The Canadian wine industry, currently valued at over $10 billion annually, could see its worth soar by billions if certain trade barriers are removed, according to a new Deloitte report commissioned by the Wine Growers of Canada. The study outlines a roadmap for increasing domestic wine sales from local producers to at least 51% over the next 15 years, a target that could elevate the sector’s value to approximately $13.7 billion, further bolstered by related industries such as shipping and tourism. With domestic market penetration stagnating at around 40% for nearly two decades, the industry is advocating for significant policy changes to unlock its full potential.
Removing Trade Barriers
The primary recommendation from the report is the elimination of provincial trade restrictions that hinder consumers from purchasing wine directly from out-of-province wineries. Dan Paszkowski, the president of Wine Growers of Canada, emphasised that the goal of reaching a 51% domestic market share cannot be achieved simply by increasing overall wine sales; it will require displacing imported wines over time.
Paszkowski pointed out that unlike consumers in leading wine-producing countries such as France, where domestic wines account for 83% of sales, Canadians currently face barriers that restrict their purchasing choices. “We’re probably the only retail sector in the country that has to say no to a consumer when they visit our winery and ask, ‘Can you ship this to my home province?’” he stated. This limitation is particularly damaging given that approximately four million tourists visit Canadian wineries each year.
Learning from the U.S. Model
The report highlights a stark contrast with the United States, where direct-to-consumer shipping is permitted in 48 states. This framework has contributed to the California wine industry’s staggering growth, which is projected to be valued at approximately $67.5 billion by 2024.
Carl Sparkes, owner of Devonian Coast Wineries in Nova Scotia, recalled sending a case of his wine to every premier in the country as part of a promotional effort. He noted the irony of consumers being able to order anything from around the globe through platforms like Amazon, yet being unable to obtain a bottle of local wine from a neighbouring province. “As a principle, any Canadian should be able to order directly,” Sparkes asserted.
Provincial Restrictions and Progress
While the federal government has made strides in reducing alcohol trade barriers, provincial regulations remain a significant hurdle. Currently, only British Columbia, Manitoba, and Nova Scotia allow unrestricted direct shipping of wine from other provinces. Some provinces have initiated agreements or are on the path to easing restrictions, but progress has been slow.
In 2022, ten provinces and territories signed a memorandum of understanding to explore a direct-to-consumer system. Paszkowski anticipates that an announcement regarding a fully integrated market addressing logistics, compliance, and tax issues will be forthcoming.
The Canadian wine industry is concentrated in four main regions: the Okanagan Valley in British Columbia, the Niagara region in Ontario, Quebec’s Eastern Townships, and Nova Scotia’s Annapolis Valley. The report indicates that each bottle of Canadian wine generates approximately $89.99 for the economy, compared to just $15.73 for imported wines. This economic benefit extends beyond wineries, positively impacting the tourism and transportation sectors as well.
Challenges Ahead
Another critical issue facing the industry is the federal excise tax structure, which some argue puts Canadian wines at a competitive disadvantage. The excise tax for Canadian wine exceeding seven per cent alcohol is set at 74.5 cents per litre, significantly higher than the 39 cents per litre in the U.S. and a mere six cents in France. Paszkowski noted that wineries in regions like Niagara can face tax burdens amounting to hundreds of thousands of dollars more than their American counterparts, hindering their ability to scale and compete effectively.
In response to these challenges, the Canadian federal government introduced the $166-million Wine Sector Support Program in 2022, renewed with an additional $177 million in 2024. However, this funding is nearing its conclusion, and the sector is advocating for further long-term investment to ensure stability and growth.
“Stable, predictable policy is essential for wineries to feel confident investing in the future,” Sparkes concluded. “We are in a long-term business where what we plant today won’t yield results for years, and that level of predictability is critical.”
Why it Matters
The potential for growth in Canada’s wine sector is not just about boosting sales; it represents a significant opportunity to enhance the national economy. By addressing trade barriers and tax imbalances, the industry could witness a renaissance that strengthens local businesses, creates jobs, and enhances the cultural tapestry of Canadian society. The recommendations outlined in the Deloitte report could pave the way for a more competitive and vibrant wine sector, encouraging Canadians to support homegrown producers and ultimately fostering a thriving economic landscape.