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Virtual Wineries: Canada's model for the future

July 19, 2011

The Canadian wine industry is emerging as a niche producer of internationally-respected Icewines and Late Harvest wines, and is garnering an impressive list of awards and praise. In order to sustain success, the industry is constantly adjusting and addressing market factors affecting its overall competitiveness, including image-enhancement promotion, educating consumers on the merits of fine Canadian wines, as well as adopting new technologies and innovations to improve production efficiency. Lately, production efficiency and innovation have been driving a new trend in the Canadian winemaking landscape, with virtual wineries being called the next wave in Canadian winemaking.

Virtual wineries are not actually a new concept; in fact they have been around for decades. However, these wineries are now increasing in popularity, spawning across Canada and are proving efficient in producing quality small lot wines, while conserving land and resources; an increasingly important attribute to Canadian and international consumers.

A “virtual” winery is a winery that does not physically exist. The “winery” is primarily online and allows winemakers to operate under their own brand, offering freedom from brand restrictions and greater room to experiment with grapes and wine styles, while cutting overhead costs associated with buildings, land and equipment. Essentially, a person with no physical vineyard or equipment can use an existing winery to crush and ferment purchased grapes, but will bottle the product under their own label. WineAccess, Canada's wine magazine, featured an article The Next Big Thing: Virtual Wineries, which highlighted this model of wine production as the return of the artisanal craft of winemaking. When taking into account the production process, including crushing and fermenting, tank storage, and packing and compliance, one can easily see the benefits of operating a virtual winery with shared facilities. Today's virtual wineries are concentrating less on the tourism, but rather establishing a direct connection between the winemaker and the consumer. The online aspects of the virtual winery ease the costs of traditional promotion and advertising, creating a cost-efficient means of selling premium wines.

In Canada, virtual wineries vary in nature. Some wineries have their own vineyards, while others purchase grapes and share facilities with larger, established estate wineries. Whichever the case, these virtual wineries in Canada are contributing to echo-friendly efforts Canadians are so passionate about today, and are ultimately helping to fortify virtual wineries as a viable and sustainable model for the wine industry. The virtual winery model allows room for experimentation, resulting in more cultivated, premium handcrafted wines. This concept holds true as many virtual wines made in Canada boast the VQA symbol of quality, meaning they meet the sustainable criteria behind the VQA certification requirements. These additional benefits are only further establishing virtual wineries' appeal as a prosperous, green option for the industry, and furthering its success in both domestic and foreign markets.

Some of Canada's well-known and established virtual wineries include Sandhill, a small production, virtual winery producing high quality VQA, single vineyard wines. This British Columbia (BC) winery sources its grapes from several different sites – some owned and some leased. Lacking a physical winery itself, Sandhill operates under the umbrella of Peller Estates where the final wines are crafted. In Ontario, there is a growing assortment of virtual wineries as well. Union was launched in September of 2010 by legendary Canadian winemaker Allan Jackson, founder of the well-known Jackson-Triggs brand, and his partner Andrew von Teichman, an experienced winemaker from Canada's largest VQA estate winery, Pelee Island. This duo sources premium fermented VQA wine from the most recognized VQA wineries in the Niagara region and uses the most state of the art crushing facilities to craft their premium wines. Union is unique from other virtual wineries, in that it obtained its own manufacturing license, so while it uses another winery's crushing facilities, the label doesn't need to operate under the facility's umbrella. The Union winery boasts the benefits of a virtual winery because without the overhead costs of having a bricks and mortar winery, their premium wines can be sold without the premium price tag. Some other established Canadian virtual wineries making a name for themselves include Twenty Twenty-Seven Cellars, Charles Baker, and Haywire.

However, the virtual winery concept doesn't come without controversy. Some say this model creates unfair competition, giving “dabblers” a fast track into the industry, where others have sunk a large sum into land, buildings, and practices to satisfy provincial manufacturing and sale of alcohol policies. An article by The Global and Mail featured Okanagan Crush Pad, a newly launched winery housing the virtual wine Haywire. The winery caused a stir as it has been set up to serve individuals looking to venture into the winemaking craft without having to obtain a winery licence. The company responded with the fact that they will assume all responsibility for wines it's contracted to make and will take ownership of the juice under its winery licence in order to comply with liquor laws. While producers may not be able to agree on the concept, most agree that the evolution toward virtual wine is inevitable, given the modern-day, online business landscape; which is encouraging the industry to adapt to remain competitive on a domestic and international scale.

The domestic market has long been a focal point for Canadian wines. The wine industry has been successful in improving consumer awareness and appreciation for the quality wines being produced in Canada, and a key component to the re-positioning of Canadian wines was the development of the VQA certification and premium wine standard. However the domestic market is still a challenge for the Canadian industry, due to growing international competition. Despite this, the ever-popular trend of buying local, coupled with new, green and sustainable production methods, such as the expanding virtual winery concept, are helping Canadian wines to gain more ground domestically.

Exports are very important to the Canadian wine industry as well, with exports reaching $27.8 million in 2010. While there are many challenges facing Canadian wines on the global front, Canadian wines have been gaining popularity in the United States and Asia. In fact, Canadian Icewines have enjoyed much praise in Southeast Asia, presenting a significant opportunity for Canadian exporters. Wine exports to China have net the most growth from 2009 to 2010, increasing by 182%. (For more information please visit The Wine Market in China: Opportunities for Canadian Wine Exporters.) Exports to the United Kingdom closely follow, having increased 177% from 2009 to 2010. Ontario Chardonnay was recently showcased in London surrounding the London International Wine Fair. The aim of the event was to showcase 40 of Ontario's top VQA Chardonnays, and highlight the quality and range of this popular wine. After resounding praise and significant media coverage, the Department of Foreign Affairs and International Trade Canada identified the UK as a target market, and specifically London as a priority city within the EU, due to its position as a window market to other EU countries. With many of Canada's virtual wines boasting VQA standards, and the ability for niche wines to be produced for less, it is yet another testament to the benefits of a virtual winery concept and how it may prove to aid in positioning Canadian wines as a key competitor in the global marketplace.

Data obtained from Agriculture and Agri-Food Canada

While the trend of virtual wineries has really taken off in other countries, it is still on the brink in Canada. Virtual wineries show great potential as a viable option for Canadian winemakers. Canada is equipped with a relatively small base of vineyards, yet a blossoming generation of skilled winemakers, who are primarily concerned with land preservation and production of high quality Canadian wines. Virtual wineries may be the next emerging trend, but may also become a standard production concept that will drive Canadian wines to reach their full potential.

Please get in touch with us if you have any further questions regarding the Canadian wine industry, or the present opportunities for Canadian wine exporters.

Until next time...
Cheryl Hogan
Project Officer, Agri-Food Trade Service (ATS)
cheryl.hogan@agr.gc.ca

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