Wine Industry Articles
Okanagan wineries’ road map to success
Grapes to Wine
Summer Issue
by Jim Hansen, BDO Dunwoody LLP
The Okanagan wine industry is one of Canada’s great success stories. For the last three decades it has gone from strength to strength – starting out as a handful of operations putting out average products at best, to become an international exporter of labels that have won world renown.
The sector is also unique for having suffered few growing pains – due in good measure to its founders’ acumen and commitment to long-range planning. But while this area of B.C. agri-business has avoided the bumps and hiccups that often plague other growing industries, even the wineries can’t afford to rest on their laurels.
Continued business success is built on strong market knowledge and being prepared to institute change – sometimes painfully sweeping and strategic – as shifting customer demands require. And while all good businesses rely on a solid strategic plan, the smart entrepreneur knows these plans are not carved in stone.
Developed by financial professionals such as chartered accountants, these plans lay down a business’ objectives – for revenues, target markets, growth. And, like the market, they’re subject to constant change. A company’s strategic plan may map out its course for the next three years, but they are also revisited at least each quarter and revised as needed. If the business has to take a fork in the road to keep moving forward, the business plan is broad enough to let it move around that obstacle.
In this area, the Okanagan wineries are a case study other Canadian businesses should emulate.
First and foremost, flexibility is a hallmark of this industry. In late 1970s the Okanagan had only 18 wineries, none of which could boast of a stellar wine. Perhaps stung by that reputation for mediocrity, a major shift was already underway. Okanagan winemakers knew at that time the future lay in superior wines. To that end, they trekked to Germany and California to learn their art from the masters. With upgraded skills, the wineries started their long climb toward international recognition.
In 1989 that forward thinking paid off when the Canada-U.S. Free Trade agreement threw open the B.C. border to a burgeoning American market. Practically overnight orchards were ripped up and vineyards planted to take advantage of this new market with a now superior product. The previous emphasis on volume over quality was finally abandoned, and to protect the wineries hard-won reputation, in 1990 the province established the British Columbia Wine Institute to set quality standards and supply generic marketing.
Today the Okanagan is home to 97 wineries, 15 of them launched in the last two years alone. The industry employs over 2,000 full- and part-time workers, produces such award-winning labels as the world-class Mission Hill Okanagan Chardonnay, and in 2003 generated over $230 million in revenues.
Coupled with this is the steady growth in the last decade of agri-tourism. The Okanagan’s breathtaking vistas of mountains and green tableland mixed with its mild climate – cool, clear winters and warm, dry summers – has turned the region into a tourist Mecca, with a catchment area of over 8 million residents within an hour’s flight. Agriculture has helped create such popular events as the Icewine Festival or the Okanagan Wine Festival, now an inseparable part of the valley’s character.
While not a new or radical concept, direct farm marketing has seen wineries add value to their operations through on-site tours, restaurants, wine bars, gift stores, hotels, and convention centres. One truly innovative stroke in this mix is the Shakespearean productions held each summer at the Mission Hill Family Estate Winery, By 2003 the Okanagan’s still-nascent agri-tourism sector generated over $100 million in revenues annually.
The wine industry’s success represents three decades of hard work and smart business planning. In the transition to family-owned operations to public companies, from local producer to international exporter, the sector has hardly missed a beat.
Its success is also a tribute to a new breed of Canadian entrepreneur. The wine industry remains dominated by small to medium-size companies, each with an average of less than 50 employees. The small force of highly motivated, non-union workers lets wineries embrace change as needed and keep ahead of the market.
None of this happened by chance. Whether it was financing new production facilities, seeking out sources of capital to expand vineyard operations, or taking the next step and going public, the wineries relied on professional financial advice at every turn. Accountants work closely with their clients, immersing themselves in every step of the process. Like grapes from the vine, accountants know how to cultivate the necessary knowledge to help drive a businesses growth.
As we raise a glass to the Okanagan wineries triumph, we know this industry shall continue to succeed based on sound planning.
Jim Hansen is a Partner in the Kelowna BC office of BDO Dunwoody LLP. He is involved in all areas of client service including accounting, auditing, taxation and business consulting. He can be reached at tel. 250.763.6700; jhansen@bdo.ca.
