The Wine Industry in a Challenging Year

by

Like most other industries around the world, winemakers and growers will look back at 2020 through the dark lens of the Covid-19 pandemic.

In fact, when the BC Wine Institute surveyed the industry in mid-August, the results that came back in September painted a dismal picture of a sector in crisis.

The poll by Leger Marketing showed that 83 per cent of wineries had been negatively impacted  by the pandemic, and worse, one in 10 wineries and grape growers said they were at risk of losing their business, with 58 per cent saying they had suffered a large loss of revenue, and 55 per cent saying they had reduced access to customers.

But what a difference a few months can make.

While updated news out of the wine industry in BC has been anecdotal, BCWI CEO Miles Prodan says the vast majority of industry leaders he’s spoken to said they’ve bounced back and expect to earn revenues in line with 2019.

“We were a little surprised to learn at the time that one in 10 wineries …. thought they would not make it through Covid,” Prodan said. “Generally it was relatively pessimistic, albeit it was in the middle of August so it was in the middle of the tourism season.

“But, subsequent to that, it’s all anecdotal,” Prodan added. “There are some who have done reasonably well, others who have done very well, and others not so much.”

In general, Prodan says it appears most wineries have fared far better than they  expected when BC went through its first lockdown. That was no accident, he said, because winery owners, the BC government and the BC Wine Institute worked very hard to create a workable situation to prosper despite the pandemic.

“Initially of course wineries were closed, and as they reopened we worked with them very closely on how to handle tastings,” Prodan said. “It was quite restricted at 50 per cent of capacity, but as it turned out it was a quantity vs. quality issue, and the quality was up.”

Prodan explains that most wineries went to a reservation system, giving them more time to spend with each customer, and that effort paid off.

“It gave people time to sit down with those guests and talk about the wine and the winery and that resulted in an increase in sales,” he said. “So, less people buying more wine, it all netted out to be about the same.”

In fact, some wineries found business improved in 2020, thanks largely to a combination of two factors. The first is that BC wine drinkers are loyal and very supportive of the local wine industry, and the second was an increase in local tourism that helped make up for the decline in international tourism.

Michael Clark, co-owner and winemaker of Clos du Soleil in the Similkameen Valley, said those factors came into play for his business, with the result that the winery improved its revenues over last year.

“Yes, Covid certainly was a challenge, but in fact our business was very strong this year,” Clark said. “Clos du Soleil has been lucky to win some good awards this year that helped spread the reputation of our wines but the main thing is that in BC generally, and certainly for Clos du Soleil, we are blessed with very loyal customers, who have really stepped up to support us during what has been a crisis period for the world, so that’s been great for our business.

“Despite the challenges, things are going well, but I don’t want to make it sound like Covid has made things easy.”

Prodan says that loyalty was particularly evident this year because there were far more local visitors to wineries this year, due to restrictions on travel due to Covid-19.  

“In the Okanagan Valley if you talk to tourism operators and hotel operators I think it was fairly busy,” said Prodan. “Because of Covid-19 and travel restrictions, people were less inclined to go very far, and so I think what we saw was a lot of people from the Lower Mainland planning their trip coming into the Okanagan.

“They clearly replaced any foreign visits, even from Alberta if you want to call Alberta foreign … so we’re very fortunate.”

By contrast, Vancouver and the Lower Mainland were harder hit in terms of overall tourism, but even there, wineries in the Fraser Valley and Vancouver Island got some benefit from having more people in the region unable to travel, and therefore looking for things to do close to home.

“I spoke to my tourism colleagues in Vancouver and in Victoria, the big centres, and they are down,” Prodan explained. “There’s no cruise traffic, conventions or meetings, so it was that idea of staycations that benefitted the Okanagan, and it’s true of the wineries in Kamloops, because they enjoyed a really strong year too. The Fraser Valley and the Island, they were also really taking advantage of the Staycation concept and people going out to visit their own wine region.”

Clark agrees with that theory, saying his own winery experienced very strong sales at the farm gate and through the wine club, something he has heard from others as well.

“Maybe if I was at a much larger winery my answer might be different,” Clark said. “Usually we get a lot of people here from the United States, but the offset of these travel restrictions is that people locally need things to do, and for us it more than made up for the reduction in travel from other countries or provinces.

“We also had very strong demand from online and from our wine club, so overall we are up.”

Troy Osborne, the Director of Viticulture with the Arterra Group and a director on the BC Grapegrowers Association, agrees that 2020 was a case of wineries and grape growers triumphing over adversity, but adds, it wasn’t easy.

"It slowed us down until we got our policies and procedures in place, so it was a bit of a scramble at first, but once we got everything dialled in and made sure we stuck to our work pods … I wouldn’t say it was business as usual, but we are certainly coping and it hasn’t affected what we’re doing in the vineyard or even in the winery, so I feel we are on track,” said Osborne. “I would say it hasn’t affected us other than in having to get organized and work around it.”

One of the problems faced by growers were the delays in getting foreign seasonal workers in from Mexico and other locations due to the Covid-19 related travel restrictions, but Osborne says that only caused some delay at the front end until the BC government and industry groups managed to come up with safety protocols.

After that, the main concern wasn’t so much production, but safety for the workers.

“There was a bit of a delay getting some of our folks in from Mexico, and of course, when they did get here they had to quarantine, so there were challenges there, but we pulled through and now we’re ready for it next year,” Osborne said.

Osborne also says that, despite fears earlier in the year that Covid would dramatically affect grape growers throughout the province, for the most part the industry has done well this year, putting out roughly average production numbers but with very high quality. Of course, much of that success had to do with the weather, as always.

The early part of the growing season started out as a challenge, with a colder than normal spring and more precipitation, followed by a cooler summer. That, combined with the issues getting workers into the fields and the potential for lower sales to struggling wineries, had many growers concerned about their income this year.

But Osborne says, like the Covid situation, the weather also ended up being less of a negative factor than expected.

“It was a bit of an odd year,” he admitted. “We had that slow start with a cold, wet spring, so there was a poor fruit set that had everyone quite worried, but that lower fruit yield in my opinion actually played in our favour as the season went on.”

Osborne says the summer was warm but not hot, but the unusually warm weeks from September all the way through October saved the season. Farmers had to do less thinning, and at the end of the year Osborne expects most growers will see higher yields and high quality, with little or no long-term impact from Covid-19 related labour shortages.

In particular, Osborne expects the Valley’s Merlot, Pinot Noir and Cab Franc vintages will be extremely good this year, with pretty much all the white wines showing superior quality.

Clark says his experience at Clos du Soleil echoes what Osborne has said, with overall decent yields and higher than average quality.

“The beginning of the season was slow to start, but that glorious Fall really allowed us to catch up,” he said. “The whites are all uniformly excellent, and for the reds, I really think this year we are producing an absolutely ideal Merlot.”

The BCWI believes most wineries were able to make up for lost business and, like Clos du Soleil, some increased their business, but operating in a crisis has provided lessons to the entire industry, amid new challenges for 2021.

For example, Prodan says all liquor sales increased in 2020, but while wineries did well in terms of revenue, their share of the overall market actually decreased.

“Good news is that revenue from winery visitations is up, and when you are buying directly from a winery, whether it’s onsite or online, they make the highest margin from those sales,” Prodan said. “But in a year when all liquor sales are up, our market share for VQA wine has slipped for the first time in years, plus, we are seeing people are trading down to less expensive wines and this is causing price pressure for BC wineries.

“Hopefully this will correct itself, but this is a challenge we’re going to face in the coming year.”

On the plus side, Prodan says wineries have shown themselves to be innovators who come up with solutions in the midst of a crisis, such as the massive shift to online and wine club sales.

Co-owner and Head Winemaker Gavin Miller of Upper Bench Estate Winery says that was key to his company’s success this year.

“Unlike a lot of wineries here we’re open all year round,” Miller said. “So when lockdown happened it probably didn’t affect too many of the wineries until April or May, whereas it was big for us, so we really jumped on the online bandwagon very early, and we saw people take up on that like you wouldn’t believe.

“I would say we had the best February and March we’ve ever had.”

While fewer tastings in summer hampered sales in July and August, Miller says constantly innovating and reaching out to the customer base means that revenue for the entire year roughly balanced out with 2019.

Osborne agrees that while the Covid-19 pandemic was the central challenge for the year, the long-term impacts are not necessarily all bad.

“Ultimately, some good stuff has come out of this as well,” said Osborne. “When you are forced to make changes you not only make do, but you find opportunities as well.”

He cited examples like having more people able to work mainly from home and more flexibility about work hours as two improvements he’s seen in the industry since the pandemic struck early this year.

“For people who have kids, many were in that situation where you go to work and put in your eight hours, and that’s it,” he explained.  “Covid has given us some flexibility and we’ve seen the world hasn’t fallen apart.”

Click here to subscribe to Orchard & Vine Magazine Print Edition

Tags

by

Orchard & Vine Year End 2023