BMO Report Signals that Now May Be the Time to Buy a Winery
The Glass Is Full, Canadian Winery Sales Growing Faster than Other Types of Alcohol
By Graham Dyer, Farms.com
According to a recent report by BMO Capital Markets, Canadian wineries have a bright future. The outlook for wine demand in Canada is strong and will likely continue with moderate growth. While wineries saw rapid growth prior to 2005, since then the average growth rate has continued to be a respectable 3.1% - outpacing the overall economy. “While the climate may preclude the sector from becoming an international powerhouse, its reputation on the international stage has grown, and Canadians are increasingly reaching for a glass of pinot noir instead of a pilsner,” said BMO Economist Aaron Goertzen.
According to “The Canadian Wine Industry: Shiraz Grown” BMO report, wine sales continue to grow faster than sales of other types of alcohol, so its share in overall alcohol consumption continues to rise. Winery output surged nearly 10% in 2011 to a record high. Winery output the closing months of 2012 is expected to grow modestly, as British Columbia wineries struggled with a wet spring. Surprisingly, unlike the fruit growers in the same region, Ontario wineries were not impacted by the early spring frost.
The report also suggests that Canadian wine makers are well positioned because historically, in response to competition, Canadian wineries reinvented their product by switching to higher quality grapes and by developing the Vintners Quality Alliance (VQA) which has become an effective quality assurance and marketing tool. The industry has also made inroads to increase productivity.
The wine industry is small, representing only 0.04% of Canadian GDP, and is only viable in a few areas in the country where the grape growing season is long enough. A large majority of Canadian wineries in terms of acreage are located in Ontario -- nearly two-thirds – while British Columbia has most of the remaining acreage. According to BMO, domestic wineries produce around one third of the wine consumed by Canadians, with Canadian wineries exporting very little.
If you have ever considered buying a winery, now may be the time. The BMO report concluded in their report that the “industry will continue to benefit as Canada’s population ages, but it also has its eye on younger consumers, with producers adopting bolder brands and marketing tactics. Meanwhile, an increasingly sophisticated consumer is showing a willingness to indulge in more premium wines, providing an opportunity to produce higher-value products.”