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COVID-19 fallout sours B.C. wine sector outlook

B.C. winery owners grapple with lost sales and a potential drop in vineyard land values
Ron and Shelley Mayert spent $5.8 million to buy Encore Vineyards out of creditor protection on July 1 | Chris Stenbert/Encore Vineyards

B.C.’s wine industry has suffered under COVID-19 restrictions, with tasting rooms and winery restaurants forced to close for months and most are now open at reduced capacity.

Dine-in service at restaurants across the province largely curbed revenue for wineries from that sales channel, with the slight uptick in lucrative on-site retail and direct-to-consumer sales failing to make up the difference. 

Add to this falling real estate values, and there is little doubt why many winery owners are apprehensive about the future.

Some believe it’s a good time to sell. Tim, Colleen and Chris Turyk, for example, sold Unsworth Vineyards, which is located in B.C.'s newest wine sub-appellation, the Cowichan Valley, to Californians Barbara Banke and daughter Julia Jackson in a side-project for the women, who are also part of the ownership group of the U.S. wine giants Jackson Family Wines and Kendall-Jackson.  No price was disclosed for the sale, which closed on June 22.

Abbotsford’s Shelley and Ron Mayert spent $5.8 million to buy Encore Vineyards Ltd. out of creditor protection on July 1 in a transaction that provides insight into the state of the sector. 

Encore’s dismal financial situation was made clear long before the pandemic took hold. Founder Harry McWatters died in July 2019, and one of his heirs, general manager Christa-Lee McWatters, told Business in Vancouver that she was surprised to learn that the enterprise had about $17.95 million in liabilities, $3.37 million in assets and crushing interest payments.

Receiver BDO released documents in May that addressed the impact of COVID-19 and urged creditors to accept the lone bid to buy the winery’s operations.

Encore bought its downtown Penticton property in 2016 for about $8 million. Three separate appraisals pinned the property’s value in the $6 million range, and BC Assessment suggested that the property’s value was really around $3 million, according to BDO.

“It is likely that in a liquidation scenario, the value realizable from the premises would be compromised by the bankruptcy as well as the added impact of the current pandemic,” BDO wrote in a note to creditors. “The value produced would therefore be in between the BC Assessment and appraised values [or about $4.5 million].”

Author John Schreiner, who earlier this year released an updated version of his Okanagan Wine Tour Guide, told BIV that the situation is not yet so dire that many winery owners would be forced into fire sales. 

“I can’t think of a lot of wineries that are in a situation like that,” Schreiner said. 

“Harry bought [Encore’s Penticton property] almost five years ago now. The values were pretty sky-high. Some of the other people who bought in that time probably were buying 10 acres, 15 acres. I don’t think there are a lot of people who are horribly exposed.”

Recent buyers in the Okanagan’s wine country have also been large deep-pocketed enterprises such as Arterra Wines Canada, Andrew Peller Ltd. (TSX:ADW-A) and companies linked to successful wine entrepreneur Anthony von Mandl. 

They may continue buying, Schreiner suggested.

Ron Mayert told BIV that he and his wife intend to buy vineyard land, and that “could happen next month if we get the right spot.”

Many Okanagan wineries are in a similar situation to that at Fitzpatrick Family Vineyards (FFV) in that owners are neither seeking to buy nor sell land in the short term. 

“All you can do is focus on the areas that you can control, and we’re focused on our retail channels,” FFV owner Gordon Fitzpatrick told BIV.

“It’s nice to see the restaurants ordering again, but we’ve stepped up our efforts online. At our wine club, we had our big spring shipment and that was helpful.”

Fitzpatrick opened his on-site wine store on June 15, about two and a half months later than usual, and he opened his on-site Fitzbistro restaurant on June 24, similarly later than usual. 

“We recommend that people make reservations to visit our tasting room, and we spend more time with people,” Fitzpatrick said. “It’s curated. We share with them our stories. In our case, how we make our sparkling wine.”

Tasting room visits are down significantly from last year, but he said the average per-visitor purchase is up. 

“We are providing a better guest experience because of the amount of time that we spend with each person and group.” •

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