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TORONTO, ONTARIO--(Marketwire - Oct. 30, 2012) - The Canadian wine industry is poised for solid growth over the next five years, with an aging population, a willingness by consumers to pay more for premium wines and the opportunity to make greater inroads in the Canadian marketplace driving the expansion, according to BMO Economics' special report on the Canadian wine industry.

"The Canadian wine industry has undergone a remarkable expansion over the past two decades," said Aaron Goertzen, Economist, BMO Capital Markets. "While the climate in Canada may prevent the sector from becoming an international powerhouse, its reputation on the international stage has grown, and Canadians are increasingly reaching for a glass of pinot noir instead of pilsner."

Remarkable Expansion:

• The Canadian wine industry grew an average of more than 11 per cent per year between 1995 and 2004.
• Canadian adults in 2011 purchased an average of 22 bottles of wine, up from 13 bottles in 1995. One-third of wine consumed in Canada is produced by domestic wineries.
• Between 1995 and 2011, wine rose from 18 per cent to 30 per cent of Canadians' total alcohol consumption; over the same period, beer fell from 53 per cent to 45 per cent and spirits fell from 29 per cent to 25 per cent.

The increase has been the result of an aging population - as older individuals are key consumers of wine and tend to have more income - and reports of wine's beneficial health effects. The free trade agreement also lifted protections against imports; in response, Canadian wineries reinvented their product and switched to higher-quality grapes.

"There is likely scope for Canadian wineries to increase their exports of premium-priced products such as icewine, for which economies of scale are not as important," noted Mr. Goertzen. "While icewine is produced in relatively small quantities, its high value means that it already accounts for one-third of wine exports, and Canadian wineries are internationally renowned for this cold-climate product."

"Canadian wineries produce fine wines exhibiting unique and desirable characteristics that begin in Canadian vineyards with high quality fruit," said David Rinneard, National Manager, Agriculture, BMO Bank of Montreal. "Going forward, we anticipate that Canadian wineries will continue to reassert their position in Canada and showcase their quality products in other parts of the world. As other nations' diets expand, we have every reason to believe that Canadian wineries will be successful in making a place at the international table."

Recent Developments

Wineries continue to see solid growth after a particularly strong decade. The industry is experiencing average volume growth of 3.1 per cent and wine sales continue to grow faster than sales of other alcohol.

Nearly two-thirds of the country's vineyard acreage is located in Ontario, with the rest concentrated in British Columbia and some smaller operations in other provinces. Domestic wineries provide approximately a third of the wine consumed by Canadians, while nearly three-quarters of imported wines come from France, Italy, the U.S., and Australia.

Growth Opportunities

The report outlines how Canadian wineries can continue to grow:

• The industry will continue to benefit as Canada's population ages, and the adoption of bolder brands and marketing will likely reach younger consumers
• Sophisticated consumers are willing to buy more premium wines, providing an opportunity to produce higher-value products
• There is an increasing number of wine bars in Canada
• Wineries also have room to make inroads into less-tapped provincial markets; only 22 per cent of sales in Quebec originate from Canadian wineries while more than half of sales in New Brunswick come from Canadian wines

The full report can be downloaded at www.bmocm.com/economics.