The Canadian wine sector, valued at over $10 billion annually, is seeking significant growth through the removal of provincial trade barriers and a shift in consumer purchasing habits. A recent report from Deloitte, commissioned by Wine Growers of Canada, outlines a potential increase in the industry’s worth to $13.7 billion over the next 15 years if Canadians choose to buy at least 51 per cent of their wine from local producers. This strategy aims not only to boost direct sales but also to enhance associated sectors like tourism and transport, which are crucial for the economy.
A Call for Increased Domestic Consumption
Despite its current valuation, the Canadian wine sector has stagnated around 40 per cent domestic market penetration for nearly two decades. Dan Paszkowski, president of Wine Growers of Canada, emphasised that reaching the 51 per cent goal will require a concerted effort to reduce imports rather than simply increasing overall wine sales. “We’re not going to be reaching 51 per cent by increasing wine sales across Canada. We’re going to be increasing to 51 per cent by displacing imports over time,” he stated.
The report highlights that successful wine-producing countries, such as France, achieve over 50 per cent domestic sales, with consumers opting for homegrown options 83 per cent of the time. The Canadian wine industry aims to replicate this success by encouraging consumers to purchase directly from local wineries.
Breaking Down Trade Barriers
One of the key changes advocated by the industry is the ability for consumers to buy wine directly from out-of-province wineries. Currently, retail stores often limit their offerings to popular brands due to the need for large volumes, leaving smaller producers at a disadvantage. “We’re probably the only retail sector in the country that has to say no to a consumer when they come and visit our winery,” explained Paszkowski. “We can’t legally do it yet, and that really is hurtful to the growth of the industry.”
In stark contrast, 48 states in the U.S. permit direct-to-consumer shipping, contributing to the growth of California’s wine sector, which is forecasted to reach approximately $67.5 billion in 2024. Carl Sparkes, owner of Nova Scotia’s Devonian Coast Wineries, echoed these sentiments, arguing that it is unjust for Canadians to be unable to order wine from neighbouring provinces when they can easily purchase goods from around the world online.
Navigating Provincial Restrictions
While the federal government has relaxed some restrictions on alcohol trade between provinces, significant barriers remain at the provincial level. Currently, only British Columbia, Manitoba, and Nova Scotia allow direct-to-consumer wine shipments without restrictions; other provinces have either established limited agreements or are in the process of reforming their laws. For example, Alberta has a reciprocal agreement with British Columbia allowing direct sales, while Ontario and Nova Scotia signed a memorandum in spring 2024 to facilitate similar exchanges.
Last year, a memorandum of understanding was signed by ten provinces and territories to explore a direct-to-consumer system, signalling potential collaborative progress in establishing a unified market. Paszkowski expressed optimism about forthcoming announcements that could lead to a more integrated marketplace addressing shipping, compliance, and tax collection issues.
Economic and Competitive Challenges
The report underscores the economic impact of choosing Canadian wine over imports, with each bottle of local wine generating approximately CAD 89.99 for the economy, compared to just CAD 15.73 for imported varieties. This ripple effect extends beyond the wine industry, benefitting culture, tourism, and transportation sectors as well.
However, the industry faces challenges from an uncompetitive federal excise tax structure that makes imported wines more affordable. Canadian wines with more than 7 per cent alcohol content are subject to a tax of CAD 0.745 per litre, significantly higher than the U.S. average of CAD 0.39 per litre and France’s mere CAD 0.06 per litre. Paszkowski noted that the disparity in taxation places Canadian wineries at a competitive disadvantage, hindering their ability to scale and reduce costs effectively.
In response to these challenges, the federal government introduced the CAD 166 million Wine Sector Support Program in 2022, which was renewed in 2024 with an additional CAD 177 million. As this programme approaches its final year, industry leaders are advocating for its renewal and calling for long-term investment stability to ensure future growth.
Why it Matters
The potential for the Canadian wine sector to grow significantly hinges on overcoming both regulatory and market barriers. By fostering a culture of local consumption and removing trade restrictions, the industry could not only enhance its economic contribution but also secure its position in a competitive global market. As tourism and local businesses thrive in tandem, the implications for Canada’s economy are profound, promising a vibrant future for the nation’s wine industry and the communities that depend on it.
