Grape Shortage Looms in B.C.

Growers, wineries scrambling to secure fruit for 2018 and keep up with demand

by Peter Mitham
Harvest in full swing at Okanagan Crush Pad Winery, which recently acquired a new vineyard because of a grape shortage in British Columbia.

Oliver, British Columbia—Wineries in British Columbia’s Okanagan Valley are scrambling to secure fruit amid rising prices for land and grapes.

The shortage of grapes is a the result of both a strong market for B.C. wines, sales of which increased to about 1.56 million cases in the 12 months ended March 31, up around 65% from 955,000 cases five years ago, as well as a move by large wineries to secure their supplies of grapes.

“We have seen both the big guys consolidating their holdings and many of the small, independent growers converting over to wineries,” Joe Luckhurst, managing partner with Road 13 Vineyards in Oliver, told Wines & Vines. “This has led to a shortage of independent growers and an end to much of the contracted fruit that wineries have previously relied upon.”

Red varieties, which account for approximately 51% of the 10,260 acres of vineyard in B.C., but just 47% of the 32,706 tons harvested in 2017, are in particularly short supply.

Pricier bulk wine and grapes
Jackie Wendenburg, who with her husband Mark operates Wine Aspect BC Bulk Wine Brokers Ltd. in Penticton, said the shortage has “definitively” translated into short supplies of bulk red wines. Wine Aspect’s listings now show prices in the range of $12 to $14 (all prices in Canadian dollars) a litre for red lots, whether of blends or varietals such as Syrah, Merlot or Cabernet Sauvignon.

Crop reports for the B.C. Grape Growers Association indicate that Merlot, the province’s most-harvested red grape, fetched $2,765 a ton last year, up from an average of $2,419 a ton in 2013. The price of Cabernet Sauvignon rose to $2,801 a ton last year from $2,589 a ton in 2013, while Syrah checked in at $2,927 a ton last year, up from $2,673 a ton in 2013. (Rare varieties such as Terolldego and Grenache topped the price charts last year at $3,852 a ton and $3,686 a ton, respectively.)

The high prices have pressed wineries to find more affordable fruit.

“While there still are private growers that are selling their fruit to wineries, those contacts are all but locked in,” Luckhurst said. “With all this in mind the price per ton, particularly of red fruit, has nowhere to go but up. It seems that investing in more land may be the only option to future-proof a winery business in B.C.”

But between the trio of large players that dominate Canada’s wine industry – Arterra Wines Ltd., Andrew Peller Ltd. and the portfolio of wineries and brands owned by Anthony von Mandl – as well as foreign investment, Luckhurst says many smaller wineries have been priced out.

Road 13 recently purchased a tract in the Similkameen Valley just west of the Okanagan, but it counts itself lucky given the tight conditions in the market.

Land prices up nearly 6%
Farm Credit Canada, Canada’s federally owned agricultural lending agency, reports in its annual survey of farmland values that Okanagan agricultural land rose 5.7% in value in 2017 and currently averages $91,978 an acre. Sales last year maxed out $166,900 an acre, though vineyard land has been known to fetch upwards of $200,000-plus an acre.

“The largest portion of acquisitions has been to secure grape production land over the past year and a half (to) two years now. It’s been pretty consistent,” said Amos Rossworm, a senior relationship manager with the agency who focuses on the wine industry. “Most of the sales are private growers; most of the acquisitions are wineries.”

This has led to the consolidation in the sector that wineries have observed. While wineries typically plant a portion of every vineyard to white grapes, he said red varieties are behind the latest land drive. This is a shift from the years following the financial crisis of 2008, when consumer demand pulled back and several wineries launched second labels in 2009 to deal with the surplus. The cool growing conditions of 2010 and 2011 delivered conditions that saw wineries shift red varieties into rosé production.

Today, with warm seasons and confident consumers, circumstances have allowed wineries to forge ahead with red wine programs.

“If you go back five years ago there were too many red grapes in the valley and not enough wineries to take up the supply, and now it’s vice versa,” he said. “You just can’t produce enough red grapes to meet the demand right now.”

Christine Coletta, co-owner with Steve Lornie of Summerland’s Okanagan Crush Pad Winery, said the grape shortage was among the reasons she recently bought the 50-acre Secrest Mountain Vineyard site. With 38 planted acres, it supplies 150 tons of grapes and supports 10,000 cases of production annually. The acquisition complements the couple’s work to develop its Garnet Valley Ranch site, a high-elevation vineyard in the hills above its winery in Summerland. “The shortage … is going to impede winery growth,” she said. “Fortunately for us, our lender BMO [Financial Group] understood this and moved heaven and earth to quickly make this acquisition a reality.”

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