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Charlie Pillitteri, CEO of Pillitteri Estates in Niagara-on-the-Lake, Ont. (Rosa Park for The Globe and Mail)
Charlie Pillitteri, CEO of Pillitteri Estates in Niagara-on-the-Lake, Ont. (Rosa Park for The Globe and Mail)

Canada Competes

How Canadian wineries are bottling success in Asia Add to ...

Pillitteri Estates is a family-run winery in Niagara-on-the-Lake, Ont. – a place where vino lovers can get up close and personal with the wine-making process before taking home a bottle. But increasingly, some of Pillitteri’s best customers are buying their products more than 10,000 kilometres away.

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About 30 per cent of Pillitteri Estates’ business is exports these days, says chief executive officer Charlie Pillitteri, with the majority going to Asian countries such as South Korea, Japan, Taiwan and China. Increasing sales in Asia is a major part of the winery’s business plan, he said.

“It takes a bit of effort on our side, dealing with the language and the culture,” said Mr. Pillitteri. “But in terms of all of our customers, I think the Asians are the most aggressive and the most interesting.”

Canadian wine exports have increased steadily over the past few years – from $19-million in 2009, to close to $38-million in 2011. And a large part of that bump in sales is due to the emergence of a vibrant Asian market, and its appetite for Canadian icewine.

While icewine exports to some countries fell in the wake of the global economic downturn (including to the United States), sales to China and Hong Kong have been rising. In fact, Canadian icewine exports to China have increased by more than 1,000 per cent since 2004.

It’s because of this potential for profit that wineries are seeking to capture the attention of Asian wine connoisseurs. But exporting to that market is not without its challenges.

“If it was easy everyone would do it,” says James Stewart, president and CEO of Vancouver’s Paradise Ranch Wines.

More than 50 per cent of Paradise Ranch’s business is exports, says Mr. Stewart, mostly to China but also Hong Kong, South Korea, Malaysia, Singapore and Indonesia. It’s “relatively easy” to get people interested in Canadian icewine, he says, because of our reputation for award-winning, high-quality products. “People know we make the best icewines in the world.”

“Combine that with the fact that in many of these countries they’re effectively new to the culture of grape wine consumption,” says Mr. Stewart. “If you put a bottle of the finest Margaux on a table and icewine on a table and brought some person who’s never consumed wine in their life before, they’re going to prefer the icewine because the body is biologically designed to appreciate sweetness.”

Mr. Stewart also notes that at less than $100, icewine is an accessible luxury product in a market where the growing middle and upper classes are hungry for them. However, he says, doing business in Asia frequently requires more than just a good product. An essential element to selling in Asia is developing a personal connection with buyers, he says, something not necessary in Europe or the United States.

“In Asia, acceptability of the product isn’t enough to consummate the transaction,” he says. “There’s a way they conduct business – it’s so relationship-based that the sales cycle is really extended; it takes a lot longer to close a deal.”

Mr. Stewart says he visits China frequently to support his distribution partners, particularly during wine events that are extremely popular there.

“Introducing a wine or opening a wine shop would be a big deal over there; they’d have a giant event in a big hotel, and invite lots of government people,” he says. “And if you don’t go to the event and support them, you get in to the concept of ‘face.’ they would really lose face if the supplier of this product doesn’t come and support them in their launch.”

Exporting to China can also be challenging because regulations there change frequently, he adds.

“Every time you ship there, something’s different,” he says. “Requirements change and it’s guaranteed to be a regulatory hassle every shipment. … You need to go there regularly, and of course when you’re there, the time change and expense is significant.”

Though he has carved out a successful business after more than a decade in the Asian market, Mr. Stewart says the choice to enter that market isn’t one to be taken lightly.

“Knowing what I know now, would I be interested in getting involved in the exporting wine to China business?” he says. “No, and honestly, for anybody who shows up new to the game, the challenges would be even more significant.”

In order to put their wine on Chinese shelves, Pillittieri Estates must put a label on every bottle with a tasting note in Mandarin, the alcohol content, the volume, recommended storage temperature, bottling dates and “all those little facts so it can clear China Customs successfully,” says Richard Slingerland, Pillitteri’ manager of business development.

Most of Pillitteri’s distributors in China are Chinese Canadians who spend six to eight months of the year there, says Mr. Slingerland, and that helps them stay on top of regulatory changes. He also works closely with the Canadian embassies in China and the consulate offices in Canada, which update him with new information.

One of the biggest issues Canadian icewine exporters have to tackle in China is the proliferation of counterfeit products. “On my last trip alone I found eight imitation Canadian wines,” says Mr. Slingerland.

To combat counterfeiting, Pillitteri uses the Prooftag system. A small silver sticker, a bit larger than a fingernail, goes over the cork. Each has a different identification number and a series of more than 200 “bubbles” on every design, which makes each one unique. “With any smartphone you can take a picture and it will bring you directly to the Prooftag website, and it will tell you if it’s an authentic product from the winery.”

Mr. Slingerland says the start-up cost to launch the Prooftag system was expensive, but now it’s only about $1 dollar a bottle.

When it comes to counterfeit wine, Mr. Stewart says, “If you let it drive you crazy, it will. Enforcement is extremely difficult. My approach to it is to proceed on the belief that a certain amount of people are always going to buy the counterfeit product. But most people who do, are going to know it’s counterfeit. … If a store is selling icewine for $5, it’s pretty obvious it’s not icewine.

“We have to continue to educate the consumers as much as possible and take heart that it’s going to be pretty obvious in terms of the quality and price of the product, which are counterfeit and which are real,” he says.

Mr. Pillitieri says his company is starting to market red table wine in China, but it’s difficult because Canadian prices are generally higher than those of other foreign competitors.

“They say, ‘The price is too high, I can buy French or Italian or Chilean wine cheaper,’” he says.

However, Paul Speck, president of Henry of Pelham in St. Catherines, Ont., says that, though icewine used to be its “lead card” in export to Asian countries, it has fallen behind red and white table wine. “I shipped a container to China about eight months ago and it was half icewine and half red and white,” he said. “Now I have another container leaving – only high-end red wine, $30 a bottle and up.”

Mr. Speck says introducing icewine first in Asia was a way to open the door to Canadian table wine.

“We knew that icewine was incredibly rare, a luxury wine and hard to do, and so when we poured it, people were just enthralled by it globally,” he says. “And the idea was to seed in the notion that you could grow great wine in Niagara [region], and then follow it up with table wine. And that’s really what’s happening.”

Beyond the Asian market, selling Canadian wine can be difficult because most wine-producing countries like France, Italy, Australia and Spain tend to support their own wine industry. “In Burgundy people drink Burgundy, in Bordeaux people drink Bordeaux,” said Mr. Pillitieri. Even selling wine across provincial borders here in Canada can be challenging, because wineries are, for the most part, at the mercy of provincial liquor control boards who decide whether to stock their product.

Though the cost of exporting to Asia can be significant, it’s still profitable, says Mr. Slingerland, because they avoid domestic taxes. “The best margins for selling our wines is through retail store and exports,” he says.

“On a $10 bottle of wine, in our retail store when we sell it, we have to submit $4.80 of that to the Ontario government,” he says. “When exporting, we are collecting the same amount of profit for us, but we don’t have to distribute some of that to the Ontario government.”

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