Reform is needed in the Canadian wine industry: here's why


This is chapter three of a four-part series investigating the wage disparity in the Canadian wine industry.


Chapter one began with a discussion surrounding winery management and migrant workers.


Chapter two went behind the scenes with winery employees anonymously sharing their personal experiences which was met with some disdain from winery owners who felt the structure of the industry was unfairly cast.


This instalment provided winery owners an opportunity to share the challenges they face.


Lauren Buksevics is the daughter of John Skinner, founder and owner of Painted Rock in Penticton, BC. Painted Rock is widely heralded within the Canadian industry, largely due to their tireless championing of the BC wine industry in international markets.


There's a palpable sense of pride that emanates from Lauren, evidenced through her confident voice. What's clear, however, is that despite outward appearances, the building of their brand has been a decades long battle, "We bought the property in 2004. My Dad had a previous career but wanted to build a family legacy. If you think of concept to cash flow - he invested in 2004, sourced and planted vinifera, paid consultants - it was 5 years of pure outflow. We didn't sell any wine until 2009. It wasn't until 10 years after we bought the land that my Dad started taking a salary."


Jak Meyer, founder and owner of Meyer Family Vineyards in Okanagan Falls, BC, who produces some of the region's best Chardonnay and Pinot Noir, echoes Lauren's statements, "The path to profitability is long and full of challenges. The path to cash flow positive is even more so. Anyone with a winery has put in years and years of cash, hard work and risk in order to make wine and at the end of the day there is very little guarantee of success. This is still farming and over the long run, land prices continue to move up so generally speaking, most people are cash poor and asset rich."


While they're often accused of the "rich owner" trope, Lauren shows no qualms clapping back, instead opting to mention how well they treat their employees, "Our winemaker started with us as a cellar hand and worked his way up. We paid for his education in Washington. On the flip side, we've had vineyard staff who we sent to school and as soon as he graduated, he moved to another winery. We will always invest, pay well, give benefits to salaried employees and give salaries as much as we can to give security but there's both sides to the story that need to be shared."


It's a widely held misnomer that proprietors have deep pockets. Lauren debunks this myth, by exposing a skewed reality: voices of scorned or disgruntled staff often take precedence to ownership woes, "We had a manager quit when I was 9 months pregnant on Christmas eve because she had just received her Christmas bonus. I was about to have a baby and I couldn't even fly to the winery because I was too pregnant. Of course there's cases where managers are underpaid and under valued but there's also examples of employees who don't treat employers with that much respect either."


Jak espouses this statement, sharing that cash flow was challenging for his winery in the first decade of its inception, "We put in a large chunk of money in the beginning and had to supplement cash flow for approximately 7 years and only after that started to repay that shareholder loan. We are 14 years into it now and still have an existing shareholder loan we are repaying as we are now profitable. We have been fortunate that land prices have risen significantly so there is a pot at the end of the rainbow however this is only accessible if selling."


Tenacity and positivity overshadow their frustration, however, and Lauren quickly pivots to highlighting all the efforts and strides they're making to help the industry grow, "I believe going into everything with your eyes open. All winery owners should know the realities of the business. You have to lobby government, and ask for what you need. It's the same thing for employees asking for what they need. Do we need grants for training? My Dad has been working really hard to bring a BC Wine Centre for Excellence to the Okanagan so that we as employers can offer our employees education locally."


Jak goes further, by exposing the structures of government stores that largely benefit big business. Wineries are required to discount their product in the neighbourhood of 65%, which is unrealistic for most small producers, "The expectation from any of the large liquor boards such as LDB, LCBO and SAQ expect that a winery will discount enough to cover their excessive markups of 125% so that the shelf price comes in close to your retail market. This is why the selection of good wines are not available in the government stores and are typically large commercial wineries that have the volumes to discount that much. They operate on large volume and very low margins. Small wineries cannot operate this way."


There's also the assumption of robust owner salaries far higher than those of their staff, Lauren mentions, "There are plenty of wineries who value their staff and are put first - they get paid before we get paid. To be seen as money hungry is offensive. If people are great in their roles, there are jobs out there. It's just as hard to find good, stable employees. They are hard to come by. The idea that you have to sell your soul to get benefits is a bit of a stretch."


Will Roman is the general manager of Rosewood Estates Winery in Beamsville, Ontario, known for making honey and mead. In recent years, the winery has taken a new direction with their winemaking.


Embracing and fostering innovation has served the winery well - much of their inventory sells out in mere weeks or sometimes even hours. Optically, it would appear the winery is thriving.

The VQA (Vintner's Quality Alliance) prides itself on marketing and promoting quality Canadian wine, performing tests to ensure safe products are available for consumption to the general consumer. Will agrees with this approach, stating authenticity and accuracy are of utmost importance to the winery.


Beyond lab tests and label protocol is a tasting panel that determines what the VQA deems as "typical for the region" This is when the process errs on nefarious, Will shares, "The problem I have with the tasting panel is if they don't enjoy the wine, don't think it's typical, or if they think it's flawed, they fail it. We're a 40 year old region - we don't have a typical style. Due credit is not given to people who are making innovative products. Why do we make Chardonnay a certain way? Because Burgundy made it that way? There's no justification for following a region half way across the world. We are not ancestral, we don't have 3-5 generationally owned vineyards. We still do not know what works well here. Why are we trying to shackle producers from what might work best? We don't know yet what consumers here want to drink."


Wineries embracing experimentation like Rosewood will attest to the frustration in appealing to a specific set of palates that dictate what will be offered to the consumer. Will shares that many of their wines have failed the VQA tasting panel, but will submit the wines even if they know that will be the case.


The backlash has been endless, as Rosewood approaches winemaking very differently than their counterparts in the region. Examples include their Gewurztraminer, aged in barrel for two years, unfined and unfiltered. Each time the wine is submitted to the VQA, it is failed. Notes from the tasting panel have concluded the wine is "too yellow", "oxidative" or considered flawed. Will has been lobbying to find out who is sitting on the panels, as it impacts their bottom line in a big way.


Wines that are not awarded VQA status after having been failed numerous times are subject to a 43% tax, should the winery go on to sell said product to Ontario restaurants, "If we sell VQA to a restaurant in Ontario, we have another 10% tax added on to it. Our total tax is 16%. If the grape wine is not VQA, that tax jumps to 43% sales tax that we pay to the LCBO. I have to limit quantity because I can't afford to pay 43% in just tax, not to mention all my other expenses or fixed costs."


While Will could omit restaurant sales to skirt the tax, it's not a realistic business decision with how popular the non-VQA wines have become, with big demand coming from wine bars in Toronto. Will muses, "I've had a number of restaurants thank me for not making regular VQA factory wine. I do sell non-VQA direct from the winery but it's taxed the same. The issue is that we've built a reputation with our style that restaurants love. Our distribution is 30-35% to restaurants alone. So when the VQA fails the wines but restaurants love it, this is the issue we're facing."


In addition to the taxes faced for non-VQA awarded wines, there are fees paid to VQA of $1200 annually, plus a $355 fee for each wine submitted. If a wine is failed and resubmitted, that fee is applicable every time. That means the failed Rosewood skus result in a loss of several thousand dollars to the winery before they can even start selling it.


Beyond fees paid to the VQA, are marketing associations acting as ambassadors for burgeoning regions with reaches far superior to those of small wineries, rendering them no choice but to pay into them for exposure. Jak shares, "We pay annually to the following boards: BCLDB $1500, BCWI $8000, BC Grape Growers $1200, and BCWA approximately $3000. That's nearly $14000/year in fees."


The battle with bureaucracy is real, and severely impacts a small winery's bottom line. Will shares they avoid the LCBO channel entirely, as they are not interested in participating in the monopoly. "The LCBO takes 62.5% off the top. Why would I do that? I can retain more margin and pay people more if I avoid that channel. The system benefits the big guys - let's leave it that way. Let the free market run. It's one group dictating based on personal preference having an impact on taxes. The VQA and LCBO have a shackle and strong hold and they don't want to budge."


Alan Dickinson, winemaker and proprietor of Synchromesh in Okanagan Falls, BC, is celebrated not only locally, but known globally for his wine.


He is regarded as a trail blazer, but expresses frustration regularly at the assumptions made of him, and his business, opting instead to break down the economics bluntly, "We list our entry level Riesling for $23 retail. After taking out taxes, agent commissions and accounting for the portion of production sold through wholesale accounts we're left with $14.64. If you take the 14.64 per bottle and look at the cost of goods sold (grapes, labels, glass, closures, packaging services etc.) our margin is $9.94 per bottle. This is before any variable or fixed overhead costs like mortgage, wages/salaries, employment expenses, vehicle expenses, entertainment, marketing, shipping, warehousing, accounting, licenses etc. Our variable overhead is costs that roughly scale up with production volume and have been pretty steady around $48/ case so $4/bottle. At this point our $23 bottle of Riesling is down to $5.94 before any mortgage, financing, taxes or anything. I would have to sell nearly 4000 cases of that wine just to break even, before paying myself anything, being able to repay any shareholder loans or buying my kid an ice cream for his birthday."

  

Will argues there needs to be more focus placed on merit, rather than allowing monopolies to continue reigning, "There needs to be reform. We're not trying to prove that we can make good products anymore. If you can't sell wine whether it's VQA or not, that's a 'you' problem. You need to re-evaluate whether or not you want to be doing this."


While Alan agrees that there are many shortfalls in the industry, and cannot understand how any business would not pay their staff wages that support basic necessities of housing, food and transportation, he expresses disdain for the comments made of him as a business owner, "Our society has developed a real anti-wealth, anti-success attitude with a large portion of the population and it is frustrating because without those of us taking huge risks to create businesses that employ and support our communities there are no jobs for those people. If there is no reward, financial or otherwise to success and drive then why would I ever agree to work as hard and as long as I have, impacting my relationships, life experiences and financial stability."


If you'd like to weigh in on the ongoing conversation, please send me an email to lauramilnes@gmail.com


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