Okana­gan Val­ley Wine B.C.’S Re­gion Savours Its First Sips of Suc­cess One

Now Is the Time to Tap into Pur­chas­ing Its Winer­ies

CAIFU - - 海外投资 Theme Topic - Overseas Investment - By Cather­ine Skrzyp­in­ski

of the stops the Duke and Duchess of Cam­bridge made dur­ing their royal tour of Canada in Septem­ber 2016 was a visit to Bri­tish Columbia’s Okana­gan Val­ley to soak up the sun, pick grapes and sip wine.

“This royal visit will be a defin­ing mo­ment in our his­tory,” said Mis­sion Hill Win­ery founder and pro­pri­etor An­thony von Mandl. “It will place the Okana­gan Val­ley on the in­ter­na­tional map as a re­gion pro­duc­ing ex­cep­tional qual­ity wines that can stand along­side the best in the world.”

John Mcewen, CEO of Bri­tish Columbia- based tech­nol­ogy ven­ture capital firm Dis­cov­ery Capital Man­age­ment Corp., agreed with von Mandl. “The royal visit was a bonus to an al­ready- bub­bly busi­ness.”

The wine in­dus­try in Bri­tish Columbia con­trib­utes around $ 2 bil­lion CAD an­nu­ally to the prov­ince’s econ­omy, ac­cord­ing to the Bri­tish Columbia Wine In­sti­tute.

When wine afi­ciona­dos think of the Okana­gan Val­ley, breath­tak­ing land­scapes, lakeshore com­mu­ni­ties, its dry and sunny cli­mate, and its award-win­ning winer­ies come to mind. The Okana­gan is syn­ony­mous with B.C. wine as it is by far the largest re­gion, com­pris­ing 84 per­cent of the prov­ince’s vine­yards and is home to the ma­jor­ity of its winer­ies.

The Okana­gan Val­ley is a unique mar­ket place, as it is be­gin­ning to de­velop an in­ter­na­tional rep­u­ta­tion for pro­duc­ing qual­ity wines like Riesling, Chardon­nay, Pinot Noir and Caber­net Franc, Mcewen told CAIFU Tues­day, Nov. 1, 2016. This suc­cess is spilling over into the re­gion’s vine­yards, as they are 20-30 per­cent ahead of sales in 2016, com­pared with sales from 2015. Around 800,000 vis­i­tors are pour­ing into the re­gion ev­ery year, boost­ing its wine tourism mar­ket. “There’s a lot of smil­ing,’ he added.

Wine con­nois­seurs have tra­di­tion­ally as­so­ci­ated Canada’s wine in­dus­try with their pro­duc­tion of icewine, a dessert wine made from hand­picked frozen grapes dur­ing the win­ter months. Icewine’s sweet taste is also a hit among Chi­nese con­sumers, as they fre­quently give bot­tle of icewine as a high-end gift to busi­ness part­ners, friends and fam­ily.

Wine exports from Canada have sky­rock­eted in the 2010s – from $36.8 mil­lion CAD in 2011

to $73.9 mil­lion in 2015, ac­cord­ing to Statis­tics Canada and CATSNET An­a­lyt­ics. Mean­while, icewine rep­re­sented 25 per­cent of to­tal ex­port value at $18.6 mil­lion CAD in 2015, with China com­pris­ing ap­prox­i­mately 34 per­cent of those sales at around $6.3 mil­lion CAD.

A Young Wine Re­gion

Mcewan em­pha­sised Bri­tish Columbia is among the world’s youngest wine re­gions. “In the ad­vent of free trade, winer­ies had to com­pete; there­fore there has been ma­jor growth [ in the prov­ince] since 1988,” he noted.

That was when the Canada-u.s. Free Trade Agree­ment – the pre­cur­sor to the North Amer­i­can Free Trade Agree­ment – came into ef­fect, paving the way for the Okana­gan Val­ley’s rise as a ma­jor global player in the wine in­dus­try. This trade agree­ment en­cour­aged Cana­dian wine­mak­ers to ex­per­i­ment with Euro­pean grapes and wine­mak­ing tech­niques to com­pete with the Amer­i­can mar­ket.

Es­tab­lished in 1990, the Vint­ner’s Qual­ity Al­liance (VQA) stan­dard guar­an­tees con­sumers they are drink­ing wine made from 100 per­cent B.C. grown grapes. There­fore, the prov­ince’s wine in­dus­try has grown from just 17 grape winer­ies in 1990 to more than 255 as of Jan­uary 2016.

Mis­sion Hill Win­ery’s award-win­ning wines at­tracted the at­ten­tion of Prince Wil­liam, Duke of Cam­bridge and Cather­ine, Duchess of Cam­bridge dur­ing their brief stop in Kelowna, B. C. dur­ing au­tumn 2016. Its Chardon­nay put the win­ery on the map in 1994 by win­ning “Best Chardon­nay in the World” in Lon­don. A decade later, vint­ners voted Mis­sion Hill’s Pinot Noir best in the world un­der $50 in 2013.

There­fore, the qual­ity of wines grown in the Okana­gan Val­ley has im­proved sig­nif­i­cantly over the past 25-plus years, Mcewan added.

The se­cret is now get­ting out about the Okana­gan Val­ley, as a num­ber of travel pub­li­ca­tions and tra­di­tional news sources have been tout­ing the re­gion’s praises. USA To­day read­ers first ac­knowl­edged as the sec­ond- best wine re­gion in the world in 2014, while Travel and Leisure mag­a­zine ranked the Okana­gan as one of the best places to travel in 2016.

“To not only have the Okana­gan Val­ley rec­og­nized among the finest wine re­gions glob­ally

but to fin­ish in sec­ond spot by read­ers of a ma­jor in­ter­na­tional news­pa­per is a tremen­dous hon­our,” Ellen Walker-matthews, mar­ket­ing chair for the Okana­gan Wine Fes­ti­vals, said in a news re­lease in Au­gust 2014. “This will con­tinue to build the in­cred­i­ble mo­men­tum we have seen in our wine re­gion over the past sev­eral years. … This type of recog­ni­tion in­spires travel to the Okana­gan Val­ley as a pre­mier wine tourism des­ti­na­tion.”

Re­al­i­ties of Own­ing a Wine Busi­ness

Cur­rently, the Okana­gan Val­ley is home to 200- plus vine­yards and around 165 li­censed winer­ies – most of which are small, fam­ily- op­er­ated busi­nesses. A small bou­tique win­ery sells be­tween 5,000- 15,000 cases of wine per year, Mcewan said. “[ These wine­mak­ers] want to achieve a cult sta­tus – sim­i­lar to a craft beer model.” Mean­while, medium- size winer­ies sell be­tween 15,000- 20,000 cases of wine an­nu­ally, and count high-end restau­rants among their clients.

“The Okana­gan is one of the most beau­ti­ful places world­wide – it’s like Napa Val­ley with a lake,” Mcewan con­tin­ued. “But most of the [vine­yards] are un­der­cap­i­tal­ized, and five per­cent of these winer­ies would be in­ter­ested in sell­ing.”

This is why the Okana­gan Val­ley is ripe for in­vest­ment, as a grow­ing num­ber of Chi­nese- Cana­di­ans and in­vestors from China have pur­chased around a dozen winer­ies there since 2010.

A Chi­nese buyer should rec­og­nize the huge po­ten­tial in in­vest­ing in Okana­gan Val­ley, Mcewan said. “If they have the capital, then in­vest­ing in a win­ery is a great op­por­tu­nity, as the Okana­gan is very ac­ces­si­ble to the Van­cou­ver mar­ket,” he added. The Okana­gan Val­ley is a 45-minute flight or a half-day’s drive from the city.

Ac­cord­ing to Mcewan, the key chal­lenges fac­ing in­vestors is to know where to spend their time and wealth, as the win­ery busi­ness is lo­ca­tion-spe­cific. Prop­er­ties should be ac­ces­si­ble to cus­tomer traf­fic, but iso­lated enough to pro­duce a bumper crop.

The slope of the land is im­por­tant, or its ter­roir – the com­plete nat­u­ral en­vi­ron­ment in which a par­tic­u­lar wine is pro­duced, in­clud­ing fac­tors such as the soil, to­pog­ra­phy and cli­mate. The sun’s lo­ca­tion also makes a dif­fer­ence, he ex­plained.

“If they have the capital, then in­vest­ing in a win­ery is a great op­por­tu­nity, as the Okana­gan is very ac­ces­si­ble to the Van­cou­ver mar­ket,”

Bri­tish Columbia’s north­ern lat­i­tude also has a big ad­van­tage when it comes to sun­light, ac­cord­ing to the B.C. Wine In­sti­tute. Dur­ing the peak of the grow­ing sea­son, Bri­tish Columbia vine­yards will see as much as two hours more sun­light per day than famed re­gions such as Napa Val­ley in Cal­i­for­nia.

“Magic hap­pens in the vine­yard, not the win­ery it­self,” Mcewan con­tin­ued. “Buy a prop­erty with those char­ac­ter­is­tics.”

Per­haps the most chal­leng­ing as­pect of own­ing a win­ery busi­ness is to have ex­per­tise in three dif­fer­ent spe­cial­i­ties, Mcewan ad­vised:

• Farm­ing hy­brid grapes, as well as vinifera vines

• Chem­istry: to cul­ti­vate or­ganic vine­yards and bio­dy­namic farms

• Sales, mar­ket­ing and brand de­vel­op­ment

While vine­yard man­age­ment is im­por­tant, Mcewan con­tin­ued, hands- on ex­pe­ri­ence in agri­cul­ture is key for a wine­maker. Ad­di­tion­ally, taxes and reg­u­la­tions of run­ning a win­ery are com­plex. That is where Dis­cov­ery Capital comes in – Mcewan said they will help Chi­nese in­vestors meet these chal­lenges by hav­ing their ex­pe­ri­enced man­age­ment team ad­vise them in run­ning the

“Magic hap­pens in the vine­yard, not the win­ery it­self,”

busi­ness for a decade. Dis­cov­ery Capital’s team then hands over the wine busi­ness to the in­vestor when it is prof­itable and eas­ier to run.

Tap­ping into Con­fi­den­tial Listings

The av­er­age sale price of a win­ery in Bri­tish Columbia lies be­tween $ 5 mil­lion-$ 15 mil­lion CAD, ac­cord­ing to Mcewan. How­ever, many of the listings are con­fi­den­tial, as po­ten­tial in­vestors must know some­one in the in­dus­try.

“Win­ery own­ers want to keep it a se­cret, as wine is an emo­tional thing,” he added. “…It makes sense to buy in early be­fore the price goes up. The Cana­dian dol­lar is low [as of Novem­ber 2016].”

Mcewan noted land in the Okana­gan Val­ley is be­com­ing scarce, as there is only 10,000 acres of arable vine­yard land. “When the best land is gone – it’s gone,” he said.

Mcewan has fore­casted the win­ery busi­ness will ex­pe­ri­ence con­sol­i­da­tion and ac­qui­si­tions over the next few years. Con­stel­la­tion Brands Inc. agreed to sell its Cana­dian wine busi­ness to the On­tario Teach­ers’ Pen­sion Plan for $1.03 bil­lion CAD in Oc­to­ber 2016.

“We seized the op­por­tu­nity to sell the en­tire busi­ness in a value-en­hanc­ing trans­ac­tion when it pre­sented it­self,” Con­stel­la­tion CEO Rob Sands said in an Oc­to­ber 2016 news re­lease. “The Cana­dian wine busi­ness is the leader in the Cana­dian wine mar­ket and is a long-term growth op­por­tu­nity.”

Chi­nese in­vestors would be wise to ac­quire ex­ist­ing vine­yards and land for vine­yard de­vel­op­ment now, as the Chi­nese have de­vel­oped a taste for the bev­er­age and are in­ter­ested in learn­ing more about wine, Mcewan stated.

“Most own­ers are think­ing too small,” he con­tin­ued. “Chi­nese in­vestors should look at the op­por­tu­ni­ties and see what’s pos­si­ble.”

If Chi­nese in­vestors can in­crease qual­ity and pro­duc­tion at a win­ery, drive prof­itabil­ity of each win­ery and de­velop Cana­dian sales and distri­bu­tion, they then can im­port the wine back to China and Asia, Mcewan ex­plained.

“Winer­ies are in beau­ti­ful re­gions, close to golf cour­ses and restau­rants,” Mcewan con­cluded. “We will help in­vestors build a good life in the Okana­gan, as they are buy­ing land as part of an in­vest­ment for fu­ture gen­er­a­tions. It’s a trendy and fash­ion­able busi­ness choice – it’s now time en­joy the life­style ben­e­fits of the wine busi­ness.”

“Chi­nese in­vestors should look at the op­por­tu­ni­ties and see what’s pos­si­ble.”

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