2023 alcoholic beverages outlook: Slow sales a symptom of weaker ... - Farm Credit Canada

The bars reflect the dollar value of sales in billions. The numbers above the bars reflect the year-over-year percentage change.

As of July 1, 2022, Canadian wines are now subject to the excise tax. This is a tax on particular goods manufactured in Canada, payable when the goods are delivered to the buyer. In Ontario, a harmonized wine tax is set to come into effect on July 1, 2023. This translates to an increase in the tax rate on Ontario-produced wines and a decrease in the tax rate for non-Ontario wines, including blended wines. This will benefit manufacturers producing blended wines and make their products relatively cheaper, all else being equal, the opposite would be true for Ontario-made wines.

On the radar: Grape production

Periods of prolonged cold weather in BC and Nova Scotia last winter caused significant damage to wine vines. Initial projections by Wine Growers B.C. forecast a 39% to 56% drop in wine and grape production in 2023. Last year, there were similar concerns in the Niagara region, and grape production was 14% lower than the 10-year average.

In the short term, this will leave wine producers scrambling, regardless of whether they grow their grapes. Cash flow could depend on inventory levels: wineries with high inventory levels can leverage their position to generate revenue.

If damage to vines is severe enough, the entire vines may need replanting. Replanted vines take three to four years to reach full maturity, bearing quality fruit. This would significantly impact near-term production.

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