’s Best Wineries (Touchwood Editions, 2017).

I’ve always thought that New Zealand and British Columbia have a lot in common. Both are spectacularly beautiful places with warm, welcoming people. The wild areas near Tofino on Vancouver Island remind me a bit of the wild areas on the north coast of New Zealand’s South Island. And both Auckland and Vancouver have a distinctly cosmopolitan feel.

There are some wine similarities, too. Romeo Bragato, the visionary who planted the seeds of today’s Kiwi wine industry more than a hundred years ago fled New Zealand when prohibitionists took charge and cut funding for this research. His new home? British Columbia!

The wine industries in both BC and its Kiwi cousin have experienced dramatic ups and downs over the years and both are on the rise today, inspiring books that survey what has been accomplished.

New Zealand Revolutions

There is a strong sense of history in Warren Moran’s book about New Zealand wine. Moran has been in the mix of Kiwi wine since the 1950s and you can tell that he wants to record all that he has seen, the people he has known, and the wines he’s experienced.

I especially appreciate the attention to detail I found here as Moran careful lays out the evolution of the wine industry that brought New Zealand to its current place as one of the world’s premier wine-growing countries.

Moran is a geographer, professor emeritus at the University of Auckland, and pretty good story-teller. He organizes his book around two revolutions that have shaped Kiwi wine, a regional revolution, where winegrowers searched for the best places to grow their grapes, and a varietal revolution, where they experimented with grape varieties.

New Zealand’s most famous wine, Marlborough Sauvignon Blanc, is the result of this double revolution, but it is a mistake to identify Kiwi wine with this one grape variety and winegrowing region. Indeed, Moran’s detailed account highlights the great (and sometimes underappreciated) diversity of New Zealand wine. I especially appreciate the maps and historical photos found here.

Canadian Icons

I have several of John Schreiner’s books on my shelf and I consult them whenever I head north to visit the British Columbia wine country. Schreiner’s knowledge of B.C. wine is every bit as deep as Moran’s Kiwi wine expertise.

Icon‘s focus is on what has been achieved in British Columbia wine, leaving the full story of how it happened to Schreiner’s other books. Because B.C. is less well known that New Zealand in the wine world, this focus is quite useful and hopefully this book will draw more attention to the region and its wines.

New Zealand wines are everywhere here in the U.S. market whereas B.C. wines are mainly represented by Ice Wine. If you want to know what else B.C. has to offer you pretty much have to go to the source. This volume just might be the nudge you need to book that ticket!

Shreiner identifies about 100 noteworthy wineries, focusing in most cases a single iconic wine. Schreiner provides a few paragraphs about the winery, the winemaker, and the wine followed by tasting notes, which are sometimes Schreiner’s own but often taken from the winery’s release notes (I wish Schreiner had written all the notes, but that wasn’t practical, he tells us).

Each winery gets two pages for the story, the notes, and a bottle shot and, while I can see the logic of this structure (all icons are equally iconic), I sometimes felt like the editorial format got in the way of the story. I wish Schreiner could have drawn upon his deep understanding to tell us more — giving more space to particular influential wineries, for example, or perhaps organizing them regionally or historically rather than according to the alphabet.

The book is already 300+ pages, however, so something would have to be cut — some of the wineries or Christopher Stenberg’s beautiful photographs. A difficult decision.

Icon ends with a list of wineries that have the potential to join the icon list in the future, which is appropriate. British Columbia has achieved so much when it comes to wine and its future looks especially bright. You can bet that Icon will be in my backpack the next time I point the GPS for B.C.!

Celebrating Milestones for Canada (150 Years) & Canadian Wine (37 Vintages)

July 25, 2017 By Mike Veseth in Canada, wine history 2 Comments

Milestones. Do they mark how far you have come on a journey? Or do they tell you how far you’ve left to go? Both, I guess, which gives them a (wine) glass half full / half empty quality that invites contemplation.

Canada and Canadian wine have reached important milestones recently and I think there is something to gain in contemplating them in tandem.

O Canada!

2017 is the 150th anniversary of Canada’s confederation — a significant milestone in its national history. The past 150 years have not always been easy. Canada has been rocked both by external events (world war, global depressions, financial crises) and domestic social and political conflicts, too.

Canada’s version of federalism gives even more autonomy to its provinces than U.S. federalism gives to its states. The balance between federal and provincial interests has not always been smooth and tensions among the provinces (and even within them) and their people and cultures have not always been easily reconciled.

Canada has somehow negotiated these challenges and emerged, on its 150th birthday, in an admirable state — prosperous, generous (especially regarding refugee immigrants) and widely respected. O Canada, indeed!

Indeed, Canada is even celebrated today on Broadway, where the Tony-winning musical “Come From Away” draws audiences to consider the remarkable response of one Canadian town the unexpected arrival of refugees, in a way, from the September 11 terrorist attacks. (Prime Minister Justin Trudeau traveled to New York to see the show — his special guest was someone named Ivanka Trump!)

150 years is an important milestone, but nobody thinks Canada’s story is over. The future is sure to be full of challenges as the road twists and turns, rises and falls. But Canada and Canadians can look forward to the journey with confidence.

O Howard Soon!

July 24, 2017 is another important milestone. It is the day Howard Soon retired as Master Winemaker for Sandhill Wine in Kelowna, British Columbia, after an amazing 37 vintages. Soon is the dean of Canadian winemakers and this milestone is reason enough to celebrate his amazing career and Canadian wine, too.

The grandson of Chinese immigrants, Soon initially took his biochemistry degree from the University of British Columbia into the brewing industry before making a fateful pivot to wine, working his way from quality control to assistant winemaker to winemaker for Colona Vineyards, one of Canada’s largest wine firms.

The Canadian wine industry has changed dramatically over Soon’s remarkable winemaking tenure as it faced market challenges that are both external (increased competition from the United States after the NAFTA treaty) and domestic (the lack of a true “Canadian” wine market because of strong provincial control over alcohol sales). Soon has played an important role in helping the industry to weather the storms by setting a course to higher and higher quality.

When Sue and I first visited Vancouver many years ago the sommeliers refused to serve Canadian wines — they simply wouldn’t do it. It was an over-reaction because there were some good wines even back then, but an indication of their poor reputation These days, however, there is obvious pride in the wines all around and they are proudly featured and served.

Soon and his winemaking colleagues have both changed Canadian wine for the better and they have done something even more difficult — they have changed the way Canadians think about their wines. Quite an achievement.

Soon’s most recent project, Sandhill Vineyards, is in the vanguard of the quality movement (Sandhill appears in my next book Around the World in Eighty Wines). It was founded twenty years ago with the idea to feature terroir through a series of small production single-vineyard wines. soon

Soon has received virtually every recognition that Canadian wine has to offer and he reaches the retirement milestone at the top of his game. His signature 2014 Howard Soon Sandhill red wine was recently named #1 red wine of the year in the All Canadian Wine Championships.

(Signature wine is right — the label bears Howard’s actual signature!)

The wine is special. Grapes from the Phantom Creek Vineyard were co-fermented in the proportions found in the vineyard — a field blend! — then aged in new French and American oak for 22 months. Critic John Schreiner calls is a “triumphal achievement.”

Howard Soon and Canadian wine have come a long way but they both seem to have arrived at this mile post with enthusiasm to move forward to reach new goals. Sue and I had dinner recently with Howard and his wife Wendy. Howard told us he plans to spend more time with Wendy and their kids and grand kids.

But the same drive that has pushed him to this milestone seems likely to carry him ahead to new challenges and adventures. Great winemakers like Richard Peterson and John Duval, to name just two, seem to move from one mile-marker to the next, always looking forward. It will be interesting to see where the wine road takes Howard Soon!

What’s the Big Deal about Supermarket Wine Sales in British Columbia?

February 21, 2017 By Mike Veseth in Canada, globalization, wine, wine exports, wine markets 6 Comments

What’s the big deal about British Columbia supermarket wine sales? It is a very big deal in some circles because the stakes are higher than they might seem. Here’s my analysis of the situation.

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Supermarkets are an important wine sales vector in the United Kingdom and most but not all U.S. states, so many consumers take it for granted that they can walk into their local Safeway, Kroger-affiliate, Whole Foods or Trader Joe’s store and be greeted by a world of wine choices.

Oh, Canada!

Things are a bit different in Canada. Provincial alcoholic beverage control regimes apply somewhat in the spirit of Sweden’s Systembolaget monopoly, which was at one time the world’s largest wine retailer — a title that I think passed to the Ontario Liquor Control Board store system before being taken up by Tesco, the British supermarket giant.

British Columbia is moving towards expanded supermarket wine sales after some preliminary trials. The process is a bit awkward because there are many stakeholders with vested interests in the old control system of wine sales. Moving to supermarket sales may increase total wine sales, but the “trade creation” will be accompanied by a certain amount of “trade diversion” from other retailers, who are understandably unhappy. There is lots of push back as you would expect.

The political economy of B.C. supermarket wine sales is both domestic (more supermarket sales at the expense of existing wine sales license holders) and also international. Incredibly, the B.C. regulations exclude non-B.C. wines from regular supermarket shelves (imported wine may theoretically be sold in a separate and costly and somewhat inconvenient “store within a store”). This has produced an international dust up as the United States has brought charges at the World Trade Organization over the discriminatory practice, an action that the European Union and New Zealand have also supported. The list of wine exporting countries lined up against the B.C. supermarket regime continues to grow. Argentina recently joined the US in this action and Australia quickly followed suit..

The Weak and the Strong

What is the problem? Can’t British Columbia to what it wants regarding wine retail regulations? Maybe not, because Canada (along with most of the world’s nations) is a member of the World Trade Organization (WTO) and is bound by its rules.

The World Trade Organization is actually a fairly weak international institution. It has spent the last couple of decades trying and failing to reach a global agreement on trade liberalization. But the WTO (through its predecessor, the General Agreement on Tariffs and Trade or GATT) was founded on two very strong principles: Most-favored-nation (MFN) treatment and non-discrimination.

Most-favored nation treatment prohibits a country from discriminating at the border against the goods of one WTO-member trading partner relative to others in terms of tariffs and so forth. Every country gets the deal that the most-favored country gets. You cannot single out one country for better treatment or — the real fear — impose sanctions against another except in well-defined circumstances. This was one reason why China worked so hard to get into the WTO — to limit the threat of a trade war against its products.

The MFN rule has been diluted somewhat in recent years as bi-lateral and multi-lateral preferential trade agreements like NAFTA have become more important. (The rise of preferential agreements is often seen as a reaction to the inability of the WTO to produce agreements on broader, global trade regimes) These agreements allow a certain amount of systematic positive discrimination in favor of fellow trade block members. The MFN rule still controls negative “trade war” discrimination.

The second rule, the non-discrimination principle, holds that once a product enters a country, paying whatever legal tariffs are levied at the border, it cannot suffer internal discrimination because of its import status. It must be treated from a regulatory standpoint just as domestic products are treated. That’s a powerful principle.

I am an economist, not a lawyer, but it seems to be that allowing domestic B.C. wines to be sold in supermarkets while prevented equal access to legally-imported California, France, New Zealand or Australia wines would seem to be a violation of the non-discrimination principle and actionable under WTO rules.

Principle and Interest

I was aware of some discussion of possible US action through the WTO as the BC supermarket protocols were being developed, but the US threat was taken lightly by some north of the border. The BC market is relatively small (we are not talking Ontario here) and there are substantial costs to initiating a WTO action, which can take years to resolve and burn up a lot of attorney fees in the process. Not worth the trouble! So some people in BC were surprised when the US finally acted.

But I was not surprised. While BC market losses might be relatively small for international wines, they establish a precedent that could be important if the local-product-only supermarket sales idea spreads — to Ontario, for example. And there might be other discriminatory practices that apply in Canada and its provinces that need to be studied — the supermarket rule might have been the tipping point to take action.

Finally, there is a more global concern. We seem to be living through a period when protectionist rhetoric is in the air and actions that challenge or violate the rules of fair trade are seriously proposed.

In this environment, it is in the interest of global industries like wine to resist the protectionist tide wherever possible on the grounds of both principle and interest (self-interest, that is).

Past is Prologue at Tantalus Vineyards

November 14, 2010 By Mike Veseth in Canada, history, wine markets Leave a comment

Past is prologue, Shakespeare wrote in The Tempest, and I’ve learned that if I want to figure out the future I first need to understand the past. That’s why we decided to visit Tantalus Vineyards on Dehart Road southeast of Kelowna, British Columbia. My investigation of the future of Canadian wine had to start at its roots.

Jane Hatch (that’s her in the video) and David Patterson showed us around the contemporary winery and hospitality facility that opened just a few months ago (the video was made while it was still under construction). Jane is the winery’s general manager and David its production winemaker.

Past, Present and Future

Looking down over the vineyards to the lake from the new LEED certified building with its First Nations mask decorations, it would have been easy to forget the past and just enjoy the present. But Tantalus is a place where past, present and future come together.

J.W. Hughes bought land here in 1927 and planted his Pioneer Vineyard to vitis lambrusca varietals (think Concord grapes and the like), to be sold on the table grape market. In 1930 he agreed to sell grapes to Victoria Wineries Ltd. (for $100 a ton) in what may be the first wine grape contract in Canadian history. Commercial B.C. wine production up to that point was focused on fruit wines – loganberry wines at Victoria and apple wines at nearby Calona Wines Ltd, for example. It was a good way to use up surplus fruit. There is no indication that the wines were of particularly high quality. Consumer expectations for wine were low and these products found buyers.

Hughes expanded his vineyard holdings and then, starting in the mid-1940s, began to sell them off to his farm managers. That’s how Martin Dulik came to own Pioneer Vineyards, which he paid for over seven years beginning in 1944 by giving Hughes half of the revenues from each harvest.

Dulik, a Czech immigrant, managed the vineyard well and the grapes that he and his son Den produced were sold on both the wine and table grape markets. As wine production in the region expanded in the 1960s, many growers replanted to French hybrid varietals like Seyval Blanc, but Den Dulik resisted the trend, reasoning that his vitis labrusca grapes made better wine than the hybrids. He was probably right, although the wines they were went into were often the unsophisticated “pop” products that were popular at the time.

Taking the Next Step

In 1978 Dulik was persuaded to plant White Riesling and these vines are the foundation of Tantalus Old Vines Riesling that I tasted on my visit. Soon Pinot Noir, Chardonnay and other vitis vinifera vines joined Riesling in Pioneer Vineyards.

Everything was in place, therefore, when Den’s daughter Susan developed a passion for wine and started making wine with the family fruit. Her project soon developed into a farmgate winery called Pinot Reach conceived with the intention of making exceptional Pinot Noir. Pinot Reach opened in 1997. Its wines, especially the Old Vines Riesling, were soon being praised by no less than Jancis Robinson, the celebrated British wine critic.

Investor-enthusiasts Eric Savics and Eira Thomas bought the winery and vineyards from the Duliks in 2004, renaming the operation Tantalus, and began the transformation that includes the new winery facility you’ll find there today. Tantalus’s recent development reflects two trends that I saw everywhere on our Okanagan wine tour.

Global Meets Local

The first is a growing international influence. Although the market for these wines is mainly local, the winemaking influences are decidedly global. Tantalus’s senior winemaking consultant, Jacqueline Kemp, is a New Zealand “flying winemaker,” who brings international experience to her work here. Production winemaker David Patterson is Canada-born, but he learned winemaking in New Zealand and earned his winemaking spurs there and in Oregon and Australia.

All across the region I met winemakers and “flying interns” from around the world. In a way this continues an existing pattern, since many of the early winemakers here were immigrants who brought winemaking knowledge with them, but it is more than that. The Okanagan is now clearly part of a very intense global exchange of technical winemaking knowledge.

Talking with David about the great strides that the region’s wines have made, I brought up climate change. Surely the changing natural environment accounts for the improvement, I suggested. David disagreed. It was better winemaking, not warmer weather, that made the difference he said, and surely the international influences are part of that.

The second trend, which is seen so clearly at Tantalus, is that this global energy is clearly focused on identifying distinct local terroirs. The Tantalus team realize that theirs is an exceptional location for Riesling and Pinot Noir and they are drilling down into those vineyards and particular varietals to see what they will reveal.

The region is extremely varied in its micro-terroirs – almost anything is possible here from ice wine to Syrah and Zinfandel. But just because something can be done doesn’t mean you should do it and the race is on to find out what works best for each vineyard block. Focus and increasing specialization are the wave of the future here.

Yes and No

So is past prologue? Yes and no. Yes in the sense that the Okanagan wine industry wouldn’t be what it is today without the evolutionary process it’s experienced. The industry is stronger for the work of its pioneers and the legacy they created.

But no, the world has changed, is changing. With better winemaking and increased investment the true potential of this region’s wine industry is being unlocked. The challenge now is to get the word out and then to get the wine out. I’m trying to do my part on the former, but the latter is the bigger challenge in the long run because of regulatory structures that make marketing and distribution costly and inefficient even within Canada to say nothing of international trade.

O Canada, my how you’ve changed. I’m looking forward to visiting again in a few years to see how present trends develop.

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This post owes a debt to John Scheiner’s writings, especially The Wines of Canada (Mitchell Beazley, 2005), John Scheiner’s Okanagan Wine Tour Guide (Whitecap Books, 2006) and his British Columbia Wine Companion (Orca Books, 1997). Scheiner’s blog and books are great resources for anyone who wants to know more about B.C. wines.

Vino Ogopogo: Wine Tourism Okanagan Style

November 3, 2010 By Mike Veseth in Canada, extreme wine, wine tourism Leave a comment

We recently returned from an “extreme wine” research trip to the surprising Okanagan wine region in British Columbia (click here to read part one of the series).

Surprising? Well, many U.S. wine drinkers find the very idea of Canadian wine surprising (ice wines apart), which is understandable since only a handful of wineries have successfully navigated the process to get distribution south of the border. The wines themselves hold many surprises, if you can find them.

And then there are the wine tourism opportunities. Wow! For a lot of people, this will be the biggest surprise of all.

On the Wine Tourist Trail

Wine tourism has become big business as enthusiasts seek closer links to their favorite wineries, wine producers try to make more high margin direct sales and the hospitality industry has embraced the wine tourism trend. George Taber has written a fascinating book, In Search of Bacchus, that surveys the global wine tourist scene and gives a sense of the industry’s rising profile.

Wine tourism is a naturally appealing — even if you omit the wine! — because vineyards and wineries are often located in areas of real scenic beauty. But wine tourism in many areas has been slow to develop because vineyards are agricultural zones often lacking in the expected tourist infrastructure and amenities. And at some point as more people arrive there is tension between farming and tourism. The debate over the Napa wine train captures some of this problem.

Vino Ogopogo

The Okanagan wine region in British Columbia has a decided advantage over most winegrowing regions. Usually the wine comes first and then the tourist infrastructure slowly develops. It’s the other way ’round here. The Okanagan region has spectacular scenery with four season sports and recreation opportunities that have long attracted visitors. At the center of it all is beautiful Lake Okanagan, a long narrow north-south body of water that feels like a fjord and has just about everything a tourist might desire, including a resident Lake Monster named Ogopogo.

Wine grapes are known to love to look down on lakes and rivers and so do people, of course. So the Okanagan developed its tourist infrastructure long before the current wine boom (which I’ll discuss in an upcoming blog post). We benefited from this timely development on our trip, staying right on the lake at the Summerland Waterfront Resort in Summerland, B.C. and enjoying meals made from regional ingredients at Local, a restaurant just next door. Sipping wine in the evening with the fireplace roaring, looking out across the lake to the vineyards on the Naramata Bench — well wine tourism does not get much better than this.

Raising the Stakes

As this region’s wine industry developed from the 1990s on, many wineries made very significant investments in wine tourist facilities — partly, I think, because of the need to compete with and complement the amenities already here in order to attract tourist business.

Direct sales of the kind that wine tourists provide are extremely important to wineries in this region. Every wine maker I talked to noted the cost and difficulty of getting distribution in other Candadian provinces to say nothing of entering the U.S. market. Direct sales are therefore key and tourists from Vancouver in the west, Alberta in the east and the U.S. down south are a big part of that business.

Burrowing Owl Estate Winery in Oliver a good example of a B.C. destination winery. Perched on a hillside, it is a beautiful facility in a great location that includes the winery, a tasting room, restaurant and an inn with a swimming pool. A must stop on the wine tourist trail, they count on cellar door sales to move most of their substantial annual production.

Wine economics note: tasting room fees are still very low in this region — amazingly low for anyone who has visited Napa Valley lately. Most of the wineries I visited offered free tastings for a limited number of wines. At Burrowing Owl, a $2 donation was encouraged — the money goes to the a nature conservancy group.

Top of the World

The ultimate wine tourist destination in the Okanagan Valley must be Mission Hill Winery. Inspired by Robert Mondavi’s iconic winery in Oakville, Mission Hill sits atop a peak and looks out over the lake. The winery is stunning, with an entry arch that immediately made me think of the Mondavi winery and a soaring bell tower. Everything inside is strictly first class, too, including comprehensive tours that end with sommelier-led tastings from your souvenir Riedel glass.

As beautiful as the building is, I don’t seem to have taken any photos of it. I guess I couldn’t resist the view (shown above) looking down over vineyards to the lake below. I wasn’t alone: members of a photography club were buzzing around like bees making images of the vineyards, grapes, rose bushes, bell tower and, inevitably and unintentionally, each other.

Mission Hill is the cherry on the Okanagan wine tourism cake. Altogether, this wine region is quite a treat and sure to grow in popularity as the word gets out. We’ll be back — possibly staying at one of the guest ranches in the area, horseback riding in the morning and wine touring in the afternoon, or perhaps taking advantage of vineyard lodgings like the ones at Working Horse Winery.

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This is the second of my “extreme wine” reports on the Okanagan wine scene. Watch for the final post (on the region’s future) in a few days.

Extreme Wine: O Canada Ice Wine

October 27, 2010 By Mike Veseth in Canada, extreme wine, wine fraud, wine price 4 Comments

Ice wine, Canada’s distinctive contribution to the world of wine, holds a fascinating place in the world wine price tables and so qualifies for inclusion in The Wine Economist’s extreme wine series.

Top of the World

Which country gets the highest average price for its bottled wine exports? You might think it would be France with all those expensive Champagne, Bordeaux and Burgundy wines or Portugal with its costly eponymous after-dinner wines. But both of these countries also export a good deal of much cheaper wine, bringing their average export earnings (USD per liter) down to $4.24 and $3.70 respectively. (Data are for 2005 from my copy of The Global Wine Statistical Compendium.)

New Zealand with its gorgeous Pinot Noirs and Sauvignon Blancs ($6.64) and the UK with its classy sparkling wines ($6.87) both earn more per liter of bottled wine exports than the “usual suspects” of France, Germany, Italy, Portugal and Spain to say nothing of New World powers Argentina ($1.87), Australia ($3.65), Chile ($2.72) and South Africa ($2.42).

(Remember that wines that are exported for, say, $4.00 will have a much higher price on your store shelves due to transport costs, distribution and retail margins and applicable taxes.)

At the very top of the table, for reasons that I think are due to exchange rate sand import resales more than domestic wine prices, is Switzerland ($8.23 per liter) followed closely by Canada ($7.32). How can frigid Canada rate so high? Ice wine (or Eiswein) , of course!

The Highest Compliment?

Canada didn’t invent ice wine (credit Austria with that) but it is the world’s largest producer of this chilly wine, making nearly a million liters in a good year according to John Scheiner’s authoritative The Wines of Canada. Ice wine’s high cost is the biggest single factor in Canada’s lofty export earnings average.

Tiny bottles of ice wine bring enormous prices — $50, $100, even $500 and more for a half bottle at retail. Who pays these spectacular prices? Japan and other Asian countries are the largest export market. Ice wine is the quintessential high end gift wine — attractively sweet, beautifully packaged and luxuriously expensive. Tourists snap bottles at Duty-Free to take home to Asia.

I’ve heard that so much ice wine is bought by Tokyo-bound travelers that some Canadian duty-free stores have special bonded facilities in Japan to make purchases more convenient. Pay at the airport in Canada and pick up your ice wine at baggage claim in Japan. Sweet!

Ice wines are so expensive and sought after in Asia that counterfeiting is a serious problem. Some experts believe that as much as 50 percent of the ice wine sold in Taiwan is bogus — sweet wines from Canada and elsewhere that are doctored up and repackaged.

Check out this image from the label of one of the faked wines — brewed, not fermented! Yikes. Must have got ice wine mixed up with ice beer. These may be big counterfeiting operations, but not necessarily sophisticated ones.

A recent Globe and Mail article suggests the problem may be even worse in China.

Well over 50 per cent of icewine in China is fake from what I’ve seen and heard,” said Allan Schmidt, president of Vineland Estates, which has quit the market entirely. “If it was 80 per cent … I wouldn’t be surprised.

The legitimate Chinese market for Canadian icewine has grown rapidly, which the industry attributes to a burgeoning middle class and the desire to give exotic gifts. It rose to $2.16-million in 2007 from $270,000 in 2005. The market sagged in 2008, but was worth $1.2-million in the first half of this year [2009]. It’s our most important flagship wine produced,” said Bob Keyes, vice-president of economic and government affairs with the Canadian Vintners Association.

Chilly Saga, Intense Experience

Ice wine is a very particular product. The grapes for ice wines are left on the vine long after regular grapes have been picked. By law natural ice wine in Canada can only be made from grapes that have been frozen to -7 degrees Celsius (17 degrees F) and harvested at minimum 35 degrees brix. The juice, what is left of it, is highly concentrated so each grape yields just a drop or so. Picking is done by hand, of course, since many clusters will have experienced bird damage or fallen prey to disease.

Vidal Blanc is the grape of choice for Canadian ice wine — its tough skin can stand up to harsh weather — along with lesser amounts of Riesling and other varietals. Most of Canada’s ice wine is produced in Ontario, where wine makers can pretty much count on frightfully low temperatures early in the winter season. But the first ice wines came from out west in British Columbia.

North America’s first commercial ice wine was made in 1978 by German-born Walter and Tilman Hainle of Hainle Vineyards Estate Winery in Peachland, British Columbia. Tillman Hainle, Walter’s son, generously shared precious bottles of a recent vintage from with us at the 2008 Riesling Rendezvous meetings. [See Tilman’s helpful comment below.] It was one of the most memorable wines I’ve ever tasted, so I just had to visit Hainle Vineyards on my recent Okanagan wine country expedition.

Sue and I met with Dr. Walter Huber, the proprietor of Hainle Vineyards and Deep Creek Wine Estate, who purchased the business from the Hainle family after Walter’s death. Dr. Huber was an extremely generous host, pulling corks with almost excessive enthusiasm. He’s refuses to release his wines before their time, choosing to let them dribble out slowly to lucky wine club members. He is generous to a fault with inquisitive visitors like me, even letting us sample an ice wine from 1984. Wow! I purchased some old vine Rieslings to drink a few years from now when they have fully matured.

Only the Beginning

Ice wine is what made Canada’s reputation in wine, Dr. Huber explained, but it’s not all there is to Canadaian wine these days, especially in the Okanagan Valley in eastern B.C., where the vineyards overlook Lake Okanagan and dozens of very different micro-climates co-exist. Winegrowers are able to ripen cool climate grapes like Riesling and Pinot Noir, of course, but also Cabernet Sauvignon, Merlot, Syrah and apparently even Zinfandel!

I love ice wine, but it is only one element of Canada’s dynamic wine industry. I’ll report on the surprising wine tourism industry in my an upcoming post, followed by a peek at what might be the future of Canadian wine. O Canada, you produce some unexpected wines! Check back soon to learn about what’s happening today and what the future may hold.

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[Note: This post is part of an occasional feature on extreme wines. Extreme wines? You know, the cheapest, the most expensive; the biggest producers, the smallest; the oldest, the newest and so forth.]