Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 11 - Evidence - Meeting of February 14, 2012
OTTAWA, Tuesday, February 14, 2012
The Standing Senate Committee on Agriculture and Forestry met this day
5:11 p.m. to examine and report on research and innovation efforts in the
agricultural sector (topic: innovation in the agriculture and agri-food
sector from the producers' perspective).
Senator Percy Mockler (Chair) in the chair.
The Chair: I welcome everyone to this meeting of the Standing
Senate Committee on Agriculture and Forestry. To the witnesses, thank you
for accepting our invitation.
My name is Senator Percy Mockler, from New Brunswick, and I will ask the
senators to identify themselves, beginning on my left, please.
Senator Mercer: I am Senator Terry Mercer from Nova Scotia.
Senator Robichaud: Fernand Robichaud from Saint-Louis-de-Kent, New
Senator Mahovlich: Frank Mahovlich, Toronto.
Senator Nolin: Pierre Claude Nolin from Quebec.
Senator Plett: Don Plett, Manitoba.
Senator Buth: JoAnne Buth, from Manitoba.
Senator Maltais: Ghislain Maltais from Quebec.
Senator Rivard: Michel Rivard from Les Laurentides, Quebec.
The Chair: Honourable senators and witnesses, the committee is
continuing its study on research and innovation efforts in the agricultural
sector, as in our order of reference, developing new markets, domestically
and internationally, enhancing agricultural sustainability and improving
food diversity and security.
On behalf of the Standing Senate Committee on Agriculture and Forestry,
we want to thank you, witnesses, for accepting our invitation and sharing
with the committee and with Canadians your opinions, visions and
recommendations. Today, we are focusing on the understanding of innovation
in the agriculture and agri-food sector.
Honourable senators, today we welcome Mr. Hanspeter Stutz, President of
Domaine de Grand Pré; Mr. François Pouliot, President of La Face Cachée de
la Pomme; Mr. Walter Schmoranz, President of Pelee Island Winery; Ms. Josie
Tyabji, Director Western Estates and Industry Relations, Vincor Canada; and
also Dr. Kevin Ker, Research Associate and Professional Affiliate, Cool
Climate Oenology and Viticulture Institute Brock University.
Kevin W. Ker, Research Associate and Professional Affiliate, Cool
Climate Oenology and Viticulture Institute Brock University: Thank you
for the opportunity to be part of this panel on the grape and wine industry.
Others on this panel have more direct experience with marketing, and my
comments will be focused more on enhancing sustainability for the industry.
Using some Ontario examples, I will highlight some of the ongoing work
which is applicable in Ontario and adaptable across the country and provide
a few ideas with regard to needs and opportunities.
For the Ontario industry, I will provide a bit of economic background.
Ontario viticulture generates a farm gate value of $78 million — that is
2001 — with 96 per cent of the grapes grown going into wine. There are over
7,000 people with wages and salaries of over $100 million annually as part
of this industry.
Wine begins in the vineyards and is dependent upon the collective success
of sustainable vineyard production and sustained and growing wine sales of
domestically produced grapes and wine.
From the Canadian Vintners Association reports prior to 1988, Canadian
grapes and wine sales made up 49 per cent of the domestic market. In 2001,
this had dropped to 32 per cent. This is extremely low when compared with
other wine regions that have a higher domestic wine share: Australia has 90
per cent domestic wine share; California has 63 per cent of the U.S. market
share; and New Zealand is at 57 per cent and growing.
To ensure sustainability and growth, the active cooperation and
interaction of the industry and the federal government, along with other
levels, are required. Sustainability must be looked at in what I call a
"Triple E" system: It has to be effective in operation, environmentally
responsible and economically viable.
In British Columbia and Ontario, growers and wineries have forged
partnerships to develop research-funding entities. In Ontario, the Ontario
Grape and Wine Research Inc. was formed in 2007 and secures funds for
research from levies on growers and wineries to secure base funding for
research and innovation. These funds are used to access funds from the
government to initiate multiple research projects for viticulture, oenology
as well as marketing.
An example of a research initiative where there has been a partnership in
academia is the federal government's Developing Innovative Agri-Products,
DIAP, program. A partnership of Brock University, along with the research
institute, the Grape Growers of Ontario and Agriculture and Agri-Food
Canada, was successful in funding a four-year project that will end in 2013
called Harvesting Innovation for Growth and Sustainability of the Canadian
Grape and Wine Industry.
This allowed for the hiring of a viticulturist and oenologist to
undertake research and outreach to the industry. This program is directed at
optimizing grapevine cold hardiness while ensuring premium fruit quality,
expansion of outreach services for analytical services, pre-harvest sampling
and the development of a computer-based vine alert data base system that is
able to assist all growers in protection strategies and delivery of
workshops to growers in Ontario, Quebec and Atlantic Canada.
A memorandum of understanding has also been part of this project between
the Cool Climate Institute at Brock, as well as the Pacific Agri-Food
Research Centre in Summerland, British Columbia.
As well, institutions in Quebec have been involved, with Vignoble de
Brome-Missisquoi, and as well in Nova Scotia, with the Nova Scotia
Agricultural College and Acadia University as part of this. From these
partnerships, there is a thought to compete to create a national network of
centres of excellence for the grape and wine industry.
A second initiative tied into this DIAP project was innovation,
integration, adaptation, a response to climate change for the Ontario grape
and wine industry, again funded by government, growers, the wine research
entity, Vintners Quality Alliance as well as wineries and growers
individually. Partner institutions include Brock University, the University
of Guelph, Environment Canada and the Vineland Research and Innovation
This is a project looking to be proactive at developing approaches to
mitigate the impact of climate change by focusing on what climate change
means and its impact on viticulture. As we know, we need grapes grown in
order to make wine. This includes looking at volatility of weather patterns,
excessive heat, extreme cold events, drought or excessive rainfall and its
impact on the wine regions and its cold hardiness. As well, there is
oenology for looking at wine styles — dealing with seasons that are cool and
impact on fruit and wine quality and what efforts can be made at the winery
level to remediate or remove unwanted flavours that may occur due to climate
These are two examples of how industry and government are partnering to
address critical issues that will test the sustainability of the grape and
wine industry over the next years and decades.
There are still needs to be addressed and as yet have not. There is a
need for a national vine certification program whereby growers can secure
plant materials that are domestically produced and known to be free of
viruses, other pathogens and pests. A large amount of material is still
imported. However, each year the number of acceptable suppliers in Europe
dwindles as there are threats of diseases and other quarantinable pests that
have expanded in European nurseries and have restricted the available plant
material in Canada.
Vines that are infected must not be allowed to enter Canada as there is
no cure. Infected vines from these nurseries could devastate thousands of
acres of productive vineyards. A certified Canadian-produced vine program
would help to eliminate this threat and provide vines.
Another need is the development of a formal network of centres of
excellence across Canada, linking institutions and industry stakeholder
groups between B.C., Ontario, Quebec and the Atlantic provinces, along with
The research network can enhance the collaboration process looking at
national priorities to strengthen the Canadian wine industry and allow for
well-defined research projects and coordination of activities to optimize
activities and financial support. Funding for a national system by the
federal government would aid in seeing this idea come to fruition.
There is also a need to review ongoing government programs for greater
participation by all members of the industry. An example is AgriFlexibility.
This federal program needs to expand the rules to allow individual grape
growing businesses to access cost-shared funding. In Ontario alone, more
than 125 growers looked to invest almost $12 million to access matching
funds, but they were unable to do so as the rules of this program restricted
funding strictly to organizations.
Another program that may need some adjustments is the AgriMarketing
Program, which is involved in long-term international strategies. This
program should expand to encompass domestic strategies to enhance or promote
Canadian wines, 100 per cent domestic as well as the international Canadian
blends. As I have commented, we have only a 32 per cent domestic market
share of the wine sold in Canada, which dropped from the 48 per cent evident
In addition to research, the adoption and implementation of research
results by growers and wineries is critical. It can be called research into
practice. Outreach programs need to be further developed to assist the
uptake and adoption by wineries and growers in all parts of Canada. An
example of this outreach could be patterned after recently completed
research on the development of a grape and wine learning network. This is a
unique network and not tied to post-secondary education; this is the
training of the members of the industry as they exist right now. In addition
to practices such as workshops, seminars and meetings, the learning network
proposes the transfer of knowledge by having members of the industry and
research facilitate and develop educational programs. The teaching of
practices from applied research and collective knowledge may be conveyed to
others by peer training, webinars and other venues. We have to remember that
an idea or result of research is only that, until it is used practically.
We need to ensure these results are put into practice and implemented by
those at the grassroots level. There are more needs and issues to be
addressed, but in deference to the committee and other panel members I will
close by saying this is an industry that is highly competitive locally,
nationally and internationally, yet we see the benefit of working
collectively. It needs all parts to function collectively — viticultural
production, processing and marketing — in order to be efficient,
environmentally responsible and economically viable to be truly sustainable.
Thank you for your time and consideration.
Josie Tyabji, Director Western Estates and Industry Relations, Vincor
Canada: I am from British Columbia. I have been in the wine industry in
British Columbia for 27 years and have gone through the 1988 free trade,
which is when we had the 48 per cent market share. I have been through grape
marketing boards and have seen a lot of changes over the last 27 years in
One thing that many people do not understand or see in our wine industry
is that there are two very separate industries as far as it goes. There is
the 100 per cent agriculturally based products, which many people know as
VQA, and there is the blended and bottled in Canada, which is essentially
imported wines brought in and blended in Canada to help us compete in the
One is agriculturally based and the other is more manufacturing based.
Both of them create thousands of jobs across Canada in all provinces.
The other main difference between these two is that the agriculturally
based products in Canada must be premium and highly value-added in order to
be profitable and competitive. Our agricultural based has high inputs, and
because we are very limited in the scope of what we can produce in Canada,
we must compete in the premium high value-added segment for the products
that are 100 Canadian. That is where our quality programs are so important,
with things like VQA. The blended and bottled in Canada wines compete more
in the value sections of the products.
In British Columbia, we have been working under this scenario since free
trade in 1988. We came out with the VQA program, and in British Columbia our
growers currently enjoy very good returns, and wineries are multiplying. We
are up to about 200 wineries in four regions across British Columbia. Our
average price per tonne continues to rise and is about $2,200 a tonne. If
you talk to people across Canada, they will let you know that is a very good
price. The average price point of a bottle of wine now is about $17.50. Our
100 per cent agriculturally based products are focused on the premium end of
We have come up to a point in our supply. We have been highly focused
just on British Columbia because that is the supply that we have had and we
have been very focused on B.C. We have gotten to the point now where we need
to expand our markets out of British Columbia and start to seek other
premium markets across Canada and around the world. You will see for the
VQA, that is what we are doing. For the Canadian blended products, you will
see that the market share of blended Canadian across Canada is 26 per cent,
VQA is 5.8 per cent and imports are 68 per cent, as was alluded to. Over the
last 10 years, blended Canadian products have decreased by 7 per cent, and
imports have increased by 5.5 per cent. We are not holding our own in terms
of the market share in Canada.
I will talk about economic contributions of the domestic wine industry in
Canada. As you will see in British Columbia, VQA wines contribute
significantly more than in Ontario. That is because the focus has been on
premium, and it is a free market system out there. It started in Canada a
little less, but the domestic wine industry essentially economically
contributes almost 10 times more than imported foreign wines — 8.5 in their
economic multipliers. It is very important from an economic standpoint in
Canada that we support Canadian products.
In the industry in British Columbia we came up with a strategy for
Agri-Food that quality products is what our focus needs to be. Research and
development is a very important part of it. Developing domestic and
international markets is another key strategy, and this Growing Forward
program that is federal and provincial is a good way to also expand our
markets. The other thing is competitiveness. We need efficiencies in our
industry, and regulatory support to ensure we are setting ourselves up to be
competitive. One thing that came out of our last Agri-Food meeting is that
many times we in Canada hold ourselves to a much higher standard than the
rest of the world. We set up regulations that prohibit us from being as
competitive as the products that come into our marketplace.
In the blended business we also need to continue to foster innovation,
new technologies and efficiencies and ensure regulations for Canadian
products are not becoming more stringent to set our manufacturers further
back against imports.
There are a number of areas that were alluded to that require attention
to remain competitive, and working for quality in the wine industry is very
complex. We start with the farming of grapes. Even with the farming itself
there are many different things you can do out on the farm to produce a
quality product. Many of the farmers have switched over from apples or other
products. There is a lot of training, tools and equipment that need to be
brought into the grape growing process to ensure they are actually growing
the quality products that will make us internationally competitive.
When you get into winemaking, it is a very capital-intensive industry.
Barrels, tanks, explosion pumps and presses are all unique to the wine
industry and are costly, but in order to be a good-quality producer, you
need to ensure you have all that equipment.
Labs and technical analysis, again, are very intensive. Some small
wineries do not have the equipment they need to ensure that they are
producing a quality product. Then you get into the whole blending and
bottling and winemaking, and then you add on the sales and marketing,
developing labels and getting out into the marketplace and ensuring that you
have the distribution networks. It is a very complex industry.
Many people do not have the business planning side of it. There are many
different layers in terms of being effective and efficient. Then there is
research and development to continuously improve on industry needs.
Six years ago a decision was made in the industry to change the excise
tax. It basically put the Canadian blended business at a different level of
competitiveness to the VQA industry, and the VQA is the 5.8 per cent, the
blended is the 26 per cent. Essentially it took $10 million out of the
blended wine industry, and our proposal is to have that $10 million that was
taken out of the blended wine industry reinvested back into the entire
industry in an innovation fund. Whether it was through the Agricultural
Flexibility Program, or another program, the applicants could apply for
funding based on their litreage and apply for that to use it against any of
the things that they need, whether it is on the farming side or the lab side
or the winemaking side or the sales and marketing side, and apply that to
help grow their businesses. That would allow the wineries to set the things
that are most important to them, because everyone, whether small or large,
is at different stages in terms of what they need to help grow their
business. We think that that would be very beneficial.
Many other countries in the world come into our marketplace. We have New
Zealand, Australia and many others that are being subsidized for marketing
programs, and they come into our marketplace with shows across Canada and
are telling everyone how great they are, and we are struggling to really get
the same resources to be able to do the same types of things that they are
doing in our backyard, and you can see that they are really starting to gain
on us. Our products are just as good or better than anyone else in the
world; however, we just do not have the resources to get out there and make
the same splash, and we need to start doing that.
I am sure you have all been hearing about the barriers to internal trade
in Canada, the interprovincial barriers. That has been very active in the
media, and that is something that we think can quite easily be implemented.
I know a bill is being read in the house right now. The personal exemption
system is what we believe would be the best approach to getting that
implemented, and the Canadian Food Inspection Agency, CFIA, and some of the
regulations being looked at, country of origin and other statements, those
types of things, can really handcuff the blended industry, and we would not
want to see that. We also need to continue to protect trademarks like
icewine and VQA internationally so that when we go out into these other
marketplaces people cannot duplicate our products. There have been incidents
of that, other countries trying to duplicate our icewine and sell it as
We believe that with the innovation fund through the Agricultural
Flexibility Program, the internal trade barriers, and maintaining
regulations that support the Canadian industry we can help to grow our
industry forward. Thank you.
Walter Schmoranz, President, Pelee Island Winery: Thank you for
the opportunity. I am very excited about this. I did not know what to
expect. I am for sure as well prepared as the first guest speakers here.
Mr. Ker has the ability to show you the stage of our industry in Canada,
especially from the research part. We have a federal research station, a
provincial research station and Mr. Ker finally coming to an understanding
that we have to work hand in hand. The first steps are done and there is
more to come. In the past, the provinces did their research. There was very
little connection between the province and the feds.
To give a little background about myself, I came to this country in 1985.
I have been president at Pelee Island Winery since 1986. We started growing
grapes in 1979. We have about 600 acres planted and produce grapes on Pelee
Island, one of the smallest appellations in Ontario. I took the liberty to
show on the map, Prince Edward County just down the road here from Ottawa,
the smallest appellation. The Niagara Peninsula is certainly by far the
largest one, and then there is Pelee Island and Lake Erie, north shore,
Southwestern Ontario. To give you an idea, we grow approximately 15,000
acres of grapes in Ontario. To put that in relation, 15,000 acres, for the
gentleman here from Manitoba, that is what some grain growers do before
lunch in his province. For us, 15,000 acres is a very time- consuming, very
labour-intense agricultural business.
If you followed the news last week, you would have heard about that
tragic accident outside Kitchener. We employ in our very labour-intense
industry almost 20,000 offshore workers who come in every year and make a
living in Ontario. From my own experience, I have had Mexican guest workers
on our vineyard farm for over 20 years, and we have second-generation
workers coming now. It is a business that is uniquely different to most
other agricultural businesses we are involved with in Canada and in Ontario.
The labour we need per acre is much higher, even higher than orchards. The
labour is comparable to greenhouses maybe, but the difference between
greenhouses and vineyards is that we do not have a roof over our head, so we
do not have glass and plastic around us. That is why I took the liberty to
show you some of our uniquely Canadian problems.
I personally do not think that we are less efficient or less sustainable.
I think the investment done over the last 20 years in the Canadian and
Ontario wine industry is pretty much cutting edge, pretty much the
international standard, if not partially even higher. What we are facing in
our country, especially in Ontario, if I may say so, is some unique basic
rules and regulations for our grape and wine industry.
You look, like I said, at the data about tonnage. Appendix 2 is
Chardonnay, and it shows you the grape production from 1988 to 2010 in
Ontario, and some make sense. There is still an upward trend, I would say.
Some make absolutely no sense, and that is typically Canadian. If you go to
the vintage of 1993 or the vintage of 1995, and even I would say 2003, you
see dramatic shortage in production. This has to do with our almighty
Canadian winter. We go through severe climate changes, and here we are
disadvantaged compared to any other grape growing region in the world. To
put 15,000 acres in perspective, Germany, my native country, is one of the
smallest grape growing producing countries in all of Europe, and it produces
250,000 acres. If you go to one of the smaller if not smallest wine growing
regions in the United States, let us say Washington state, you might come up
with 18,000 to 19,000 acres.
In the perspective of the wine world, we are a relatively small, minor
factor, but I think there is a population we have. With the wine consumption
we enjoy in our province, we have a great future.
Coming to this uniquely Canadian problem of having a Canadian winter,
which makes us famous for icewine production, a good thing, is certainly
devastating for a grape farmer in Ontario, and that is what Mr. Ker started
talking about, innovation. If it is Brock, if it is Summerland, there was a
lot of hard work done, research done on what can or could be done for the
industry to avoid some of these disasters. We can go into detail on all
these uniquely Canadian systems, I would say, who help and assist the wine
and grape industry; and I think that is maybe my perspective of this group
of people here growing up in Europe. This is part of what the province or
the federal government has to do, provide an infrastructure that you can
prosper in business. In our region we are on the forty- second latitude on
Pelee Island, so we are fairly far south. It might have to do with climate
change, so you might have to get used to that. Yes, the climate in general
gets warmer, but the peaks and valleys will be much more severe, and we need
support to adjust for that. Big machines would be an answer.
Another thing, and there is clear evidence of this over the last many
years, is precipitation. If you see the pattern of precipitation, we do not
have drought situations like they see out West. We do not have it yet in
Ontario, but we sure have rain patterns that are absolutely unusual. You
have days and weeks where you get as much as 100 millimetres in less than 48
Again, infrastructure, with machines to do the inversion, to get rid of
cold air, blow the cold air out, and make sure warm air gets in, would help.
Also drainage, something almost every farmer understands, is even more
needed when we are talking about a special crop like grapes. Look at what is
available provincially and federally as direct subsidies and make sure these
things are maintained and extended.
I am sorry to say it, but again, with my European upbringing, I took the
liberty of showing you very clearly the input of domestic VQA 100 per cent
Ontario-grown grapes, B.C. and Nova Scotia grapes. We show the blended
sector in it, and this is the wine industry. I took the liberty of giving
you a printout of the Liquor Control Board of Ontario, LCBO. As we all know,
it is maybe the single largest buyer of alcohol in the world.
If you follow exactly on the point, I took the liberty of highlighting
the two pages. It is a little confusing, but the first page is 828. It shows
you, on the left upper corner, the red table wines. If you flip over, you
make it to 829, the lower left corner will show you the total in the right.
There is another page, just to confuse you more, 831, and that is a rosé
wine, and you get the total in detail.
All the rest that you see on all of these pages is our dear friends and
competitors who come to our monopolistic system, the liquor board system.
I do not know how to put it in perspective, but if my brother in Germany
has a gorgeous idea to take a couple million litres of wine off the German
table wine market and has the ability to ship it to beautiful Ontario, the
German agriculture ministry will fall over him to make sure he is not only
delivering it outside the EU. However, he will make sure that, for every
case he delivers into that system, there will be a hard subsidy coming with
every single case.
Even more evident in the last couple of years is Spain, one of the
largest, by area, wine producing countries in Europe, which has the ability
to get hundreds of millions of euros to go outside the EU and promote their
An amazing fact for people who do not work every day in this industry
like I do is that it is much easier for me to ship a case of wine into the
state of Michigan, or even into France for that matter, than to get into the
liquor board of Manitoba, the liquor board of Newfoundland, or the liquor
board, God forbid, of British Columbia. This is something an outsider will
We are highly regulated. We are part of the alcoholic beverage industry.
I do not think there is another industry that goes through so many audits,
provincially and federally, as we do. The major reason, as we all know, is
the tax we generate for the provincial and federal governments.
I think we have to understand that, yes, we can grow grapes and, yes, we
can make wine. We have shown over the last 15, 20 years on the international
scale that we can compete in Italy, in San Francisco, and even in Bordeaux
if we have to, but we cannot compete in our own marketplace.
It is absolutely beautiful to see how the province of British Columbia,
over the last many years, has had the ability to pull different channels out
for a relatively small industry, if I may say so. We have 15,000 acres, and
I think the province of B.C. might have 8,000.
Ms. Tyabji: Yes, 9,000.
Mr. Schmoranz: They have over 200 wineries, which shows you how
successful it must be to be in the wine and grape industry in British
Columbia. We have approximately 180 in Ontario.
Why is there such a discrepancy? It is fairly simple to explain. The
British Columbia government went full out to support their local industry
and provided a whole bunch of different channels to retail their product. We
have a channel, and that is my retail store in beautiful Kingsville, Essex
County. It is my only retail store for the winery. I have access to — and
that is why I put it at the top of my introduction — over 600 liquor stores.
We will be in direct competition with all Europeans. I am not even
worried about the 180 domestic wineries, because most of them, due to
economies of scale, will not even dare to go to someone as large as the
LCBO. Think about it. If you are a 5,000- or 10,000-case operator you will
not necessarily talk to Walmart. You would love to talk to a dépanneur in
Quebec or to a boutique store in downtown Halifax, but the opportunities for
us in this province are very slim to non- existent.
The markup, clearly understood and no question about it, is fairly high.
All of that goes back to the province, and rightfully so. Mind you, the
subsidies go directly to these programs that directly stay in competition
for the shelf space we are fighting for.
We cannot say tomorrow morning, this liquor board is so damn successful
let us give them another 600 stores. We give them another couple of miles of
linear shop space to be able to get on the shelf. This is not easily doable,
and clearly understood in a monopoly system.
I also showed you the grape prices. That is where the commodity starts.
You people just went through the announcement that we might get rid of the
Wheat Board as we know it out West. In our province of Ontario we still have
a grain board. It is very close, if not exactly the same, as a marketing
board. The marketing board in a real sense would control what comes in and
whether you are allowed to retail and sell merchandise in your own market.
In our case no one controls what comes in from Chile, South Africa or
Spain. We are between a monopolistic retailing system and a marketing board
system purchasing our fruit. I am sorry I did not bring even more data, and
I would like to take the opportunity. There was just a brand new KPMG study
out. If you do not mind, I will take the liberty of sending it to you later.
This is of utmost importance to us. We need all the research and we need
the support, especially with the unique climates and microclimates we enjoy.
If you look at the map between Prince Edward County and Pelee Island, I do
not know how many degrees, but it is easily between Alsace and southwestern
France in altitude, if you think about it.
We have unique needs and unique research that has to be done specifically
on site, and farming has to be supported. I am not too worried about the
competitiveness and sustainability in the production of wine. These wineries
are mostly fairly new and maybe more modern than the older co-op systems in
France, Hungary, or even in some parts of Mexico, for example. I am not too
concerned about that, but it is the basis of agriculture, simple things like
drainage, cold air movements, having access to virus-free plant material, or
even access to new varieties and in a timely fashion. All of these things
would be most appropriate and appreciated.
The industry is so small in the scale of the agriculture sector in
general, but the tax generated by us is fairly significant. I would really
appreciate if your chamber has a chance to get the message across, if you
could work from British Columbia to the Northwest Territories, all the way
to Newfoundland, and consider us not as an import into Nova Scotia or into
Saskatchewan, and that would be tremendously helpful.
I am sorry I was not better prepared, but I hope to provide you with more
information. Thank you very much for the opportunity.
The Chair: We thank you, Mr. Schmoranz. It was well said.
We will now hear from Mr. Pouliot, President of La Face Cachée de la
Pomme. Perhaps you could start by explaining the origin of your company's
François Pouliot, President, La Face Cachée de la Pomme: Hello and
thank you for inviting me. I will to try to give a good presentation even
though I was asked to appear before your committee on short notice.
I am from Quebec and I make wine, but with apples. It is a completely
different sphere of activity, although very similar in some respects. Face
Cachée de la Pomme was established in 1994, the year I decided to make wine.
At the time I said to myself that, since Quebec's climate is still very
cold, perhaps we could try making ice wine, not with grapes, but with
apples. Thus, ice cider was born from the idea of making wine with apples.
La Face Cachée de la Pomme is somewhat like the dark side of the moon in
that it is a side of the apple that we had never seen before because ice
cider had never been made before.
Ice cider was invented in Quebec. It is ice wine made with apples. Unlike
ice wine, outdoor temperatures between -20º and -25º are needed to
concentrate the apple sugars because apples are half as sweet as grapes.
However, we end up with characteristics similar to those of ice wine
produced with grapes. Ice cider originated in Quebec, where we have both
elements: very tasty apples and very cold winter weather.
I began making ice cider in 1994 as a hobby. In 2010, there were more
than 50 ice cider producers in Quebec. Ice cider is the best selling,
locally produced alcoholic beverage in Quebec. It represents 70 per cent of
locally produced alcoholic beverages sold at the SAQ. Alcoholic beverages
produced in Quebec represent only 1 per cent of SAQ sales. However, in 2000,
sales were zero and today they have risen to $14 million in the entire SAQ
chain. This is very good progress in the span of just a few years.
We have also established cider as a premium product. Up until about 15
years ago, apple wine or cider was considered a rather second-class
beverage. Today, ice cider is recognized throughout the world and at
international fairs and competitions. A few years ago, we did not fit into
any category. But we have opened doors for a number of producers.
Today, there are ice cider producers in Ontario, Nova Scotia, and I
believe in British Columbia as well. The industry is starting to take shape.
Our ice cider, Neige, has even been served at El Bulli, a restaurant in
Spain considered to be the best in the world. When President Obama visited
Canada shortly after he was elected, he was served Neige ice cider in
Ottawa. Last summer, when Prince William and Princess Kate visited Quebec
during their tour of Canada, they were also served Neige ice cider. Thus, it
has truly become a source of national pride.
Ice cider is found in 50 countries. Naturally, the majority of sales
continue to be made in Quebec. We now have recognition; Quebec law now
contains a definition of ice cider, which is regulated by Quebec. The
definition is in my presentation.
About two years ago, we applied for recognition of reserved designation.
In Quebec, we have CARTV, the Conseil des appellations réservées et des
termes valorisants. I believe it is a first in North America. We should
obtain recognition of the designation in about 18 months and it will be a
big advantage. We have made great progress in 15 years.
We have created a new association that represents only producers of ice
cider, as this is a distinct category of products made in Quebec. It is now
very important that we develop this product and market it internationally.
By the end of next summer, we will have established a domestic and
international marketing and development plan for the next five years.
As the other witnesses mentioned, it is very difficult to sell in other
provinces. La Face Cachée de la Pomme products are sold in 25 countries, 50
U.S. states, France, the United Kingdom, Spain and Japan. But selling to the
rest of Canada is very complicated. I do not know why. We sell a small
quantity in the other provinces, but it is really very little and it is
very, very complicated.
And when we do go to other countries, we are very small in comparison to
the associations that represent port, cognac and sherry in Spain, which are
our competitors. I believe that we need assistance to develop both the
Canadian and the international markets, which have huge potential.
The other reason why we really need the federal government's help is
because once we receive our reserved designation, we will have to protect
it. Other countries are now beginning to take an interest in our product and
copying us. There are some producers in Vermont and Wisconsin, in the United
States, as well as in Denmark, Sweden, Switzerland and Germany. There is now
a producer in Spain, who wants to copy us, but Spain does not have our
climate and it would not be a true ice cider.
Although we use apples, we would also like to be considered wine
producers in order to obtain your support to help defend our industry and
the designation in Canada and abroad.
I would have liked to have suggested other ways you can help, but I did
not have enough time to complete my research. Once we receive our
designation, helping us to enforce its proper use will be the major
When I arrived in Hemmingford, the apple industry was truly in decline. I
purchased a five-hectare orchard and we planted 16,000 apple trees. We now
cultivate 50 hectares. Almost all our neighbours kept their apple trees and
others have started replanting. It has boosted the local economy.
My company employs 22 people; when I started out, it was just my wife and
I. In addition, some neighbours are following our lead. This is creating a
solid regional economy.
We also researched apple cultivars. At first, we thought that all apples
drop off the tree. I now have approximately 10,000 trees of apple cultivars
that do not drop their fruit. Just look at these photos and you will see
that this is not folklore. I really do have parcels planted with apple
cultivars that do not drop their fruit. We finished harvesting the apples
this weekend, at the beginning of February, and the apple trees were still
laden with fruit.
We worked with research stations in Saint-Jean, and I also discovered,
quite by accident, cultivars that do not drop their fruit.
Therefore, we would also like support for research and cultivation. That
concludes my presentation.
The Chair: Thank you very much, Mr. Pouliot. That was a very good
presentation and we appreciate it.
Hanspeter Stutz, President, Domaine de Grand Pré: Thank you for
the invitation to appear before the committee. As a representative of one of
the youngest wine regions here in Canada, I really appreciate this. I bought
a winery, or more or less what was the rest of the winery, in the early
1990s. It was the oldest winery in Atlantic Canada. We had four wineries. We
had a grand reopening in 2000. We changed everything in Nova Scotia. To be
fair, we could not drink the wine before. Now we are 16 wineries in the last
It is a tough challenge and topic to talk about the subject of innovation
in agriculture only knowing the topic and not the goal of your committee.
Innovation in agriculture is such a huge sector for a presentation of only
You are asking to hear something from the producers' perspective, but it
is very important to include the consumer in this process. I assume that the
Canadian agriculture policies and strategies should guarantee both an
appropriate food production and a sustainable production community,
including measures to deal with climate change, water balance, bioenergy,
and biodiversity, to name a few.
I have observed that the consumers are looking for higher quality and
standards and at the same time products that are affordable for all
Canadians. These standards should be based on geographic origin, traditional
ingredients, processing with the goal of organic methods of cultivation. The
result will be that these products made in Canada can be successfully sold
in the domestic and international markets.
A federal initiative for innovation in agriculture, food processing and
manufacturing would bring a better and higher productivity and at the same
time a reduction of some negative environmental impacts. However, before we
can launch a profound discussion about innovation, we have to ensure that
the consumer plus the farmer pull in the same direction. We have to secure
the acceptance from both groups.
The following questions are relevant for consumers. Which models of
perceptions and attitude are predominant and which areas have a potential
for an improved acceptance? For the farmers the following questions have
high priority. Which models of perceptions and attitude are relevant to
adopt innovation in their own farm operation? How relevant are these changes
regarding the decision making and execution process for the management? What
will be the impact and consequences for the entire domestic farm industry?
In dealing with innovation in agriculture, we have to be aware of the
interaction of the consumers with the farmers.
From my point of view, this is a main factor for understanding and
accepting the innovation in agriculture. It is important that consumers are
comfortable with innovation. That is the highest priority for a consumer.
Therefore, producers play a vital role in the food chain and have,
therefore, a great responsibility.
Could this cause some uneasiness? Some of the potential negative impacts
of innovation in agriculture are industrial agriculture, intensive livestock
farming, the use of chemicals, gene-manipulated crops, et cetera. I also
feel that there is a lack of interest and fascination as far as innovation
in agriculture goes because innovation and technical process in agriculture
have no direct connection to the daily consumption of food. Innovation is an
abstract change to which the consumer may not necessarily relate unless it
Technical innovations are not the ideal solution because they do not
comply with the image the consumers have of "close to nature" agriculture.
These are some very general thoughts of the consumers' aspects, use and behaviours. There is another view of innovation in agriculture, more based
on product development or the whole value-added aspect. There will always be
a huge discussion between product development and innovation, but let us
look at this in a bigger picture.
If I give special tours at the winery for students from the community
college, I always point out that the two biggest issues facing the world in
the next 100 years are water and farmland. Are the young farmers aware of
this? For me, the highest priority should be education in agriculture. Very
often education falls short when learning by doing and sticks to the
practice of the past without regard to change. In my opinion, education is
the base for creative and innovative agriculture.
Another aspect is to learn what the latest development is in farming and
the whole food chain. Farmers should be able to travel, visit interesting
shows and fairs, and have the chance to experience and practise in
interesting regions outside of Canada. The same would apply for the teachers
of the community colleges. The planet is small, and we need to keep in touch
with all of it.
For example, our company is producing a higher-end product based on
apples. I recently brought a bottle to Switzerland where I was asked which
kind of apples I was using. We are using McIntosh and Cortland. The reaction
was that most Swiss producers eliminated the Mac orchards years ago because
the consumers were not into Mac any more. In Nova Scotia, 50 per cent of all
apple trees are at this time still McIntosh.
We need to encourage farmers to be more innovative and creative, to go
out and check trends and reward them for innovations. I do this regularly
for our companies in Europe, the United States or other countries.
Parallel to this personal innovation, the research station in the
different provinces should play a more important role for the farmers. They
would also be great instruments in supporting immigrants who want to do
something different and new for the region. Unfortunately, no one has come
up with this idea. They need incentives to look for initiatives that will be
successful and contribute to our economy.
A local farm area in Nova Scotia disposed around 50,000 acres of unused
farmland. The prices are still reasonable because there is no shortage yet.
The opportunities in Nova Scotia are obvious when you consider the following
comparison of the cost of land. One acre of farmland in Nova Scotia costs
between $2,500 and $4,000. One acre of farmland in Switzerland is between a
rocketing $30,000 and $50,000. Of course, we could grow vineyards along the
North Mountain, about 50 kilometres in length, but the question would come
up very quickly, where could we sell all this additional wine with the Nova
Scotia population of approximately 1 million? This point is underscored by
the present barriers we face as wine producers to sell our products in other
It is easier for our winery to ship 20 cases of wine to Beijing, Germany,
Dubai or Switzerland than one single case to our neighbour New Brunswick.
Surely this is counterproductive to our joint goals and objectives. We are
in the 21st century, and we need a completely open domestic market for
private use and commercial trade with respective licensees. The Agriculture
Committee is challenged and should take action to change this antique modus
operandi. We should be one proud nation of wine producers, think Canadian,
and come out of the provincial boxes.
Furthermore, we should limit the import of foreign products and
concentrate on the marketing for our own. No wine region in the world has
this policy, and we are the laughingstock of many wine producing countries.
We should strive to be world-class, but with our present policies limiting
our marketing opportunities, this cannot happen. Your help is needed on this
issue. The innovative and creative small and medium-sized wineries have no
chance in this current environment, and the big guys are clearly laughing at
us. Canada has outdated rules and regulations where wine importing, wine
growing, winemaking, and wine marketing are concerned. Our competitors
abroad could not be happier about all the red tape we are facing. The red
tape has to go. The wine industry in Canada has changed dramatically and has
the potential to continue to change, but we need to change the rules.
Allow me to address another issue in regard to innovation concerning end
consumers. Grand Pré is producing a hard apple cider, which wine and food
critics around Canada consider the best cider made in Canada. It is made
from 100 per cent apples from the Annapolis Valley, where our winery is
located. We pay between a 100 and 150 per cent better price to the local
farmers for apples than another local juice producer owned by a Quebec
company. We just started selling our products in the best and largest
culinary store in Europe in the German capital of Berlin. We have sent two
applications to the LCBO for a listing of our product, and we have been
rejected twice. LCBO has not one product of this quality in their stores.
Most of their products have much higher alcohol volume — 85 per cent made
from Chinese concentrate and water — and the largest importer is a U.K.
company who is selling their product in the United States. Being an
industrial Swiss Canadian entrepreneur, this approach to marketing surely
must be counter to our long-term goal of producing and marketing the
highest-quality Canadian products.
As a representative for our industry, I am appealing to our common goals
of strengthening the "Canadian" in our Canadian market. The bill for
changing the interprovincial barriers for private liquor shipment within
Canada will be a good start. This would at least give us a level playing
field. Do we not deserve that? Please strengthen our domestic industry and
give foreign producers second priority. With an open domestic market we will
see a higher acceptance for innovation in our country.
The Chair: Well done, witnesses. We will continue with the
questions from senators.
Senator Plett: Thank you for your great presentations. I am sure I
could sit here for 45 minutes and ask questions, but clearly in light of our
time I will try to move it along and ask a few.
First, on Bill C-311, you all referred to the problems with provincial
barriers and expressed concern. We have discussed that in the Senate here
before. We have had witnesses and discussed that issue and, as you say,
there is a bill there now. We are fairly sure that there is support for the
Is that 50 per cent of your problem, or 25 per cent of your problem? How
far are we going to move? Anyone can answer.
Ms. Tyabji: It is definitely a very important part of the smaller
producers, which is a large number of wineries across Canada. Shipping
directly from your wine store or cider store to a consumer anywhere in
Canada opens up the market, especially for the small farm agricultural
producers. As you get bigger, you are looking for greater opportunities all
over the world, but it is definitely a big help to the smaller ones.
Mr. Pouliot: There are two kinds of barriers. We cannot ship to consumers
across Canada, so that would help the small wineries. It is also really hard
— almost impossible — to sell in the liquor boards of the other provinces
because we are considered to be imported wine or something. We are not
Senator Plett: If I want to buy a bottle of Mission Hill in
Ontario, it is possible for me to do that though?
Ms. Tyabji: Not directly. You would have to go to the LCBO and
say, "I want a case." If you had visited Mission Hill in the Okanagan, you
could not have said, "There are three products I really like and I would
like four bottles of each," and do that through the LCBO, unless they have
it on their shelf. You would want to call up the winery and say can you ship
me this case of mixed products, but you cannot right now.
Mr. Ker: To clarify, the limitation of buying foreign wines is
based on what the LCBO is willing to list, maybe not exactly what you want.
One of the dilemmas with the LCBO is that they demand large volumes of wine
so they can satisfy shelf stocking across the province. Many small producers
cannot produce that volume of wine to send to the LCBO to get shelf space.
As a consumer, if Mission Hill is willing to sell that particular wine, you
are in luck. However, if you liked a Sauvignon Blanc and there is not enough
volume of that available by Mission Hill for Ontario, it will never get sold
in Ontario. You are saying, "Why can I not buy from the winery directly?"
You are not allowed, and that is the dilemma right now. It is a volume
thing. Large-volume producers are producing large amounts to put it on the
shelf. As the comment was made, if you are willing to buy it because you can
produce enough to satisfy Walmart, it is one thing. However, if your
intention is not to satisfy Walmart as a consumer, you are out of luck. It
is what they have on the shelf.
Senator Plett: Will Bill C-311 go far enough?
Ms. Tyabji: That is a big part of opening the markets to the
wineries across Canada.
Mr. Schmoranz: It is the right first step for 180 wineries. Many
will be in the neighbourhood of making 5,000 to 10,000 cases. For them to
have 20 per cent of their business shipped direct would make a tremendous
difference. Always keep in mind that in the beautiful large country you live
in, it is not easy to deliver a case of wine from Kingston, Ontario, to
Thunder Bay. There is quite a bit of cost involved, but it is a great first
step. It would absolutely make a huge difference, especially for the more
Mr. Ker: I was in British Columbia in the summer, and a dilemma
was that a tourist had travelled from Alberta to British Columbia and wanted
to buy wine. They had a small vehicle and they said, at 40 degrees Celsius,
I do not want to put three cases of wine in my car to be subjected to the
heat to take home. Can you ship it to me? They lived in Alberta so they
could not do that. It was a severe restriction for that winery. There was a
sale of three cases of wine that was stopped because of the inability to
take it over a provincial border.
Senator Plett: Yet when I was in Australia I shipped a case of
Mr. Ker: I just came back from three weeks covering the Australian
wine industry and I could ship all kinds of things back to Canada if I
wanted. However, for me to get it back from Nova Scotia — I have been down
to deal with Mr. Stutz and others — it is just horrific.
Mr. Stutz: There is another aspect. We know from the Nova Scotia
side that a lot of Maritimers are working in Alberta and B.C., and they want
to have their wine. It is not only the wine aspect; it is also the tourism
aspect that is part of this whole problem.
I think for a small winery it could be 10 per cent, and 10 per cent on
the retail side is quite a number for a small winery. For 7,000 to 10,000,
you get 1,000 cases. That is retail price and not marked up crazy through a
liquor board. That is one of the key elements.
Perhaps you know this, but we have an absolutely great situation in Nova
Scotia with our liquor board. I know some wineries in Ontario dream about a
situation like this. The markup previously was 133 per cent. They came to my
winery and said they needed my wine in their store. If you pay me $14.50 per
bottle retail, what do I get for it? They told me $4.90. You mean you sell
it for $14.50 and as a producer I get $4.90? Yes, that is the regular
markup. I said forget my wine. What do you mean forget my wine? You will
have no wine from Grand Pré in your store, as I cannot produce a high-end
product for $4.90.
After many discussions and of course the economic impact study with
agriculture and tourism, it was then very clear, and the House of Commons
went through this. Since January 1, 2008, we now get a markup of 43 per
cent. At 43 per cent, the same wine that sells for $14.50 in the store I now
get $8.60 for, and that is acceptable, that is fine, that is great because
they take care of all the logistics. I can deliver it to one warehouse. That
is huge. The impact is huge if you are in, but not with this high markup.
His problem is not only not to sell to liquor stores in other provinces but
also the crazy markup for domestic products.
Senator Plett: We could go on on that topic forever. I want to ask
one more question in the first round, and that might be all I get.
You are asking for a $10-million annual grant. In the benefits, you have
listed 1,700 new full-time jobs and $80 million in federal revenues, but
here there is $230 million in provincial tax revenues and a total of $340
million in value- added economic activity, which obviously would be both
federal and provincial. Are you asking the provinces for grants as well?
Clearly, I see the provinces having a much bigger economic gain here than
the federal government, so I am assuming you have gone to them and asked
them for the same amount.
Mr. Schmoranz: You have absolutely hit the nail on the head. I
think we all have to accept this is by far more a provincial matter than
federal. There is no doubt in my mind. You can maybe somehow help us open
Senator Plett: We would be happy to lobby the provincial
governments for you.
Mr. Schmoranz: The amazing part is in my industry in Ontario, I
have to answer to six different ministries. If you are a grain farmer, you
talk to the Minister of Agriculture and things will happen. In my case, in
the grape growing industry, one of the ministries I talk to is the Minister
of Finance, who is also, believe me, very well known by the Liquor Control
Board of Ontario. We always find ourselves in predicaments.
I think it was very well put that these markups for outsiders, 110 per
cent, is almost like gambling money here. This is common. This is not
uncommon. Let us be truthful about that.
What is very uncommon is if you are a winemaker in Washington State and
you ship to the State of California, which is much more populated and is
where the business happens, you would have to go through the distributor and
the retailer, and you would pay a higher markup by the time it hits retail.
When you are producing in California and you want to sell your wine in San
Francisco, just load up your pickup, drive down and drop it off at the
We do not have the ability in our industry, even in our own backyards, to
talk to a retailer, like Mr. Stutz said, with a reasonable markup. We are
considered exactly the same as an import, or even worse. Just to give you an
idea, we cannot play a game where, I can give you some beautiful names out
of Spain, for example, would come into the Ontario marketplace and say they
are releasing two new products and would happily put half a million dollars
behind it to ensure that every shelf is decorated for the next six weeks in
your system. We cannot play that game.
It is a pleasure to talk to Mr. Stutz when he tells me what his markup
is. I love the people from British Columbia; they not only have a liquor
board that is very successful, but they have their own VQA stores; they
retail in licensed establishments and direct shipment to customers.
For us, when we talk about B.C., and I think it is a very good
comparison, it is nice to hear what an agricultural hectare or acre goes for
in Switzerland. If he sells his for $2,000 in Annapolis Valley, maybe $3,500
where he comes from, in the Niagara Peninsula it would maybe be worth over
$10,000 an acre, and in my little area in Southwestern Ontario it is still
around $3,000, maybe $4,000 because of commodities in general. If you go to
beautiful British Columbia, you are almost at a Swiss-like level.
Ms. Tyabji: To answer the $10-million question, the reason we
asked the federal government for that is that five years ago they increased
the excise on the blended wine industry: $10 million came out of our
industry and went into the federal government's pockets, so we are asking if
we can please have it back to use it to build our industry back up again.
Senator Plett: Good luck to you.
Senator Mercer: Thank you to everyone for being here. I live not
far from Mr. Stutz in Grand Pré; I am up the road in Mount Uniacke.
Senator Plett just left the room, but I did not hear the word "grant."
I heard "$10 million" as an innovation fund. That is what I heard. I did
not hear anything about a grant. I did not hear anything about taking $10
million and putting it into the pockets of the wine producers across the
country. I heard about $10 million being invested in the wine industry in
all the provinces of Canada that produce wine. We want to have that clear.
It seems to me that we have to drag this country kicking and screaming
into the 21st century with respect to interprovincial trade. I think that
while this makes so much sense in this industry, it is the unintended
consequence where we are going to have the problem because if we were to go
ahead with this, someone will find something else, such as we want to limit
A number of years ago, this committee did a study on value-added and we
concentrated heavily on the wine industry and had great cooperation from
people across the country to tell us about it. We were talking about
value-added in all farming, but particularly at the farm gate. This industry
is famous for your value-added because you have wine sales, grape sales and
retail sales plus restaurants and promotional products sold at all of your
What is the revenue breakdown with respect to wine sales, grape sales and
generally retail sales, whether it be food or paraphernalia?
Mr. Schmoranz: I do not have the KPMG study in my hand at the
moment, but I will forward it to you next week, I promise you. To make it
simple, if the average price per tonne of grapes in British Columbia is
$2,000, or $2 dollars per kilogram, the average price in Ontario would be
about $1 or $1.20 for Class 9 and below. Out of that $2 per kilogram of
grapes, you make approximately $3 on bulk, open wine. The package is pretty,
with pretty labels on it. Get the tourists in and hopefully try to sell it
for $6, and the liquor board turns around and puts it between 65 in our
province and 110. I think in Quebec it is still close to 100. That is very
common. It is not uncommon. This is the value-added.
I am glad you mentioned this. I think this study shows it much better
than I can explain it to you. It is not about a bunch of greedy, nicely
dressed and well-manicured Chateau wineries asking for handouts.
There is an effect on the region for tourism just like the difference of
cash crop farming and long-term farming, like grapes or apples, for example.
The return on an apple orchard is not the harvest after planting, like
soybeans and corn. The year return on a fairly large investment in grapes,
as much as $20,000 without the land, is in the neighbourhood of 12 to 15
years if you are a good producer, and the lifespan of a vineyard in our
severe climate may be 20, 22 years. We are in the business for the long
term. Our approach is working hard to get more customers, get people in.
Where in the agriculture industry do you have a chance any more to see
the piglets and the finished sausage in one place? We grow the grapes, we
make the wine, we put the label on and we present it to the customer. Very
few agricultural commodities have so much direct involvement to produce and
bring it right to market. It is unique.
It sounds a little bit bombastic or whatever to say "wine culture."
There is a culture to it. You cultivate the landscape. The landscape changes
its form because of growing grapes. Conversely, it could be yellow one year
because you do sunflowers and then you do wheat. It will change. However,
with grapes you have to change the whole landscape.
We are asking for long-term investments. I want adequate drainage. We
talked about simple things like cold air movement equipment of some kind. We
need basic infrastructure, not the latest schnick schnack and the latest
little innovation from Japan. We need solid infrastructure investment. In a
winery it could be as simple as stainless steel tanks, as unromantic as it
sounds, to looking after your base water treatment. We do not only
contribute to the provinces highly. In my particular case, in a little
winery of 400,000 cases, we easily pay $140,000 in tax to the community.
Yes, we are using the treatment centres. We need basic infrastructure money.
Mr. Stutz: You talk about value-added. It could be either an
economic impact, or value-added I see two more ways a basic product than
what we are doing. If we go back to early innovation and so on, I went to
the Costco market in Nova Scotia. I found a litre bottle of apple juice from
Switzerland. What is apple juice from Switzerland doing in Canada? That is,
for me, a bad sign for the industry that means they cannot produce a
high-end apple juice here. That is wrong. That is a very simple example, to
say, wow, in a Costco market, apple juice in a glass bottle from
Switzerland. That is wrong. That is wrong for the industry. That is wrong
for the fruit growers and manufacturers. What are we doing here?
Senator Mercer: I want to go back to the discussion about the $10
million in an innovation fund to help develop the quality, and your term was
"culture" around it. I want to switch it to retailing of your products for
a moment. In many provinces, including my own, the sale of alcoholic
beverages is tightly controlled by the provincial government through the
liquor board, but in several provinces it is not as tightly controlled.
There are private stores in Alberta, Saskatchewan, some small ones in Nova
Scotia, but not many, and I think in Quebec as well, and British Columbia.
Where do you want to see that side of the debate go? In every province in
tough economic times the government talks about selling off their liquor
holdings because they see they can still get the taxes but not have the
problem of managing the liquor outlets. Where do you see is the best place
for you to market your products? Would it be via private stores or through
the government-controlled stores? We all recognize that the LCBO is the
granddaddy, the big one of them all.
Mr. Stutz: Finally, the retail price is the best in the sale over
the farm gate. That is the best sale. If we have a private wine store like
we had before in Nova Scotia, they do their job, but we are not talking
about volume. They bring in much more wine from outside the country rather
than going with Canadian wine. I would love to see a Pelee Island high-end
product wine in Nova Scotia. That is not a competition to me, but he cannot
sell a high-end product with this amazing markup system. If someone says,
"Hanspeter, if we opened the market, you would have competition," that is
not the point here. That is not the point. You have to take care.
That brings the quality up in each province, in each wine region. Grand
Pré will be the next UNESCO World Heritage Site. What do you think? Everyone
who comes to Grand Pré will want to buy a bottle of wine. Do something for
this. That is the point. I do not think the private wine stores matter for
us. It is the same markup like the liquor store. In our case, it is exactly
the same situation.
Mr. Pouliot: I can only speak about Quebec, but I imagine that the
situation is quite similar in Ontario. Compared to what is done elsewhere,
the SAQ has a big profit margin. However, the SAQ chain has 405 stores.
Thus, selling a product in a chain with such experience is really fantastic.
It is great when you have a product and the volume to sell it in that kind
of chain. I have seen it in other countries. The biggest chain in the United
States has 69 stores in California. However, they do not all coordinate
their product promotions. I think that is good. Obviously, the high profit
margin is a big barrier.
Senator Rivard: It was very interesting listening to you. As the
Romans would say, time flies, and we have little time left. I am sure a
number of other committee members would like to ask some questions. We spoke
a great deal about marketing and then tariff barriers. We know that Canada
is conducting intense negotiations with the EU to open up export markets.
Have you been consulted yet by Canadian negotiators? We will recall that,
when free trade talks with the U.S. began, the Canadian government appointed
people to meet with representatives from the manufacturing industry, whether
it was the automotive or any other industry. In your industry, Quebec was
consulted no more than others, and in Quebec a former premier, Pierre-Marc
Johnson, was appointed by the provincial government to monitor trade
Do you believe that the market would open up if tariff barriers could be
eliminated? Could we discover a market in Europe — even though competition
is stiff there because Europe is a major wine producer — for ice cider in
Mr. Pouliot, do you think there would be a huge market for you? You
mentioned that other countries produce ice cider. Do the profit margins,
even with shipping, make it worthwhile?
Mr. Pouliot: That is a very good question. We really believe in
exporting, whether to other provinces or Europe. Europe has huge potential.
I travel there three to four times a year. The response has been excellent.
Our challenge is to market and promote a new type of beverage because ice
cider is made with apples, and that is new. We are operating in the world of
Our biggest challenge is raising our profile. We have penetrated the
European market, but I hope this will not close doors for us. No, we have
not been consulted.
Senator Rivard: Has the production of ice cider surpassed that of
traditional apple cider?
Mr. Pouliot: No, not yet. In the 1970s, in the heyday of cider,
sales rose to about five million litres in 1975 and then dropped to
practically nothing in 1980.
Today, production is about less than one million litres. However, over
the past six years, production has risen by 20 per cent to 25 per cent per
Senator Rivard: It is true that marketing has a lot to do with it.
You spoke about the 1970s. I remember that, when apple cider production
began, producers enlisted Marc Laurendeau to advertise it and the market
exploded. If you do the same thing for ice cider with Bonhomme Carnaval,
that will be it!
Mr. Pouliot: The market is far from being saturated. There is room
for it to grow.
Senator Rivard: I wish you all the best. I believe this sector has
a big future in Quebec. I have had the opportunity to try it, and it grows
on you quickly.
Senator Mahovlich: When I was growing up, my dad made wine with
grapes from California. He made three or four barrels every year. I do not
know if families make their own wine any more. It was a lot of work. He had
to have a press. Friends of his made a press and a crusher. It was very
I learned to drink wine and got very interested in wine. I went to the
Napa Valley one year and discovered a nice bottle of wine. When I went to
New York, I searched for it. The LCBO used to carry it. That winemaker used
to win awards. He would enter contests in Paris, and now that wine costs $80
Has Canada ever developed a wine that wins major awards in Europe?
Ms. Tyabji: Yes. Our products have won best wines in the world.
Jackson-Triggs' Shiraz won best wine in the world in Australia, of all
Senator Mahovlich: My wife drinks an Australian Shiraz. It is
probably cheaper, too.
Ms. Tyabji: I know you are wondering why we do not promote it,
market it and get the message out. With the resources that we have, we do
our best to get these messages out. The resources that the wine industries
around the world have trump ours. There is no limit to what their countries,
their governments and their agricultural industries put into their
industries to get into our markets in Canada, and we just do not have the
same resources to compete.
Mr. Pouliot: When the Australians, the winemakers from the Côte du
Rhône and the rosé winemakers from France come here, they have big budgets
to promote their wines, and that is just for Canada. It is the same when
they go to the U.S. In France, Sopexa helps to promote French wine outside
Senator Mahovlich: We do not do enough to promote Canadian wine.
Ms. Tyabji: Absolutely.
Senator Mahovlich: Yet we have quality wine.
Ms. Tyabji: We have some of the best products in the world. We win
awards for them.
Senator Mahovlich: When I am holidaying in the United States, I
can get good-quality wines in a grocery store. I do not have to go to a
liquor store. Do you think people here would want this? Could a fellow win
an election on this?
Mr. Stutz: You could win an award with that.
Senator Mahovlich: I have only one year left here. I have to do
Mr. Ker: To put this in perspective, for a number of years in
Ontario you could not buy alcohol on a Sunday. You could not go to the LCBO
or to the Beer Store. Amazingly, Ontario wineries were granted Sunday
licences. Lo and behold, the LCBO looked at their wine sales, which had
declined slightly, and saw the phenomenal amount of sales at the wineries.
Amazingly, there are Sunday sales at the LCBO because they found out that
the consumer wanted greater access to it.
I believe that not only in Ontario but also in British Columbia and
elsewhere the consumer wants reasonable access to things. I hope you do not
decide that it needs to be all or none, in other words, all liquor board or
all private outlets. Work done at the university shows that there is room
for both entities, that there can be private store sales combined with
government store sales. The idea is to increase access for the consumer.
That is not to advocate alcohol consumption. It is to give the consumer
the opportunity to purchase alcohol when they wish. You will find that
consumers in Ontario and B.C. are very loyal. If Canadians have the
opportunity to buy a Canadian product that is competitively priced, they
will purchase it, but when they cannot access it easily, they will go to the
easiest point of access and buy something else.
We are proposing not only looking at taxation but also looking at the
modes of access to things that are Canadian- made that people can support as
To follow your line of thought, in Ontario they created satellite stores
in smaller communities. They did not have the same selection as a full-sized
LCBO store, but now you can buy beer and wine at those outlets in small
communities. Even the LCBO has recognized that they need to provide better
A great dilemma that drives the Ontario industry crazy is that in
Niagara-on-the-Lake, where they have 2.5 million tourists a year, they
cannot open an Ontario VQA wine store to promote and sell Ontario and
Canadian wine. They are not allowed to do so under the current situation.
That is an example of where we get caught going from one extreme to the
other. We need to realize that there is room for the distribution of both.
The smaller manufacturers would take advantage. Some boutique stores might
open that would buy from the smaller manufacturers, because they would not
have to provide the huge volumes of wine required by the LCBO. They would
not be stuck in the situation of having a small premium vintage section
where they buy fewer cases. Those are generally the upscale wines, which we
are doing well with, but there are also a large number of Canadian wines
that are reasonably priced. Please put that in perspective.
There was a question about value-added. The Ontario grape and wine
industry alone provides roughly $600 million annually of direct and indirect
benefits. That is a huge dollar markup from that $78 million worth of
grapes. We pay $100 million in salaries and wages. Those people pay out of
their income back into the government purse. Anything that would expand the
number of employees is good for everyone.
Mr. Stutz: Your question goes much deeper. The liquor boards are
the cash cows for the provinces. You have to realize that I am coming from
Switzerland. The market there is doing very well and the economy in
Switzerland is doing very well because we do not have a monopoly situation.
If we privatized the liquor boards in all provinces, I am sure that we would
need double the amount of educated people selling alcoholic beverages, and I
am sure the provinces would earn more tax income than they do with the
system we have now.
Alberta is doing very well with its more liberal system. There is still
the control, but it is all about control mechanism. The most ideal situation
is to take this away from the provinces. We know the history of prohibition.
Take this away and bring it here to Ottawa as a federal issue.
Ms. Tyabji: In British Columbia, we have a liquor board system. I
agree with you that from a suppliers' perspective it is a lot better,
especially for small suppliers, to be able to access a large distribution
channel for products. We also have a private LRS system, which, from a
supplier's perspective, can be a little bit more difficult to manage if you
are a smaller supplier. There are two sides of it. The B.C. liquor
distribution branch looked at what worked for both and they looked at the
smaller stores and they set those up as private individual stores, and kept
the selection and the wider varieties and access to a lot of the smaller
suppliers in their bigger stores. That works quite well.
Senator Nolin: Mr. Pouliot, you and your wife are to be
congratulated for taking an idea and bringing it pretty much to fruition in
less than 20 years.
Mr. Pouliot: We are not done yet!
Senator Nolin: That is why I said "pretty much." You talked
about the association of ice cider producers that you and your colleagues
have established. You mentioned a five-year plan and, in one of your
answers, you talked about why research and innovation are important to you.
In any event, innovation is one of the main reasons why you are here. You
took an idea and you made it a reality.
I would like you to talk about the importance of research in your
five-year plan, and how the federal government can support your plan.
Mr. Pouliot: We have a five-year marketing and development plan
for the ice cider category. First, we have to market ice cider, both in
Canada and Quebec. We thought that everyone in Quebec was familiar with the
product. However, when we spoke to consumers, we realized that half of them
had never heard of it. This is actually promising because there is a great
deal of potential. The five-year plan will develop this category of product
in Canada and around the world.
The main producers got together and hired a fairly well-known Quebec
marketing firm to help us put together a plan. It will be finished by
mid-summer and then it will have to be implemented. The best example is that
I have been participating in Vinexpo, the world wine fair, for just about 10
years. A few years ago, I was in the Canadian pavilion. This year it was
just me and a partner; another colleague was also there with a partner. We
do not have a critical mass. The idea is to get together, to form a critical
mass, and to introduce Quebec's and Canada's ice cider producers. At one
time, Canada had a major presence at international fairs; but that is not
the case today. I believe this is mainly due to the fact that we do not
receive any assistance. For that reason, we told ourselves that we would
take the lead, come up with a plan, and work together to develop the market
because, at present, we are all working on our own.
Senator Nolin: When you say that you all work on your own, I
assume that you must be thinking about developing other products. I would
like you to talk about innovation and how a partnership could be forged with
the federal government.
Mr. Pouliot: We are developing other products, but all in
connection with ice cider. This product has the potential for international
recognition. We have now developed a sparkling wine, the first dessert wine
in the world made with a traditional method.
Senator Nolin: You have to invest money, time and effort to
develop a product such as that. I assume that you and your wife are driving
these efforts. Is this something the government could help you with? Look at
what they are doing with wine; there is practically a university doing just
Mr. Pouliot: We could use some help in that regard, but that is
not our major investment at present.
Senator Nolin: Your foreign competitors seem to receive support. I
am not speaking specifically about ice cider competitors, but about products
that compete with yours on the consumer's table.
Mr. Pouliot: They receive a lot of support to develop their
category of products.
Senator Nolin: Could you take a few minutes to explain to us what
kind of support they receive. Do they receive assistance for exporting and
marketing their products?
Mr. Pouliot: They receive support for exporting and marketing.
Take the Rhône wines, for example. When they are put into the SAQ, they have
a lot of support from their region or their government.
Senator Nolin: How does it work? Does the foreign government pay
the SAQ directly?
Mr. Pouliot: For example, they will put together a half a million
dollar program for newspaper advertising. Producers work with their own
agencies, but they have a shared advertising budget provided by their
government. It is not the individual producers who pay to promote Rhône
Senator Nolin: The conclusion I draw from your presentation, if I
may, is that it is all well and good for us to be studying research and
innovation, but we must also consider the marketing side.
Mr. Pouliot: Yes.
Senator Nolin: The government must help with marketing. That is
what I am hearing from everyone.
Mr. Pouliot: That is right.
Senator Nolin: Now, with regard to our relationship with the
provinces, you will understand that we wholeheartedly support you. However,
we live in a federation and it is part of federal-provincial relations.
Nevertheless, we will do what we can.
Mr. Pouliot: With respect to international recognition, and
protecting and defending our industry, that is nevertheless a federal
Senator Nolin: Yes, but there are trade barriers and obstacles
established by various provincial marketing agencies. It is not easy.
Mr. Pouliot: That is right; it is not easy.
Senator Robichaud: I would like to add to what Senator Nolin was
saying. I realize that, here, we are interested in discussing innovation and
research. But that is not the pressing problem for the industry. Am I right?
You do some research, but marketing is the main issue.
With regard to marketing, will your program target the province where you
live because you cannot sell your product in other provinces? Have I
Mr. Pouliot: No. The day we take on the international market, we
may be joined by producers from Nova Scotia or Ontario. That is not a
problem. I believe that, in Canada, if the program helps Quebec producers,
it will also help Ontario and Nova Scotia producers. We will all have the
Senator Robichaud: On the issue of interprovincial trade, we just
heard the example of tourists from British Columbia who wanted to buy and
take home three cases of wine. However, it was summer and it was too hot.
The law does not allow the wine to be shipped. Is that right?
Mr. Pouliot: Technically, that is correct.
Senator Robichaud: That is also the case in Nova Scotia. They have
some very good wine. But if you want to transport it, do not say anything.
Mr. Pouliot: During the SAQ strike in Quebec, in 2004, everyone
bought their wine at the LCBO, on the other side of the river. However,
technically, we did not have the right to return to Quebec with our case of
Senator Robichaud: My question is about that. If you market your
product in Canada, you can still only sell it in your province, right? That
is a problem.
Mr. Pouliot: Yes, that is a problem.
Mr. Stutz: We have to realize we have federal support in
marketing, and in our case it is ACOA. You know ACOA. Provincially, it is
Nova Scotia Business Inc. or the Department of Agriculture. They organize
trade missions. That is a big support for the industry.
Senator Robichaud: But that is overseas.
Mr. Stutz: Of course, but the problem in Canada is the markup
between the different provinces. That is the barrier we have.
Senator Robichaud: Is the markup of the liquor commissions or
control boards the same for Canadian wine as it is for international wine?
Mr. Stutz: Yes.
Mr. Schmoranz: Yes, it is.
Mr. Schmoranz: Except a few people in B.C. There is always some
exception to the rules.
Mr. Stutz: It is a provincial solution in our case.
Mr. Schmoranz: By the way, Ontario has it too; there is a kickback
system for the first however many thousand cases of VQA wine. We call that a
An Hon. Senator: A return on investment.
Mr. Schmoranz: That shows you how really crazy our liquor system
is. Pelee Island, the first winery, began in 1865. It was on Pelee Island
because they ran out of land across in Ohio, on the Put-in-Bay Islands,
famous for their limestone and moderate climate, and they came over to Pelee
Island to start growing grapes. It is a beautiful story, very romantic. It
has limestone, lakes, sunshine hours; you love it. The other major reason,
let us be honest, is that they could transport wine very easily through the
lakes, all the way to Montreal and Chicago. If you look at the history of
Essex County, Hiram Walker did not start his distillery in Windsor because
they had the most beautiful well water available to make grandiose whiskey.
The reason was that he could get papers going from Windsor to the Caribbean.
He never made it further than Toledo and Detroit, but it was very
convenient. This country is so beautiful, with all this history, because you
can go to Saskatchewan and to Quebec, and we all share the same type of
history in the alcoholic beverage business. To come back to your original
question, think about it: You would be able to give us all the money to
export somewhere, apple icewine to Europe for example. The crazy thing is
that we cannot get the money to do this in our own country. Everyone else
comes into our country and has buckets full. The production cost of a case
of wine is certainly a different economy of scale than here, so that case
costs $18 to put in this beautiful bottle. The Spanish government is willing
to give you $24 on top of that to move it outside of the European community.
This is so difficult to explain. In Europe, eight or nine years ago, you
traded your old car in, and they gave you a fantastic discount to buy a new
one. They had the same program for agriculture. You traded your old vats,
barrels and tanks in and got a fantastic deal on financing for new ones. Let
us start with simple things.
I am sorry to say that I never put as much thought as Mr. Stutz did into
educating our next generation of farmers. We are coming to a point where
nearly 70 per cent of the farmers in this country are close to retirement
age, so how will we get the next generation of winemakers and grape growers
excited to stay in our business if you see diminishing numbers all the time?
How can we get them involved? If I am a German citizen who finished high
school, I go through apprenticeship, go through college, go to university,
and this is all paid for. We talked about how beautiful this landscape in
Burgundy or parts of Spain looks. They are going through major drought
problems in Rioja, not in the Penedès, but in the large areas, the premier
areas. There might be some money available for irrigation, which would be
happily given. I do not think there is another bloc in the world where
agricultural commodities are so heavily subsidized as in Europe. We have no
imagination. We all think that Bordeaux must be the holy grail of winemaking
in France, but if they can make diesel fuel for Sweden and Norway out of it,
there is something wrong in the marketplace. If you tell me that the
Canadian government is willing to negotiate a free trade agreement for
agricultural products, I am a little bit concerned, to say the least. I hope
they crossed all the Ts and dotted all the Is. I am very concerned about
that because this bottle of water in the southwest of France, for example,
would cost more money than a bottle of the local rosé; let us not fool
ourselves. This is the inequality in our system. We do not ask for handouts.
I think Mr Stutz brought it to the crux. We will not make it for 99 cents,
and I tried to show that in the beginning. We will have severe climate
conditions that will set us back once in a while.
The impact of our relatively small industry on these few provinces we are
talking about is, I think, enormous. It is much bigger — and I am sorry to
say this — than the chicken producers. It is huge, and I think no one seems
to recognize it. We are running in circles. I love innovation, and I think
the money we invested because we started from zippo, we do not have. The
year 1865 sounds very old. We can name, in less than 15 minutes, probably
100 Chateaus that are 200 or 300 years old, but that means nothing. We
started relatively new with a brand new industry. We are fairly competitive
and have cutting-edge technology to do what we do. We have no access to our
own markets. No one gets it.
Senator Buth: Thank you very much for your presentations. It has
been summarized by Senators Nolin and Robichaud that your priorities are
really the interprovincial issues and access, then domestic and
international marketing, and then some of the production issues.
Mr. Schmoranz, you made a comment that this could be huge. I am curious
about whether or not you can tell me how much bigger the wine industry could
be if you were able to solve the access problems, the interprovincial
problems and some of the market problems.
Mr. Schmoranz: That is a fair statement, and Ms. Tyabji started
with the perfect example. Europe is not a reasonable comparison, but, if you
do look at it, a country like the U.K. is not very well known for wine
production. It has a little, but it is basically nonexistent. However,
access to that market is there. New Zealand, Canada, Australia, France and
Italy are all there, and they can share that market. They can fight it out
in a really accessible market. We would go to any other European country and
easily understand that 80 per cent of the wine consumed in France is French
wine or that 80 per cent of wine, maybe more, consumed in Spain is Spanish.
This has to do with culture. Let us go a little further, to Germany; 50 per
cent of their wine is imported. It is very similar to Canada, but you have
access to the market. There is no border. Any French co-op can take a semi,
drive to Germany and deliver to 25 different stores.
Senator Buth: There will be limitations in terms of production, et
Ms. Tyabji: In the United States, when they implemented their
cross-border thing, they got up to 2 per cent of the entire market. In the
charts here you see that VQA is currently 5 per cent of the total Canadian
market, so, theoretically, it has the opportunity to double the current VQA
supply, which would be very helpful to all the wineries across Canada right
now. In terms of the impact on the liquor boards, it would not break them
because it is a very small part of the overall market, but it would still be
very helpful to the wineries themselves.
Mr. Stutz: I have an answer to do with the growers. I think if we
had a better domestic market, an open domestic market, our growers would get
a much better price for a kilogram of grapes. What they get at the moment is
not enough. It is critical. We see this in Nova Scotia, where there are 100
growers. Some are really realizing that it is really hard work to finally
make some profit at the end of the year. We did a study; 26 years is the
duration for return on investment if you start with a vineyard in this
situation. For me, it is very clear that if we had an open market in Canada,
the growers would absolutely have a better price.
Mr. Schmoranz: I misunderstood. Where could we land? There is a
clear limitation. That is why I wanted to show you the areas we can grow and
where we have the heat units and frost-free days to do it: Annapolis Valley,
a few areas in the south shore of Quebec and in British Columbia. There are
limitations, but you can go 20 kilometres north of Lake Okanagan and it
would not work anymore. A reasonable approach would be 50 per cent of the
market in our country should be ours. If that is the case, I would say the
greenbelt in the Niagara Peninsula would be running out of room, the
Okanagan would be all built up, and a good part of the Annapolis Valley
would be grown into grapes. I have no doubt in my mind.
Senator Maltais: I would like to ask Mr. Pouliot a question. But
first of all, I would like to congratulate all Canadian wine producers, who
make excellent wines across the country. Barriers aside, we will not be able
to solve the problem this evening.
Does bulk wine from Spain and Chile, for example, which is then bottled
in Montreal, face the same provincial barriers?
Mr. Pouliot: I would say yes, in the case of Quebec. In fact,
there are two markets: there is the SAQ monopoly, the wines imported in bulk
then bottled in Quebec — there are three or four bottlers — and wines sold
in grocery stores that can only be sold in Quebec. I believe there are some
that sell to other countries.
Senator Maltais: If less bulk wine was imported, would that force
the provinces to lower their tariff barriers? Canadians would like to
purchase Canadian products. Cider is one example. In 10 years, you have
captured 50 per cent of the Quebec market.
Mr. Pouliot: Yes.
Senator Maltais: With fewer imported wines, there would be more
room for Canadian wines. We have come a long way from wines such as Manoir
Mr. Pouliot: Exactly. That is a good point.
Ms. Tyabji: There are two very specific markets, and one is the
premium Canadian products that we produce — they sell within a certain place
in the market — and the products that we import in bulk so that we can
compete with the imports that come in at the lower price.
Senator Maltais: I will stop you there. Not all Canadian wines are
really good, high-quality products. There are some affordable wines that
cost $15, $16, or $17 per bottle. Bulk wine is available at the grocery
store for $12 or $13. It seems to me that you are competing against one
another. I would like Ms. Tyabji to comment on this.
Ms. Tyabji: First, within Canada the market is so big that we only
grow the 5 per cent or 6 per cent of all we can produce in the total wine
market. We could never grow enough grapes in Canada to be 100 per cent. That
is where the 26 per cent cellared in Canada is trying to fill that need to
manufacture, process products and create jobs in Canada to compete with the
Mr. Ker: From my travels in Australia, they have a premium wine
area and they have their bulk producing. Australia produces about 900,000
tonnes of grapes annually compared to our substantially lower amount. I just
looked at the pricing and it was $16 a bottle for their average
run-of-the-mill wine. They had a bulk wine that was in a cask and they were
selling 5 litres for $12.50. That is an example of the bulk wine market that
you do not want to fight.
Senator Plett: I will ask Mr. Schmoranz after to explain the chart
to me. I know we all want to have a glass of wine at this point, so I will
be very brief with my other question.
You state in the request for the $10 million grant, and indeed you very
clearly say grant so I think that needs to be clarified. Perhaps it needs to
be changed because that is what it says here.
One of the issues that you have in there is that the 2 per cent reduction
in GST hurt you. Could you explain how a 2 per cent reduction in tax has
hurt the wine industry?
Ms. Tyabji: The point of that was that the imports received the
same. The excise was taken away from the blended and the government
basically said, "You have the 2 per cent reduction in GST" when we were
talking about this. We are saying it did not make up for the 21 per cent
increase in excise tax reduction.
Senator Plett: The 2 per cent GST was not negative? I mean,
everyone got it.
Ms. Tyabji: That is right, it was across the board.
Senator Plett: Thank you. We will maybe talk after.
Senator Robichaud: On that issue, you say "Why is a national wine
strategy necessary?" The changes cost the industry $25 million, is that
right? That is what you said.
Ms. Tyabji: I did not hear; could you repeat the question?
Senator Nolin: Changes cost the industry $25 million.
Ms. Tyabji: Yes, $10 million out of the blended wine industry,
Senator Robichaud: In this handout about supporting the growth of
Canada's wine industry, in the first bullet you have the net impact of the
excise exemption on 100 per cent Canadian wines — the 21 per cent increase
in excise duty, and the 2 percentage point reduction to the GST since 2006 —
has provided an estimated $25 million annual net benefit to foreign wine
producers over the benefit to domestic wine producers.
Ms. Tyabji: Right, because the excise tax is a flat tax. The
products within Canada are sold mostly within certain price points and
because it is a flat tax, it is per litre, and it is fixed. The imports are
at a higher price point and so theirs was still fixed. It basically affected
our products from a margin perspective more because it just goes right on
the cost. If the cost of goods for us is $10 and you add on the 21 per cent
— say it is $2 — then it is $12. For the other producers, if their products
sell for $15 and you add on $2 it does not hurt them as much. That is the
difference between the taxes.
Senator Robichaud: Basically it was a benefit for the importers at
the expense of the producers.
Ms. Tyabji: That is right, exactly.
The Chair: Honourable senators, to the witnesses as we close, you
have been very informative, helpful, very enlightening, and we will continue
these discussions. I want to share with you that it is the first time that
we have gone way beyond the time allocated for this afternoon's session.
You have given us your vision, recommendations, and food for thought. On
behalf of the committee, thank you for your cooperation and your
Senator Nolin: Mr. Chair, before we adjourn, I would like to
mention that Mr. Pouliot was not given much notice to appear before the
committee and that may be the case for other witnesses. Perhaps you could
ask them to send us, in writing, any additional information that would
complete their research. It would be advisable to allow Mr. Pouliot, for
one, to complete his research and to send us additional notes so that we can
benefit from his expertise.
Mr. Pouliot: I wanted to make that suggestion because I just
finished my presentation this morning and I would have liked it to be more
The Chair: Thank you very much, Senator Nolin. It is noted.
Witnesses, if you want to add or, as we proceed to the end result of the
report, you want to make other recommendations, please feel free to follow
up. We will accept any of your written documents through the clerk of the
I see the deputy chair has a comment to make before I declare the meeting
Senator Robichaud: I have a comment. Some documents were submitted
in only one official language. I would consent to accepting them if they are
made available in English and in French at a later date.