October 7, 2005

Ontario wineries feel big chill from winter damage

By Jonathan Spicer

TORONTO (Reuters) - Ontario, home to a small but booming wine industry, is heading for a top quality grape harvest this year, but crop volumes will be so small that the province has bent its rules on using foreign grapes in cheaper blended wines, industry officials said.

The developments, results of a bitterly cold winter, are both good and bad for the sector. Ontario exports mostly high-priced, high-quality ice wines -- a sweet desert wine made from grapes harvested during the first hard frost.

"What mother nature taketh away, she giveth," said Paul Speck, president of Henry of Pelham Winery in the Niagara Peninsula close to the border with the United States.

"And what we've been given is a fabulous quality crop, so that the wines that are (2005 vintage) VQA will be of outstanding quality. There just won't be as much of it."

VQA wines are those that carry the Vintners Quality Alliance label. They are made 100 percent from local grapes.

That's not the case for blended wines, which must normally contain at least 30 percent local grape content.

The blends are sold only in Canada, while exports, including the VQA wines, are worth C$17 million a year. Most sales are to the United States and Asia.

Ontario said last month it would allow wineries to use as much as 99 percent foreign grape content in blended wines, because of the shortage of local grapes following a colder than normal winter.

Temperatures dropped as low as -28 Celsius (-18 Fahrenheit) in January and February this year and the Grape Growers of Ontario expects more than half the province's crop will be lost due to damage to the vines.

The group said the one-year easing of grape content rules will save smaller wineries from bankruptcy, and spare the industry some C$140 million in retail sale losses.

The government also lowered the domestic content quota for blended wines in 1993 and 2003 to cope with poor harvests.

But Speck, whose winery produces 75,000 cases a year, said the easier rules for blended wines could become a "speed bump" for VQA wines abroad, and the VQA admitted that the decision could be negative for exports.

"We've received a lot of calls from concerned people who had jumped to conclusions when they saw the foreign grape content in stories," said Laurie Macdonald, executive director of VQA.

Ontario produces 68 percent of Canada's exported wine.