British Columbia Winery Looks South

Quails' Gate in Okanagan Valley shops for compatible California estate winery

by Peter Mitham
Tony Stewart Quails' Gate
Tony Stewart is considering adding a California property to his portfolio. Stewart is the proprietor of Quails' Gate Winery (above) in the Okanagan Valley.
West Kelowna, British Columbia -- British Columbia’s Okanagan Valley has reveled in the moniker “Napa of the North,” but now at least one local vintner is looking for an Okanagan of the south, as he scouts properties in California.

Tony Stewart of Quails’ Gate Estate Winery in West Kelowna, a four-hour drive east of Vancouver, has been scouting properties in the Napa, Sonoma and Paso Robles AVAs. Stewart is seeking a small, estate winery in a good district to complement Quails’ Gate. Quails’ Gate planted its initial vines in 1960, and currently produces about 50,000 cases per year.

Stewart has investigated opportunities in the Oak Knoll and Stag’s Leap districts of Napa and in Sonoma County’s Alexander Valley, Dry Creek Valley and Russian River Valley AVAs. A 10,000-case winery that sources 60% to 80% of its grapes from its own properties fits the bill. Stewart expects to spend between $5 million and $25 million on any acquisition.

“We’ve looked at a number, but as yet we haven’t found something that we find is a suitable fit,” he told Wines & Vines. “There’s more and more opportunities showing up there, and with the Canadian dollar stronger, we’re confident that there should be a suitable investment for us in the near-term, in the one- to two-year range.”

Stewart also considered buying in Australia and New Zealand. The opportunities available in California reflect the economic conditions familiar to those active in the contemporary wine business: A shift among consumers to lower priced wines has pushed many wineries to re-evaluate their business models, especially the consumer’s price per bottle, and in some cases to seek new financing or sell. Wineries have been hit harder in terms of market value than vineyard properties, which haven’t been coming to market in the same numbers as the myriad brands that have proliferated in recent years.

Paso Robles is a hot region at the moment, but with Napa and Sonoma re-evaluating their business models, Stewart sees opportunities developing there. “At this point we’re really looking at what’s available, and then assessing the regions,” Stewart said. “It takes a little bit of investigative work to find those properties ... that have a reasonable brand that can be fixed up,” he explained. “There’s a lot of stuff down there right now that was predicated on a market where they could sell wines at an extremely high price-point. They invested far more than the brand could ever hope to support.”

To make good on whatever property Quails’ Gate ends up buying, Stewart will look to direct sales, a small amount of retail and restaurant business, as well as export markets, courtesy of an agency venture Quails’ Gate entered last year with Burrowing Owl Vineyards Ltd. of Oliver, B.C.

“People are not going to be forgiving if they buy a wine that’s $50 and they feel that they didn’t get good value,” Stewart said. “The consumer who buys any wine, regardless of price, should be feeling they’re getting good value at that price-point. A quality, handmade product that’s delivering good value  -- and our range in that regard is the $15 to $25 range.”

Paso Robles is an area where Stewart feels there are good opportunities to deliver that kind of wine, with bottle prices commonly in the sub-$20 range; Napa, not so much -- not yet -- though wineries are starting to make the shift down. California has seen plenty of investment from Canada during the past decade, but Quails’ Gate -- if successful -- would be the first B.C. winery also to operate in the state.

While many wineries in Canada use juice from California, and a few work with growers in South America, Ontario’s Vincor International Inc. is North America’s most prominent cross-border operator. It purchased R.H. Phillips in California’s Dunnigan Hills AVA in 2000, and the following year picked up Hogue Cellars in Washington state. It later acquired properties in Australia and New Zealand.

Constellation Brands Inc. acquired R.H. Phillips when it bought Vincor in 2006, and shut the winery last year when it consolidated operations at the Woodbridge facility in Lodi.
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