Okanagan wine sector to get $100 million investment

Many other wine industry entrepreneurs are also pumping capital into the region 

By Glen Korstrom | July 21, 2017, 4:30 p.m.

Here is a rendering of the winery that Vancouver’s Bai family plans to spend up to $50 million to build. The family is spending a similar amount to buy land and plant vineyards | Phantom Creek Estates

Vancouver’s Bai family is pumping an estimated $100 million into its wine business in the Okanagan in a move that industry watchers say is among the largest investments ever committed to B.C.’s wine industry.

The only other investments that could come close to that value – using standardized 2017 dollars – would be Anthony von Mandl’s reconstruction of Mission Hill Family Estate winery between 1996 and 2002, and the joint venture between the Osoyoos Indian Band and Vincor International to build Nk’Mip Cellars winery and a desert cultural centre and accommodations, which also opened in 2002.

The Bai family, headed by patriarch Bai Jiping, has spent about $50 million on land and intends to spend about $50 million more to build a winery in the Black Sage Bench region of the south Okanagan, said Ingo Grady, who is president of the family’s Phantom Creek Estates winery.

So far, the family has accumulated 67 acres of planted grapevines in that region. It has also purchased 20 acres of orchard land in the area and another 160 acres of unplanted future vineyard land near Cawston, Grady told Business in Vancouver.

The family has accumulated much of its wealth from flax seeds and flax seed oil and has holdings in places such as Saskatchewan, B.C. and China.

Its $100 million investment includes the future planting of all of that land as well as building the winery.

“When the winery is finished in mid-2019, it will be close to 72,000 square feet, with 50,000 square feet of that dedicated to production on two levels underground,” Grady explained.

“Levels 3 and 4 will be above ground and be dedicated to hospitality with tasting rooms, a wine shop and a multi-purpose room linked to a small amphitheatre with seats for 400 people.”

The plan is to also open a restaurant with 120 seats, including 70 on a patio.

“It’s a significant investment, especially when you consider how far down south it is,” said Miles Prodan, CEO of the BC Wine Institute.

“What we’re talking about is a place to go to experience wine as opposed to a place to quickly knock off on a list as you’re trying to take in four or five wineries during a day.”

Encore Vineyards Ltd. owner Harry McWatters, who sold some of the land to the Bai family, agreed with Prodan that the Bai family's new destination winery will draw tourists to the Black Sage Bench region. That will help sales for the many wineries already in the area, such as Burrowing Owl Estate Winery, Stoneboat Vineyards and Black Hills Estate Winery, he added.

(Image: Workers position a tank at the new Encore Vineyards Ltd. winery in downtown Penticton | Chris Stenberg)

McWatters is one of many entrepreneurs who are investing smaller, but still significant, amounts of money to build wineries that are also destinations because they have restaurants or other attractions.

McWatters bought a former theatre complex in downtown Penticton and is spending $7 million to convert it into a 20,000-square-foot winery, complete with production facilities, a 50-seat restaurant patio, barrel room and presentation centre.

The winery is the Okanagan’s first urban winery. Even though it is located on pricier land than a rural vineyard property, it makes financial sense because it will stay open year-round and likely get more traffic from visitors to Penticton and those who live in the Penticton area, McWatters said.

The lack of proximity to a vineyard is not a problem because Encore buys from many grape growers.

“We’ve contracted grapes from a wide range of growers all over the valley so we’re really in the centre of the vineyards,” he said.

McWatters plans to crush his first grapes in the new facility in September and open the restaurant next year.

Fitzpatrick Family Vineyards owner Gordon Fitzpatrick has similarly invested in a destination winery.

(Image: Fitzpatrick Family Vineyards opened a destination winery, complete with a restaurant, in May | Fitzpatrick Family Vineyards)

His family built a 20,000-square-foot winery on its long-owned Greata Ranch vineyard using capital partly derived by selling its CedarCreek Estate Winery to Mission Hill owner von Mandl in 2014.

The Fitzpatricks’ winery and 66-seat restaurant opened to the public in May.

Other entrepreneurs have similar ideas for the future.

“We’re breaking ground on a big renovation of Mt. Boucherie [Family Estate Winery] in the fall and it will probably be a year-and-a-half to two-year renovation,” said Rust Wine Co. principal Jesse Harnden.

He estimated that it would cost $7 million to transform the space with a new tasting room, barrel cellar, restaurant and bed and breakfast.

“After that, we have a plan to build another estate winery in Okanagan Falls but we’re taking it one step at a time.”

(Image: Rust Wine Co. spent hundreds of thousands of dollars to build the above small winery in the past year. Future plans involve building a large winery on a site that it bought last year. That site includes land and the small Mt. Boucherie winery. Principals in Rust Wine Co., including leading investor Sonny Huang, plan to spend $7 million to rebuild that winery starting in the fall) •