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10.23.2013  
 

Trade Deal May Pressure Canadian Vintners

Once ratified, free trade deal will pit Canadian wineries head to head against Europe's

 
by Peter Mitham
 
 
Alternative text
 
Rob Ingram, CEO of Terrabella Wineries Ltd.
Vancouver, British Columbia — The details have yet to be finalized, but the announcement last week of a free trade deal between Canada and the 28-member European Union — subject to ratification by participating countries, a process that could take up to two years — heralds changes for North America’s wine industry.

On the one hand, vintners in Canada have been preparing for the prospect of a trade deal with Europe since the North American Free Trade Agreement was signed in 1988.
Europe has long been a yardstick for Canadian producers, with media playing up a shipment of sparkling wine to France in 1955, although calling the wine Champagne didn’t sit well with the French (see “In the Wake of the Champagne Wars,” Wines and Vines, August 2009).

But with clarity over the use of names and geographic indications, and now a free trade agreement, Canada’s vintners are set to go head-to-head with one of the world’s biggest wine-producing regions.

Most tariffs on wine and spirits fell under the Wine and Spirits Agreement (2003), meaning that consumers will see little change in prices. According to a summary of the new agreement, “the general rule is that goods from Canada or the EU should not be discriminated against.” This means equal access to retail markets even though wineries in Canada will continue to operate small off-site stores while European wines will still be sold through government stores and private retailers.

Challenged to be more competitive
But the bigger challenge lies in competing against the producers themselves on price and market share, if not for shelf space.

Producers such as Rob Ingram, CEO of Terrabella Wineries Ltd. and a partner in Collective Winery Consultants Inc. believe the complete elimination of tariffs will challenge Canada’s vintners to become more competitive.

Wine producers in B.C. face increasing pressure from foreign imports (see “British Columbia Wines Stall in Home Market,” Wines and Vines headline, Sept. 5, 2013), and that won’t diminish with the further liberalization of trade. “Free trade always has the effect of getting your costs down,” Ingram said in a recent interview.

Placed on a level playing field in a third market such as China, B.C. wines would sell for double the cost of European wines, he explained. So the industry needs to reduce costs in order to hold its own against Europe.

Ingram, whose company owns Perseus Winery near Penticton, B.C., and acquired a second property near Kelowna, B.C., earlier this year for vineyard development, is seeking to bring successful individual wineries within a common fold to achieve the efficiencies they can’t secure on their own.

“You’ve got to get costs down,” he said. “[B.C. is] very expensive mainly because of our land prices — and high land prices doesn’t necessarily mean better vineyards.”

With proper management, the quality of wine from those vineyards and the value proposition to consumers can be increased, he said.

Hope for Deal Between U.S. and Europe
Ingram’s vision suggests what may lie ahead for producers in the U.S., which launched free trade talks with the EU towards a Transatlantic Trade and Investment Partnership this past July.

While it remains some ways off, Dewey Weddington, director of marketing and education for the Oregon Wine Board, said any free trade agreement with the EU that removes hurdles to the shipment of U.S. wine to Europe is welcome.

“Currently, our wineries are pursuing demand in Scandinavia and other regions that are embracing new world wines yet desire the quality, and focus on sustainability, that Oregon has to offer,” he said. “We’ve seen free trade agreements bring new interest in our wines and would expect the same should a deal become realized with the EU.”

So far as the potential for U.S. markets to receive more wine from Europe, heightening competition here, Weddington was sanguine. Oregon producers are primarily small producers who face significant competition every day; greater access to the U.S. can hardly make things worse for them.

“We compete pretty heavily already with European wines, and the rest of the U.S. producers,” he said. “I don’t know that it would necessarily increase our competition more than it already is.

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