The once flourishing custom-crush winemaking niche in ÎÚÑ»´«Ã½ is getting squeezed.
Demand for services has declined in part because ÎÚÑ»´«Ã½'s falling grape tonnage has made it harder for entrepreneurs to find grapes to buy. Even if they find the grapes, many are having second thoughts because of a growing realization that it can be difficult to market a new wine brand to stand out in what is a crowded marketplace.
At the same time, the supply of wineries today willing to outsource their equipment and expertise to newcomers who want to make a first vintage has increased.
The result is that the fees that those wineries are able to charge has declined rapidly – by about 25 per cent compared with five years ago, said Christine Coletta, who recently rebranded her Okanagan Crush Pad (OCP) winery as Haywire.
She said her venture is exiting the custom-crush niche, which it helped pioneer, because the work is no longer viable.
About 25 per cent of OCP's 40,000 cases produced in 2022 were custom-crushed for entrepreneurs who have grapes but no winery.
"In the 2023 harvest, which will be next fall, our total wine production will be for our own use," Coletta said.
The custom-crush industry did not exist in ÎÚÑ»´«Ã½ until 2009, when Alan Dickinson's Alto Wine Group started offering the service. He has since rebranded Alto as Synchromesh Wines, and he stopped offering custom-crush work in 2016, he told BIV.
Coletta's venture started in 2011.
The concept of custom crush is that entrepreneurs who want to test the waters with their own wine brand without investing in a winery could go to an established winery to have that facility produce their wine for a fee.
The winery would provide expertise, equipment and storage space in exchange for either a flat fee or a slice of the resulting revenue – essentially like a U-vin operation for commercial clients.
in part because the Okanagan in that era was producing increasing grape tonnage each year, making it comparatively easy for entrepreneurs to buy grapes from growers – or for growers to experiment with making small batches of wine.
There were few wineries that offered custom crush as a sideline business at the time – something that made offering the service lucrative.
Things have changed.
Many wineries now are willing to do custom-crush work for entrepreneurs.
Nostalgia Wines Inc. is one of the ones that focus first on their own products, but accept custom-crush clients. Its winemaking team helped nearby Uppercase Winery make its first two vintages in part to be neighbourly, but also because Nostalgia Wines has the capacity to make a few thousand cases in addition to its own production, general manager Sheila Whittaker told BIV.
Bartier Bros. Vineyard & Winery principal Michael Bartier similarly told BIV that he offers custom-crush services to three clients in addition to making his own wine.
“We didn’t go looking for the business but a few people came to us and it was obvious that it would help us dilute the cost of our own production,” he said.
“No matter what happens, you're going to pay the mortgage. Whether you have one litre of production, or you have 300,000 litres of production, the mortgage remains the same."
His winery’s capacity is around 30,000 cases but he only produces around 14,000 cases of his own wines. That leaves 16,000 cases per year to potentially help custom-crush customers make.
Bartier said he has not noticed a slowdown in the custom-crush business.
Coletta added competition for the custom-crush business from other wineries has driven the price she is able to charge for her services down.
Another change in the business dynamic is that there are fewer entrepreneurs seeking custom-crush partners.
One reason for that is that many have learned that it can be challenging to sell small batches of an unknown wine brand, said Wine Growers British Columbia CEO Miles Prodan.
He added that ÎÚÑ»´«Ã½ is now in a situation where there is a "short crop," or a declining amount of grapes.
The vast majority of all land that's suitable for growing grapes in the Okanagan is already planted with grapes, he said.
That means that there is little in the way of new land planted with grape vines in ÎÚÑ»´«Ã½’s largest and most prominent wine region.
In addition, the land across ÎÚÑ»´«Ã½ that is already planted with grape vines is yielding less fruit in large part due to climate change, said Prodan.
He pointed to Cascadia Partners’ 2022 BC Vineyard Resilience Project report for the ÎÚÑ»´«Ã½ government. Its data show ÎÚÑ»´«Ã½ having a relatively consistent amount of existing grape-vine acreage – around 6,200 acres in total each year between 2017 and 2021.
The problem is that while those acres produced more than 30,000 tons of grapes in 2018, they only produced about 20,000 tons of grapes in 2021.
The yield per acre has fallen to about 3.1 tons in 2021 from 4.6 tons in 2018, according to the report.
"It's climate change," Prodan said, before pointing to severe atmospheric rivers, heat domes and stretches of unusually frigid weather that have affected the province.
"This is not including this current vintage – 2022 – but in the three previous years, we have been in some fairly serious decline for grape production," he said. "If we take a look over the last nine years, [grape production] is trending downwards."
Entrepreneurs also have new potential options for how to create and promote their wine brands for comparatively little money, he said.
The District Wine Village in Oliver, for example, opened in mid-2021 and has 13 small wineries, one brewery, one distillery and an eatery.
Uppercase Winery, which started as Nostalgia Wines’ custom-crush customer, is one of its tenants.
"That is a great example of a way for entrepreneurs to get into the wine business without having to make the full investment in a winery," Prodan said.
He explained that the District Wine Village wineries share grape-press equipment and some other costs. They all must have their own fermentation tanks as a requirement of having a winery licence, but those costs are comparatively small, he said.
"They're all individual separate wineries, with retail fronts to them so they can have a presence there," Prodan said of tenants at the District Wine Village.
"What they don't have to do is invest in building a winery, and all the rest of it. They just rent the space."
Selling wine directly to customers is the most profitable sales channel for wineries, which is another reason why the District Wine Village is a compelling option for some wine entrepreneurs.
That direct-to-consumer sales model is the only one available to some little-known wine entrepreneurs because finding shelf space at retailers to sell product can be nearly impossible, Prodan said.
They do not make enough product to supply the British Columbia Liquor Distribution Branch’s stores, and the capped number of private liquor stores are often not in the business of stocking what can be comparatively expensive ÎÚÑ»´«Ã½ wines.
"They're in the business of selling flats of Miller Lite," Prodan said.
The provincial government has capped the number of wine-store licences, and ÎÚÑ»´«Ã½-wine-only store licences, he added. That also limits potential shelf space.
Then there is the challenge that some significantly populated areas in the province, . Instead any wine sales in grocery stores have to be separate stores within stores.
The evolution away from providing custom-crush services feels natural for Coletta because her own wine brands have been successful, she said.
She intends to split her 2023 harvest into making:
• 20,000 cases of Haywire-branded wine;
• 16,000 cases of Narrative-branded wine; and
• 4,000 cases of Free Form-branded wine.
As for Dickinson – the first custom-crush provider in the province – he said entrepreneurs seeking custom-crush partners should not base their decision exclusively on price.
"You get what you pay for in custom crush," he said.
"If you're looking to produce wine in someone's facility, the cost of that production service shouldn't be the deciding factor because there are a lot of elements that play into whether your product will be good, and whether you're getting the right advice and the help along the way." •
