Large and small wineries play important roles in success of Okanagan wine industry

By on September 12, 2017

Dear Editor:

These are some of my observations and thoughts on the Andrew Peller acquisition of Black Hills Estate Winery, Grey Monk and Tinhorn Creek Winery announced on Monday.

Andrew Peller, an Ontario based public company, has just announced that it is acquiring three leading Okanagan estate VQA wineries- Black Hills Estates, Grey Monk and Tinhorn Creek.

Andrew Peller is paying in aggregate $95 million for the three wineries (including the $17 million of Andrew Peller shares being issued to the Heiss family as partial consideration for Grey Monk).

Together, the three wineries had production last year of 125,000 cases and sales of $24.5 million, and own 250 acres of vineyards.

The three Peller acquisitions represent the most significant industry roll up since Don Triggs created Vincor and consolidated Inniskillan, Sumac Ridge, Hawthorne and other successful wineries almost 20 years ago.

The acquisitions make Andrew Peller the largest domestic wine business in English Canada and the largest producer of VQA wines in British Columbia.

The three new wineries join Andrew Peller’s existing portfolio of premium VQA wineries in British Columbia – Sandhill, Red Rooster and Conviction (formerly Calona Vineyard’s VQA Artist Series Brand) and Trius, Thirty Bench and Wayne Gretzky in Ontario.

The transactions will undoubtedly add to the ongoing industry debate about whether the larger or smaller producers contribute more to the development and reputation of the Okanagan wine industry.

Many of the smaller winery owners are distrustful of the larger wineries who, in addition to operating boutique wineries, also derive significant revenues from the sale of cheaper wines blended from foreign and domestic grapes.

As a result, as the argument goes, the interests of these larger wineries are not aligned with the interests of the smaller owner operated wineries.

Certainly, George and Trudy Heiss of Grey Monk, as industry pioneers, contributed immensely to what the Okanagan wine industry has become.

Sandra Oldfield of Tinhorn Creek is an outspoken industry leader who put sustainability first in everything she has done.

Glenn Fawcett built Black Hills into a luxury brand worthy of the Area 27 crowd.

But the large wineries also have a role to play.

Andrew Peller intends to invest $25 million in its Western Canadian wineries in the next five years, increasing the collective  annual revenues of its new BC acquisitions from $24.5 million to $30-$35 million per year over the next five years, and increasing normalized EBITDA from $8.2 million to $15 million annually.

This will be achieved through capital investment in vineyards and wineries; increased sales and margin expansion through the leveraging of its national sales and marketing capabilities across Canada; and operational efficiencies in production and packaging.

The smaller owner operators contribute their entrepreneurship and innovation to the growth and reputation of our industry.

But often it is the larger, better capitalized wineries, with their strong internal sales and marketing groups, that have what is necessary to take a successful winery to the next level when it’s founders are looking for an exit.

Both small and large wineries play important roles in the success of our Okanagan wine industry.

Al Hudec

Oliver, B.C.

(Editor’s note. Mr. Hudec is a lawyer who divides his time between Vancouver and Oliver, but he has a home in Oliver and spends much of his time in the South Okanagan. He regularly writes letters to the editor and opinion columns about the wine industry, including the state of the industry in the Okanagan Valley.

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