Largest Producers Break off from Wine Council of Ontario

Set up new group to protect and promote blended products

Ontario’s largest vintners have broken ranks with their association and established a new organization to represent the producers of Cellared in Canada (CIC) wine in the province.

The amicable divorce began after the province announced new legislation and policies that favor 100-percent Ontario wine certified as Vintners Quality Alliance (VQA) over blended products.

Vincor Canada Ltd., Andrew Peller Ltd., Colio Estates Wines, Magnotta Winery, and Kittling Ridge Estate Wines and Spirits have all pulled out of the Wine Council of Ontario (WCO) to form the Winery and Grower Alliance of Ontario (WGA). Pelee Island Winery has also joined while remaining a part of the WCO.

Anthony Bristow, chair of the newly formed WGA and chief operating officer of Andrew Peller Ltd., said the new association is necessary to remind the provincial government about the importance of CIC wine.

“Our members still represent more than half of the province’s appellation wine and consider the further development of the VQA market as essential to the industry’s long-term success, but the Cellared in Canada portfolio still accounts for most of the economic benefit to the province with CAN$360 million of the CAN$533 million in net sales during fiscal 2009 and most of the jobs,” he told winebusiness.com.

The WGA isn’t opposed to the government supporting VQA wine, but doesn’t want this done at the expense of CIC products.

One of the sore points is Ontario’s decision to impose a higher tax on CIC wine sold at offsite retail stores. Under the 1989 Canada-U.S. free trade agreement, 290 off-site retail licenses were granted in Ontario. (These outlets are owned and operated by vintners but away from their wineries.)

As part of a transition to a harmonized sales tax with the Canadian government, the province has converted the usual two percent mark-up on VQA wine sold at offsite retail outlets to 6.1 percent. It has set the mark-up for CIC wine sold at these stores at 16.1 percent. The 10-percent higher levy is intended to help pay for the WCO’s marketing efforts, as well as a subsidy program to help VQA producers to offset the cost of having their products sold by the Liquor Control Board of Ontario (LBCO).

The WCO supports this approach with most of its members being small to mid-sized wineries that only produce VQA wine. “I think the government is saying that it clearly sees the future being in VQA wine, and so it’s going to direct its policies and investments towards supporting the VQA industry, which is exciting for us,” said Hillary Dawson, the WCO’s executive director.

However, it’s the Alliance members that sell virtually all the CIC wine and own all but a few of the 290 offsite licenses. “And our members don’t need help to get our products on LCBO shelves or to develop export opportunities,” Bristow noted.

Along with lobbying against CIC-specific taxes, the Alliance is readying to dissuade the government from increasing the mandatory Ontario content of wine blended in the province from 30 percent to 40.

“We haven’t represented the CIC category very well to government,” Bristow acknowledged. “It’s essential that we start getting across the right information about what CIC wine means to Ontario in terms of production, packaging and other jobs, so that government supports this sector in tandem with building the quality and recognition of VQA brands.”

Although few in number the Alliance members are responsible for 90 percent of all the wine produced in the province and about 70 percent of the farm-gate value. Their departure from the WCO leaves it with a CAN$500,000-plus shortfall in its CAN$4-million operating budget.

“We’ll need to retool and realign some of the things we do, but we’ll continue to provide a seamless service to our members,” Dawson assured. “Of course we’re disappointed several wineries have left, but it’s always been a challenge for an organization with competing products to adequately represent all interests,” she added. “Now we can put all our energies on VQA wine – a focus that I think the Ontario government appreciates and that makes the WCO a natural partner for the delivery of many of the programs that the province has in mind to support VQA products.”

Both the WCO and Alliance have pledged to continue to co-operate on matters of common interest, including a single tourism marketing plan, and recommendations on new clearer labelling for CIC products.

“We need both VQA and CIC wine in our industry but what I think the government is saying is that any investments will be in VQA wine because it builds the industry’s quality and value,” Dawson said.

Bristow also described the breakup as cordial and hoped to keep it that way. “We share a huge need to grow our industry because we’re still so small compared to other wine regions, and our failure to communicate all of our industry’s key aspects has allowed to a certain degree for the open-door policy that makes it impossible to compete with foreign producers that are significantly supported by their government.”