REPEAT-Winter Cheer: Canadian Icewines Poised to Uncork Solid Growth with Higher Exports-BMO Economics

NIAGARA-ON-THE-LAKE, ONTARIO--(Marketwire - Jan. 26, 2013) - According to BMO Economics, the Canadian icewine industry is poised for solid production and sales this season as a result of ongoing low temperatures this winter, favourable growing conditions in 2012 and, more generally, a shift by consumers from beer to wine.

Icewine - first made in Germany in the late 1700s - is made from grapes that have been left on the vine until a sustained temperature of minus 8 degrees Celsius or lower is reached, boosting the grape's sugars and enhancing the flavour. Typical varietals used for icewine include Riesling, Vidal and Cabernet Franc.

Since frozen grapes produce a small amount of liquid, the production volumes of icewines are lower compared to table wines. The result is pricier wines, ranging from $50-$100 or more for a 375 ml bottle.

"Last year brought solid growing conditions for most varieties of wine grapes in both Ontario and British Columbia, and the crop is expected to produce some exceptional wines," said Aaron Goertzen, Economist, BMO Capital Markets.

"Ontario's icewine grape harvest for this season is expected to total 5500 tonnes - an increase of 50 per cent from the year before. This raises the prospect of ongoing solid production and export growth." However, Mr. Goertzen added that production will be 20 per cent below the record set in 2007.

In Ontario, the largest icewine-producing province, icewine production accounts for approximately four per cent of total wine production by volume. However, because of its high price, icewine's share in sales would likely be substantially higher, according to Mr. Goertzen.

"The 2012 vintage will likely go down in history as the best vintage ever for Ontario table wines and this is likely to prove true for icewine as well," said Norm Beal, President, Peninsula Ridge Estates Winery. "Although we have anxiously awaited a little longer for colder temperatures this year, the extra time on the vine has further added to the richness and complexity of an already stellar icewine vintage."

Mr. Beal stated that yields are down in some areas by as much as 40 per cent given the late cold snap. However, he believes that the exceptional quality of the 2012 vintage combined with skyrocketing demand from the Far East will result in increased global demand for Ontario icewines.

Canadian icewines continue to make inroads internationally

Mr. Goertzen noted that conditions are ripe for the Canadian icewine industry to expand its presence globally. "There is room for Canadian wineries to increase their exports of premium-priced products such as icewine, for which economies of scale are not as important. While icewine is produced in relatively small quantities, its high value means that it already accounts for one-third of wine exports, and Canadian wineries are internationally renowned for this cold-climate product."

On a volume basis, Canada exported the equivalent of 483,000 375 ml bottles of icewine in 2011. Around 80 per cent of Canadian icewine is exported to Asia, with China accounting for nearly half of the total.

"Icewine represents a fantastic opportunity for Canadian wineries to showcase a popular, made-in-Canada product to consumers around the world," said Al Giguere, Commercial Banking Area Manager, Niagara Region, BMO Bank of Montreal. "With more nations looking for unique, high-quality products like icewine, the market for wineries we work with in Ontario and B.C. will no doubt continue to expand."

Mr. Goertzen added that icewine is part of an overall robust Canadian wine sector. "The Canadian wine industry has expanded considerably over the past two decades. The stimulus comes from an aging population as well as a willingness by consumers to pay more for premium wines."

Canadian adults in 2011 purchased an average of 22 bottles of wine, up from 13 bottles in 1995. One-third of wine consumed in Canada is produced by domestic wineries.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $525 billion as at October 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.