Cheers to Canada! Demand for Canadian-made booze surges amid trade war

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Canadian spirits have never been higher — or filled more glasses.

An unexpected benefit of U.S. President Donald Trump’s trade war, and the ensuing wave of Canadian patriotism, has been a soaring demand for Canadian-made alcohol.

While the tariffs have created sobering side effects for some producers, demand is climbing for Ontario beer, liquor, and especially wine. The LCBO said there has been an overall 62 per cent growth in sales of VQA wine products.

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For Pelee Island Winery, sales have spiked 20 to 40 per cent, depending on the product.

“Definitely, people are all about supporting local, supporting Canada, and then specifically Ontario,” said managing director Annemarie Heikenwalder. “We’re definitely seeing an uptick in people gravitating towards our products, as well as VQA in general.”

With his trade war, insults, and threats to annex Canada, Trump unwittingly sparked a coast-to-coast groundswell of pro-Canada sentiment.

It has manifested in Canadians cancelling U.S. travel plans and boycotting American-made products including alcohol.

In liquor stores and bars across Ontario, people are switching from California cab sauv to Pelee Island pinot noir and from Kentucky bourbon to Windsor rye.

“It’s like the Canadian citizens sort of galvanized behind this idea,” said Gordon Orr, CEO of Tourism Windsor Essex Pelee Island. “The more rhetoric that comes out of the White House, the more people are incentivized and encouraged to support local.”

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The LCBO — one the largest alcohol buyers on the planet — has helped by banning all American products from its shelves until Trump relents.

Ontario Premier Doug Ford said in March that the government-owned agency sells about $1 billion worth of U.S. alcohol every year.

The Canadian boycotts are so devastating that at least 55 associations in the American alcohol industry have joined forces to create the Toasts Not Tariffs Coalition.

The effort is spearheaded by the Distilled Spirits Council of the United States, which said American companies annually export about $221 million worth of distilled spirits to Canada.

“It has done great harm to our industry, there is no doubt,” council CEO Chris Swonger told the Star.

Swonger said his organization has been in talks with counterparts in Canada, the Trump administration, and Canadian officials in hopes of finding a way to “untangle” the alcohol industry from current tensions.

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“We just hope cooler heads will prevail and get our products back on the shelves,” he said. “It’s impacting Canadian province revenue. It’s impacting American distillers. I’m sure, to some degree, it’s having an impact on the Canadian distilled spirits industry. We have nothing to do with some of the broader issues that are in dispute between our two governments.”

Like many sectors, Swonger said the alcohol industries on each side of the border are deeply entwined. He called it “an industry of one.”

“I’m not dismissing the great pride in Canada that has been on full display and the emotions,” said Swonger, based in Washington, D.C. “But this industry shouldn’t be caught up in this.

“I have not heard of any American turning back a great Canadian whisky.”

The same cannot be said of Canadian drinkers and American booze.

The provincially-owned LCBO told the Star there have been clear “shifts in buying behaviour,” though the agency’s ban on U.S. products is likely spurring that trend.

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The most dramatic shift has been toward products made under the Vintners Quality Alliance (VQA), which is wine made from 100 per cent Ontario-grown grapes.

The demand for VQA sparkling wine has grown 28 per cent. VQA white wines have surged 67 per cent. Red wine sales have spiked 71 per cent.

“I think people have almost a stigma about — or had a stigma — about Ontario wines, that maybe Ontario wines aren’t up to the quality of, let’s say, California,” said Heikenwalder.

“But we’re seeing a shift now where people are discovering that maybe Ontario products really aren’t what we thought they were. So we’ve seen some customers come into our retail space for tastings, and they’re quite surprised by the quality of the products that we do produce.”

The LCBO said demand for Canadian spirits has increased an average of 10 per cent.

The global company that owns Hiram Walker & Sons Distillery in Windsor, North America’s largest distillery, declined comment.

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The Beer Store pointed questions about consumer trends to the LCBO.

The LCBO said it hasn’t seen a significant change with beer and other ready-to-drink products because U.S. brands represent “only a small portion” of annual sales.

But Walkerville Brewery co-owner Mike Brkovich said more and more customers want assurances that what they’re drinking is Canadian-made.

He said the trade war sparked growing demand for his beer in bars, convenience stores, and supermarkets.

“What’s really helped us is the retail store here at the brewery, where people can come in and buy beer,” said Brkovich. “There’s been an increase in foot traffic there, as well as the events we’re having. We’re having a lot of events we didn’t have before. So that’s made a significant positive contribution to our business.”

However, there have also been some significant tariff hangovers.

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“It’s great to have an uptick in one area,” said Brkovich. “But the challenge is our input costs have gone up so much. Some of our raw material still comes from the States. Certain aspects of the business have been hurt. Other aspects, they’ve increased. So even though we’ve had an increase in the sales locally, we still face significant headwinds and challenges.”

And while the LCBO has opened up shelf space, some small producers say the government has left other rules in place that still hurt.

Sales at Elora Distilling Company have increased by 20 per cent, according to co-owner Marty Van Vliet. But that doesn’t mean profits are skyrocketing.

“The fundamental problems of being a small distiller still stand,” he said. “We’re taxed the same as big multinationals at 52 per cent of everything we sell out our door. So even though we’re selling more, it’s still hard to make money at it.”

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“That just means they’re collecting more taxes, to some degree. The government really needs to lay off spirits tax on the first 50,000 litres, like they do in other places, so that we have a chance to actually thrive.”

Another challenge is that Canadian patriotism is not an equal opportunity sensation.

Laura Fancsy, president of the Essex Pelee Island Coast (EPIC) Winegrowers Association, said the smaller and lesser-known companies are less likely to see the same benefits as large brands that people recognize.

“The big players in LCBO are going to continue to sell,” she told the Star. “The small players, I don’t know if there’s going to be an uptick. It’s a very competitive market, the LCBO, even within Ontario wines. So if you’re not one of the ones that are well known already, it’s difficult to break in. Even in this type of environment.”

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Fancsy said sales at her family’s Viewpointe Estate Winery did elevate at the start of the trade war, but there’s been little indication it will become a long-term trend.

“I’m waiting for reorders,” she said.

Despite that, many small, independent, and craft producers told the Star that patriotism and extra shelf space has boosted them.

“We’ve got a couple opportunities now to get some products we wouldn’t have been able to get into the LCBO,” said Tom Manherz, co-owner of Wolfhead Distillery in Amherstburg. “We have a cream liqueur and another flavoured whiskey that they wouldn’t take before. Now they’re taking them.”

Copper Rose Distillery, a vodka company in downtown Windsor, has seen a 40 per cent rise in daily LCBO sales since the trade war began.

CEO Melissa Roberts said the company had already experienced some “aggressive growth” in its first two years.

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“But this has just added fuel to the growth,” she told the Star. “The daily sales and purchasing of the product are just magnified that much more.”

“This time in general has really opened up a lot of opportunity on every level. Consumers’ habits are so much more focused on the whole pro-Canadian movement.”

Van Vliet said that despite some drawbacks, the increased interest in Canadian companies and smaller producers has brought a welcome lift.

“The LCBO is being much more receptive to carrying Ontario product,” he said. “It hasn’t been very good before this. It’s very difficult for small distillers to get their product in Ontario LCBOs. So, the LCBO has been more responsive since this all sort of happened, which is a great thing.”

He said there was also a noticeable increase in people coming in search of products at the company’s distillery and restaurant over the last several months. And that was during the slowest season of the year.

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“I don’t know if you travel a lot in the wintertime, but most people don’t really go day-tripping in Elora when there are freezing rainstorms,” said Van Vliet.

“But we hear customers talking about it. ‘I want to try Canadian whisky, I want to try your whisky. I want to try your rum.’”

Heikenwalder said another benefit from the trade war: loosening of inter-provincial trade restrictions. Prime Minister Mark Carney has said his government plans to table legislation for an interprovincial free trade agreement by July 1.

The Ontario government also recently tabled legislation to kill internal trade barriers. It has signed memorandums of understanding with Nova Scotia, New Brunswick and Manitoba to allow direct-to-consumer alcohol sales.

Heikenwalder is hoping Quebec, with its wine culture and close proximity, will be next.

“We’re excited that the trade barriers are going to be removed one by one,” she said. “That allows us the potential to deliver direct to consumers in some provinces where we were unable to do that before. So that July 1 date coming up is really exciting for us and for the industry.”

twilhelm@postmedia.com

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