Okanagan Valley vineyard in Osoyoos, British Columbia, Nalida Sukprasert

In a memo dated July 25^th, the Liquor Distribution Branch (LDB) outlined a relief plan for British Columbia (B.C.) wineries impacted by the January 2024 freeze event. The LDB intends to provide temporary tax relief in the form of mark-up concessions and rebates.

“In terms of the viability of businesses right now, it’s a big win,” says Craig Pacheco, managing director of Vin-Star Consulting, a Seattle-based wine business consulting firm.

In the past series of months, a number of B.C. wineries have been investigating and securing fruit contracts from Washington and Oregon for the 2024 vintage. (Washington published guidance on exporting and importing grapes in March.) However, wineries have been doing so without knowing what regulatory relief might be provided. The memo provides some initial information.

“It’s awfully late, but we’re thankful for the relief,” says Al Hudec, partner at Farris, a British Columbia-based law firm. “The better businessmen have been working at this for a while and are ready to go.”

Mark up relief

At present, wines made with grapes from outside the province are marked up 89% on the first $11.75 of the cost per liter of wine and 27% after that. “It turns your $20 bottle of wine into a $35 bottle of wine,” Pacheco says. Under the new guidance, the B.C. government will provide mark-up relief on wines sold between April 1^st 2025 and March 31^st 2026.

According to the memo, relief will be available for wines made from authorized inputs, specifically “non-B.C. grape and grape juice and unfinished wines, including first fermentation for whites and malolactic fermentation for reds.” This appears to provide wineries with wide latitude to import whole grapes and unprocessed juice, in addition to nearly finished bulk wine to fill more immediate needs.

The LDB will determine the maximum amount of relief available to each winery based on the five-year average of markup concessions and rebates normally provided for wines made in B.C., throwing out the high and low numbers. After exceeding that amount, wineries would pay the standard markup. Wineries will receive information about their individual allowed amounts in early August.

Potential issue for red vs. white wines

Overall, the dates of the relief program generally align well with when B.C. wineries might expect to sell most or all of their white wines from the 2024 vintage. Many of these wines are typically released in the spring and fall of the year after harvest.

“I’m advising my clients to get into contracts on at least white grape varietals,” Pacheco says. “I wouldn’t hesitate to recommend securing those agreements.”

The dates do not, however, appear to align with the sale of red and sparkling wines from the 2024 vintage. These wines are often released 18 to 24 months or more after harvest.

“There’s going to have to be some refinement of the program so that it recognizes that the red wines from the 2024 vintage really aren’t going to market until 2026, so you can’t sell them all through by the end of March 2026,” says Hudec. “But they’ll get that right. They’ll fix it up.”

Calculations will be critical

The stated goal of the relief program is to protect jobs and maintain viability of local wineries that are unable to use grapes produced in the province. British Columbia has approximately 350 wineries that employ more than 14,000 full-time workers. Additionally, in 2023, B.C. wine accounted for 45.1% of the market share of wines sold in the province.

The calculation used to determine relief might be a disadvantage for wineries that are scaling up production. Relief may be considerably smaller than the amount of wine they were intending to produce in 2024.

“I think smaller and growing wineries have to have some legit concerns about the cap being too low,” says Pacheco at Vin-Star. Vin-Star and Farris intend to publish a guidebook to assist Washington winegrowers and B.C. wineries this week.

Under the LDB guidance, land-based wineries, which make up the vast majority of wineries in the province, will be allowed to retain their classification while still producing wine from grapes and juice from outside the province during the specified time period. Currently, these wineries are required to use a minimum of 25% of fruit from acreage they own or lease.

Brutal series of years for B.C. wineries

The government estimates that 15% of grape vines were killed by the 2024 freeze. Production is expected to be down as much as 90% according to the government, though some estimates forecast as much as 97-99%. This comes on top of 29% of vines being killed by a December 2022 freeze event and an estimated 54% crop loss that year.

In that regard, the guidance seems like the beginning of what will need to be a series of steps. Many land-based wineries will need to replant, a process that takes years before vines bear fruit and even more time before wine is available for sale.

The government has already committed to providing $26M CAD (approximately $18.8M USD) to the industry for replanting. However, wineries will need other fruit sources beyond the 2024 vintage until new acreage comes on-line.

“It’s going to take three or four or five or six years before we get back to normal,” Hudec says. “So this program will have to be continued.”

The LBD has said it will provide further guidance in the fall.

Northwest Wine Report is wholly subscriber funded and is my primary source of income. Please subscribe to support continued independent content and reviews on this site.

To receive articles via email, click here.