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Dec. 10, 2019 | Tuesday
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NOTL wineries say end of tax rebate program is worrisome
Caroline Cellars owner Justine Lakeit said their winery will stop supplying wine to the LCBO when the VQA Wine Support Program comes to an end next April. (Dariya Baiguzhiyeva/Niagara Now)

As the provincial VQA Wine Support Program is coming to an end, some Niagara-on-the-Lake wineries are bracing up for what it may bring.

Family-run Caroline Cellars is one of the affected wineries and with the program’s termination, the NOTL winery will stop supplying its wine to the LCBO, said owner Justine Lakeit.

Although the winery is “a small player” as it doesn’t sell a lot of wine through the LCBO, the VQA support program was “a huge factor” in the winery’s ability to do so.

The VQA Wine Support Program, overseen by Agricorp on behalf of the provincial government, was a part of the renewed Wine and Grape Strategy, started in 2015. The five-year program, which will end in April 2020, provided grants to wineries by helping offset up to 35 per cent of the tax.

“Without that program, we won’t be considering any releases in the LCBO in the foreseeable future,” Lakeit said. “We’ll have to sell everything from here and that’s more disappointing to our customers who have always enjoyed purchasing our wines from the LCBO primarily when they can’t get down to Niagara.”

Caroline Cellars also participated in the LCBO’s Wines to Watch program, which allowed it to sell between 200 to 400 cases of wine over a four-month period, but the winery won’t be considering it now either, Lakeit said.

“(The program) made Ontario wines more competitive in the marketplace,” she told The Lake Report. “Ontario wines do get extra shelf space beyond our market share in the LCBO, but that’s one of the only perks for domestic products”.

In 2009, the provincial government launched a five-year Wine and Grape Strategy to provide support to the industry and help it grow by creating more jobs and increasing the number of VQA wineries, according to the Ministry of Agriculture, Food and Rural Affairs website.

Gross margin – the difference between revenue and cost of sold goods – is already a problem in the industry so the tax issue needs to be addressed first, said Ontario Craft Wineries president Richard Linley.

After the VQA support program ends, wineries and family farms will have to consider whether they will be able to afford to hire staff and do promotional sales or advertising, he said.

“We’re estimating about 75 per cent of the Ontario wineries and 30 per cent of the Ontario wine, in terms of volume, will exit the LCBO sales channel, likely over the next three to six months, if we don’t have some certainty from the government as to how our tax issues will be addressed going forward,” Linley said in a phone interview.

The non-profit organization, representing over 100 Ontario wineries and about 27 NOTL vintners, is asking the government to lift the 35 per cent import tax imposed on Ontario wineries, even if wine is 100 per cent grown and made within the province.

The full tax markup for a bottle of wine is between 95 and 100 per cent, Linley explained, up to 35 per cent of which was rebated back to the wineries under the support program.

He argued the Ontario wine industry is at a disadvantage compared to other industries in the world and across the country.

“The previous governments have treated our wines the same as imports. We can’t imagine them doing that in France or California or even B.C., and handcuffing local producers in this way,” Linley said.

Connie Slingerland, chief financial officer at Pillitteri Estates Winery, declined to comment but said the winery supports Linley’s comments made on behalf of the industry.

Strewn Winery co-owner Newman Smith said the program’s end will affect not only his operation but all wineries as well.

“But what steps we’ll have to take (after the program ends) are unknown at this point,” he said.

Bianca Jamieson, the ministry’s media relations strategist, insisted the program wasn’t cancelled – it’s just ending – and the ministry is working with the industry to ensure wineries have time to adjust “their business plans to account for the program’s sunset.”

“The government remains committed to the success of local wineries and helping growers and the wine sector grow and succeed locally and abroad,” Jamieson said in an email to The Lake Report.

“At this time, the government is undertaking a comprehensive review of the alcohol sector to inform its plan to expand the sale of beverage alcohol into corner, grocery and big-box stores, and to grow market opportunities for wineries including VQA wines in Ontario. The Ministry of Finance is currently leading this review.”

Meanwhile, Linley said the winery organization will continue to lobby the government to ask for fairness for local producers.

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