Business Climate: Can the Okanagan wine industry survive climate change?

David Paterson knew the cold snap was coming. It was mid-December, a time when Kelowna temperatures typically average around 2 degrees during the day and minus-4 at night. But heading into the 2022 holiday season, newscasters began sounding the alarm that temperatures were set to plummet. There was little the Tantalus Vineyards general manager and winemaker could do except wait and hope the freeze wouldn’t be as bad as predicted. “That’s the time you hope the weatherman is wrong,” he says.

Meteorologists were indeed wrong, but not in the way winemakers had hoped: temperatures fell even further than predicted, dipping to a frigid minus-30 degrees in some areas.

“It was a real sinking feeling,” says Paterson. “You look at all this hard work we’ve put in to grow these vines and regenerate the soil and do all the right farming practices—but this is a factor we have zero control over.”

The freeze devastated the Okanagan wine industry. According to a June 2023 report by Vancouver-based consultancy Cascadia Partners, an estimated 54 percent of the grape crop was lost, with some growers losing their entire harvest. Forty-five percent of vines suffered long-term damage and 29 percent will need replanting. The report pegged financial losses at $133 million.

Then, in August, drought and unprecedented forest fires decimated the area, putting a sudden end to the tourist season. As a result, winemakers who had hoped to cushion the loss of their 2023 vintage with robust sales of their 2022 offerings were left high and dry.

In January 2024, another freeze caused even more damage to vines which, according to another Cascadia report, is expected to lead to catastrophic crop losses, and “an almost complete write-off of the 2024 vintage.” 

“Preliminary industry-wide estimates are that the crop will produce just 1-3 percent of typical yields, with the majority of that coming from unaffected regions such as the Fraser Valley and Vancouver Island,” reads the report. “This means that the production of 100-percent B.C. grapes and wine is projected to be 97-99-percent lower than usual in 2024.”

The report estimates losses to B.C. businesses will be $440-445 million—$340-346 million in revenue losses to vineyards and wineries, and an additional $97-99 million to suppliers, logistics providers and distributors. Longer-term impacts on the vines are also expected, but can’t be quantified until later in the year.

B.C.’s wine industry isn’t alone: a November 2023 report by the International Organization of Vine and Wine predicted that, as a result of climate change, this year’s global wine production will be at its lowest in 60 years.

Miles Prodan, president and CEO of Wine Growers British Columbia, says grape tonnages have been dropping for years in B.C., but in 2022, that decline turned into disaster. “We get freeze events in the Central Okanagan and we do make ice wine. But ice wine is made at minus-8, not minus-30,” he says. “Minus-30 is just lethal.”

Crop insurance covers some losses, says Prodan, but none of the replanting costs, revenue loss from the wine that won’t get made or tourism dollars that went up in smoke.

To rebuild, wineries have to borrow at sky-high interest rates, just as their revenues sink and consumers cut back on alcohol and discretionary purchases. Because the wine market is extremely price sensitive, producers—many of them small, highly leveraged operations—can’t hike prices to cover their losses.

Most growers aren’t making drastic changes to what they plant or where, says Prodan, but they are adjusting to the shifting climate using decades of data on viticulture techniques. For that reason, he remains confident the $3.75-billion business will bounce back. “Once we’re able to reset and re-invest,” he said in an interview prior to the recent freeze, “we can continue growing.”

Dr. Miranda Hart, a professor of biology at UBC Okanagan, isn’t as optimistic. The recent freezes and fires may seem anomalous, but they  are merely a sign of things  to come.

“All of the things that happened to impact the industry are forecast to keep happening—and more frequently,” says Hart. Growers are now scrambling to replant, but Hart fears their efforts will be in vain. “We don’t know what’s going to be resilient under this new climate. So just planting the same varieties and rootstocks is terrifying, because we don’t know if it’s the right way to go.”

What’s more, the vines that did survive are more susceptible to insects, disease, drought and other stressors, adds Hart. As a result, more research is needed to map out a viable path for the future—if there is one at all.

“[For] any of these stressors on their own, you could find a management strategy to deal with it. You could irrigate differently, you could prune differently,” says Hart. “But they’re all happening at the same time. There’s just no way to deal with that.”

In an interview before January’s freeze, Paterson said he was doing his best to deal with it. At Tantalus, the wine volume for the 2023 vintage was down 40 percent, and overall revenue was down 15 percent. They were spared significant vine loss—just 5 or 6 percent—but the full extent of that loss, and now the loss from the 2024 cold snap, won’t be clear until spring.

For now, Paterson has been keeping a watchful eye on the thermostat, hoping for a reprieve from the wild weather. He would like to see government improve insurance for growers, offer a wage subsidy for replanting and help cover losses at the winery level. In the meantime, he expects a “changing of the guard,” with some wineries going out of business and new players  coming in.

But if severe climate patterns persist, he warns, even the most established growers will have little choice but to consider their options.

“We can’t do it this way forever. You will start seeing these pieces of land changing hands, and then new people coming in and doing something different,” said Paterson. “But I think we’re a few bad freezes away from that needing to happen.”

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