Andrew Peller warns of wine tax threat

Andrew Peller warns of wine tax threat

Canadian wine producer Andrew Peller has reported a slight dip in wine sales in the first quarter of its fiscal year and warned that a new tax will damage full-year earnings.

Net sales slipped to CAD64.5m (US$61.8m) for the three months to the end of June, compared to CAD65m in the same period of last year, Andrew Peller said this week. Despite the dip, the Ontario-based wine group was upbeat on the performance and on wine sales trends in North American generally.

"We are pleased with the performance generated through the majority of our trade channels in the quarter, and specifically the return to steady growth at our estate wineries resulting from the gradual recovery in the North American economy," said the firm's president and CEO, John Peller.

Currency gains and cost controls helped the group to increase net profits by 24% for the quarter, to CAD4m. 

"Looking ahead, we are confident our ongoing initiatives to enhance efficiency and productivity, combined with improving trends for grape and wine costs, is expected to lead to further growth in cash flow and earnings through the balance of the year," said Peller.

The company criticised Ontario authorities for introducing a "discriminatory tax" on wine as part of efforts to harmonise sales tax in the province. From 1 July, authorities have begun chargin a levy on so-called Cellared-In-Canada wines (CIC) sold in private retail stores in Ontario.

CIC wine that is made through the blending of wine made from domestic grapes with wine purchased on international markets. Andrew Peller sells CIC wines via its retail stores.

"The company estimates that the cost of the levy to the company, on an annual basis, will amount to approximately CAD4.3m or approximately CAD3.0 million through the balance of fiscal 2011," said Peller. 

"We believe this is an unfair and discriminatory levy, and we, along with other industry participants, are in discussions with the Government to mitigate its impact on the Ontario wine industry," said CEO John Peller.