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Steady Growth for Canada's Wines

|Jul 6|magazine12 min read

 

The Canadian wine industry is seeing steady growth says a BMO Capital Markets report released today. Analyzing information over the past decade, the report shows that the industry, although small, has grown at an average annual rate of 7.6 per cent since 1998.

The wine industry in general in Canada accounts for only 0.3 per cent in manufacturing and .03 per cent in overall economy. In the beverage industry it has had a 9 per cent average output share in the last five years while sales reached $897 million in 2010.

But its growth is almost opposite the lower manufacturing trend. In comparison to the beverage sectors average 1 per cent growth annually, 7.6 per cent shows people’s faith in potential for expansion.

 What led to this change? In the 1990s, Canada’s wines had sluggish growth, but a switch from a native grape species to wine-quality grapes, the initiation of the Vinters Quality Alliance standard to enhance quality, expanded efforts of Canadian wine promotion and industry consolidation helped the industry develop further than before.

 

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The industry is up against uneven odds. With Canada’s adverse weather, wine-quality land availability, and other limitations, wineries can be held back in production capabilities.

The Canadian wine industry is mainly located in Ontario and B.C. This is because of their respective climates that favour grape cultivation. Overall, half the industry is stationed in Ontario, with one third in B.C. and less than 10 per cent in Quebec—where production largely surrounds bottling and blending imported wines.

In sales, the industry relies completely on domestic opportunities, although it is not dominant in sales in Canada. In a highly competitive industry, Canadian wines compete with international imports from France, Italy, the US and Australia. Sales conducted through exports are largely sent to the United States, which is the largest foreign market for Canadian wines totaling 40 per cent of exports last year. Sales to the US have increased at a quick rate, a contrast in the lower sales trend for wine exports from Canada.

BMO believes that industry activity will continue to strengthen alongside economic improvement. To enhance prospects, BMO recommends the industry to focus on gaining market share at home and abroad. Extremely important for the wine industry is raising consumer awareness of the quality of its products.  Additionally, BMO Capital Markets believes the Canadian wine industry should potentially focus on grape varieties more suitable for the Canadian climate and on new innovative technologies to offset it.