California wine targets Canada—again

Grapes ready to be harvested in a Wine Country vineyard. (Photo: Lukasz Szwaj, via Shutterstock)

Wine from California vintners will now get equal treatment to sit atop Canadian store shelves under the terms of the recently renegotiated United States-Mexico-Canada Agreement.

Since 2015, the U.S. wine industry has been fighting a policy allowing grocery stores in British Columbia to favor domestically produced wines, shunning world-renowned varietals. The Canadian government has agreed to begin the new policy in November 2019.

This is a big deal for California.

“Canada is our largest export market.” — Pete Przybylinski

Wine exporters in California dominate the wine industry, comprising some 90 percent of the total U.S. output sold last year. According to the San Francisco-based Wine Institute, “California wine shipments in the U.S. reached an estimated retail value of $35.2 billion in 2017,” a 3 percent increase from 2016. The Wine Institute reported that California shipped 241 million 9-liter cases nationally in 2017, a 1 percent rise from the previous year.

Pete Przybylinski, senior vice president of sales for Duckhorn Wine Company in Napa Valley, said virtually every California winery exports to Canada.

“Canada is our largest export market,” he said. Established in 1976, Duckhorn prides itself as being the first U.S. winery to pioneer luxury Merlot. Wine Spectator magazine described Duckhorn as one of the “most accomplished wineries” in Napa Valley. The magazine rated Duckhorn’s 2013 Three Palms Vineyard the best wine of 2017.

Przybylinski said that Duckhorn is not directly affected by being unable to be sold in British Columbia grocery stores because most grocers there only offer less expensive wines, perhaps the equivalent of $15 or less per bottle. Duckhorn’s current releases range from $30 to $392 per bottle, according to its website.

In 2017, California wines accounted for $444 million in sales.

But it does pose a problem for a variety of quality wines whose producers want their products on grocery shelves.

That’s because customers who stop in a grocery store to buy items may not wish to make a separate trip to a liquor store that sells higher-priced wines. They will instead opt for the offerings from the grocery store, despite if the selection is likely to be lower-priced wines, he said.

“I am not optimistic that grocery stores will broaden their selections to include more higher priced wines,” he said. “But Canadians seem to know their wines, so hopefully they continue to seek out the best.”

Canada is the largest export market by country for U.S. wines, California being the most popular, the Wine Institute reported. In 2016, U.S. exports to Canada totaled $431 million. In 2017, California wines accounted for $444 million in sales. Total U.S. wine exports, with more than 90 percent from California, reached $1.53 billion last year.

“Our greatest concern is that as grocery stores pick up more market share, they continue to not offer the best wines that California—and the rest of the world—produces. Because the consumer does not have greater access to quality wine, you risk slowly ‘trading down’ the Canadian consumer to lower quality wines,” Przybylinski said.

Based on a Canadian report assembled by the Wine Institute, wine exporters believe there are still trade barriers within Canada that need to be addressed. Local Canadian wine production volume is about 6.25 percent that of U.S. wine production.

“Canada is an important market for U.S. winemakers,” U.S. Trade Ambassador Robert Lighthizer in a U.S. Department of Agriculture press release. “Discriminatory regulations implemented by British Columbia are unfairly keeping U.S. wine off of grocery store shelves, and that is unacceptable. Canada and all Canadian provinces, including BC, must play by the rules.”

Wines are also subject to consignment sales, warehousing and delivery charges.

Miles Prodan, president and CEO of the British Columbia Wine Institute said the current policy of favoring local wines is in effect because of a “store-in-store” rules the government put in place. Imported wine and spirits are to be sold within the store in a separate area from other items and include its own separate checkout area, he said.

“To date, no private liquor store or grocery store has taken advantage of the opportunity. In absence of a store-in store, I understand the U.S. argues they are discriminating against access,” Prodan said.


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