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Class 8: Wine

Class 8: Wine. Agenda. The Canadian and Ontario Wine Industry International Trade NAFTA Trade and Wine (Case). Ontario Wine. Ontario Icewine. Ontario Wine.

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Class 8: Wine

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  1. Class 8: Wine

  2. Agenda The Canadian and Ontario Wine Industry International Trade NAFTA Trade and Wine (Case)

  3. Ontario Wine

  4. Ontario Icewine

  5. Ontario Wine Ontario's wine regions are right in the middle of the northern grape-growing belt – between 41° and 44° north. You may find it hard to believe, but that puts southern Ontario just south of the famous Bordeaux Region in France, and parallel with northern California wine regions.

  6. Chalk Hill Estate 1992

  7. Tawse Ninety Nine One - 2005

  8. The Canadian Wine Industry • The Canadian Wine Industry, compared to other parts of the world, is relatively new. • Early wineries using local grapes were first started in the early 1800’s. The first commercial winery was started in Pelee Island in 1866. • There are wineries in many different provinces, with the main two wine producing provinces being Ontario and British Columbia. • The Vintners Quality Alliance (VQA), the Canadian regulatory and appellation system, only recognizes wines from these two provinces.

  9. The Canadian Wine Industry • The Canadian Wine Industry suffered a major set back with Prohibition. • Regulation of alcohol was transferred to the provinces in 1927. • Ontario passed a moratorium on the issuance of new winery licences. • Many of the larger wineries consolidated by buying up some of the smaller licencees. • By 1974, there were only 6 wineries left.

  10. The Ontario Wine Industry • Don Ziraldo and Karl Kaiser were the first to be granted a licence to open a winery since 1929. They received their licence in 1974. • They introduced the first European grape varieties (Vitisvinifera) to Ontario by introducing Riesling, Chardonnay and Gamay grapes. • Prior to this, inferior local grape varieties were used to produce wines.

  11. But they turn into Baby Duck Wine The basic problem of winemaking in Canada Lambrusco grapes grow well in cold climates

  12. The Ontario Wine Industry • The Ontario Wine Industry is relegated to a few select areas of the Province: • Lake Erie North Shore/Pelee Island • Niagara Region • Prince Edward County

  13. Industry Facts—Wine in Ontario * The grape and wine sector generates approximately 14,000 jobs in Ontario. * It generates more than $100 million in direct wages and salaries. * In 2010, the total number of grape vines in Ontario exceeded 15 million. * In 2007, the wine industry generated $602 million in tax revenues for the province and $3.3B in economic impacts 23

  14. Vintner’s Quality Alliance • The VQA Act was enacted in 2000. • VQA Ontario acts as the regulatory body for wine. • administers Ontario’s wine appellation system. • primary functions are wine testing, audits, inspections, compliance.

  15. Wine Appellations • These are defined geographic areas where grapes and wine are grown. • They often have additional restrictions including the variety of grapes can be grown for wine, the level of alcohol and other restrictions. • Often the appellation begins to be used to describe the wine itself. • In order to be legally called champagne, the wine in question must be from the Champagne region of France. • The first exclusive appellation is Chianti, in Italy, formed in 1716.

  16. The LCBO • LCBO originally started in 1927 to promote temperance as well as generate revenues; $12.3 million in sales the first year with 86 stores • Original stores were hidden, with product located in the back away from the customers • Slowly evolved over the years; in 1988 the government challenged the LCBO to become a major retailer • LCBO in 2009-10 provided the Government of Ontario with a dividend of $1.41 billion. It employs 6,500 people, has 613 stores in Ontario and had sales of $4.34 billion

  17. LCBO Support For Ontario Wines • Large product selection: LCBO WINES category offers 530 Ontario-produced wines, including 300 VQA wines. • VINTAGES, LCBO’s fine wine and premium spirits business unit, offered another 252 Ontario VQA wines, including 22 available year-round through the VINTAGES Essentials program. • In fiscal 2010-11, the LCBO sold more than 900 different Ontario VQA wines from over 80 different wineries.

  18. LCBO Support For Ontario Wines • Prominent shelf space/location: Ontario wines are allocated almost seven per cent more shelf space than their share of sales in LCBO stores. • They are prominently located at the front of most stores and there are specially-designed VQA wine displays in the 250 largest LCBO outlets. • In 2009, LCBO expanded VQA shelving by 20 per cent (4,000 linear feet more) in these stores.

  19. LCBO Support For Ontario Wines • WOW (World of Ontario Wines) Leaders: LCBO employees in 300 LCBO stores are specially-trained to promote Ontario wines with customers. • Small winery support: LCBO’s Go-to-Market program allows smaller Ontario wineries to direct deliver products to a small number of LCBO stores and the Wines to Watch program provides in-store presence for smaller Ontario wineries, helping them build sales for wider distribution. • The VINTAGES’ Go-to-Market program also gives access to VQA wines from smaller, quality-focused Ontario wineries. This program has been expanded in the last year to include more participating wineries and LCBO store locations. • LCBO sales of all Ontario-produced wines in 2010-11 totalled almost $320 million, almost seven per cent higher than the previous year. http://www.lcbo.com/lcbo-ear/media_releases/content?content_id=1324

  20. Wine Trade • In Canada in 2007, enough grapes were processed to make 56.4 million litres of Canadian wine. • By comparison, Canadian wineries imported an addition 77 million litres of bulk wine for blending. • A further 200 million litres of bottle wines were imported to sell to Canadian consumers.

  21. Wine Trade • Canadian Wines have less than a 50% share of the Canadian Market. • Canada is one of the few wine producers that do not dominate its domestic market • Canadian wine makers are dominated by two large producers with a large number of smaller players. • And one of those large producers was purchased by an American company in 2006, leaving only one truly Canadian large producer.

  22. Wine Trade • Canadian Wine Imports were over $1.5 billion in 2006. • Canadian Wineries produced approximately $784.5 million worth of wines • $749.5 million was domestic sales. • Only $35 million was exported.

  23. Canadians are importing more wine Exports and Imports of Wine, 1997 - 2007 http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1172244915663&lang=eng 33

  24. LCBO Sales of Wine • Total wine sales, 2009-2010: $1.121 billion. • VQA Wine sales were up 19% • Domestic wine sales account for 28% of all wine sales at the LCBO

  25. Canadian Wine Consumption • Annual per capita consumption increased between 2000 and 2007, growing from 11.3 to 14.6 litres. • This is still relatively small to other nations. • In France and Italy, wine consumption is four times greater than it is in Canada. • Brewing outperforms wine in Canada.

  26. Top 10 wine producing countries 36

  27. Wine Production by country, 2009 • France 4,700,000,000 litres • Italy 4,650,000,000 litres • Spain 3,800,000,000 litres • United States 2,777,200,000 litres • Argentina 1,210,000,000 litres • Australia 1,171,000,000 litres • Chile 978,000,000 litres • Germany 928,000,000 litres • South Africa 780,700,000 litres • Portugal 600,000,000 litres 33. Canada 50,000,000 litres

  28. Not a world power in wine http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1172244915663&lang=eng 38

  29. Global Wine Production • The Canadian Wine Industry is dwarfed by such wine producing giants such as Slovenia (83,000,000 litres) Croatia (120,000,000 litres), and Moldova (397,600,000)! • Canada produces a small volume of wine by world standards with about 8,102 hectares of vineyards in 2007, compared to the EU which has 3.5 million hectares, of which France alone has 2.5 million hectares.

  30. The Principles that influence International Trade. • “The benefits of international trade result in a more efficient employment of the productive resources of the world.” John Stuart Mill

  31. Reasons for Trade • Resources are not completely distributed across the globe. • The climate and terrain of a state. • The skills of its labor force. • The advantages of specialization

  32. General Agreement on Tariffs and Trade First developed in 1947 as a means to reduce trade barriers. The countries who signed GATT negotiated new trade agreements that all would enter into. Each such set of agreements was called a "round". Each of these agreements bound the members to reduce certain tariffs, with special-case treatments of individual products, and with exceptions and modifications for each country.

  33. General Agreement on Tariffs and Trade Goal was to minimize new existing trade barriers. Reduce import tariffs and quotas. To abolish preferential trade agreements between member countries. Tariff concessions were negotiated on the principle of reciprocity (you scratch my back I’ll scratch yours).

  34. World Trade Organization (WTO) • The World Trade Organization (WTO) is an international rules-based and member driven organization which oversees a large number of agreements defining the "rules of trade" between its member states. • It operates with the broad goal of reducing or abolishing international trade barriers. • It ensures trade among nations operates smoothly, freely and orderly. http://en.wikipedia.org/wiki/WTO

  35. Trading Blocs or Communities • To promote trade among countries that have common economic and political interest or are located in a particular region. • They favor member counties over non-member countries. • The Commonwealth of Nations • The North American Free Trade Agreement • European Union

  36. FTA Election 1988 and Wine Industry • http://www.youtube.com/watch?v=gyYjRmM7RDY • http://www.cbc.ca/archives/categories/lifestyle/food/canadas-wine-renaissance/free-trade-crisis-or-opportunity.html

  37. NAFTA – North American Free Trade Agreement NAFTA is an agreement between the United States of America, Mexico and Canada, coming into effect on January 1, 1994. NAFTA called for immediately eliminating duties on half of all U.S. goods shipped to Mexico and gradually phasing out other tariffs over a period of about 14 years. An expansion of the earlier Canada-U.S. Free Trade Agreement of 1989.

  38. NAFTA – Canada/US Trade Agreement • The agreement removed several trade restrictions in stages over a ten year period, and resulted in a great increase in cross-border trade. • The agreement greatly liberalized trade between the two countries, removing most remaining tariffs. • Canada desired unhindered access to the American economy. Americans, in turn, wished to compete in Canada's energy and cultural industries. • Canada retained the right to protect its cultural industries and such sectors as education and health care. • Trade between Canada and the United States began to increase rapidly.

  39. The Goals of NAFTA • The Governments of Canada, the United States and Mexico resolved to strengthen the special bonds of friendship and cooperation amongst their nations. • To contribute to the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation. • To create an expanded and secure market for goods and services produced in their territories. • To reduce distortions to trade.

  40. The Goals of NAFTA • To establish clear and mutually advantageous rules governing their trade. • To ensure a predictable commercial framework for business planning and investment. • To build on their respective rights and obligations under the G.A.T.T. and other multilateral and bilateral instruments of cooperation. • To enhance the competitiveness of their firms in global markets. • To foster creativity and innovation and promote trade in goods and services that are the subject of intellectual property rights.

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