From humble origins, Canada's wine industry has risen to become a multimillion-dollar industry.

An Ontario grape farmer keeps an eye on grapes destined to become ice wine in 2007. Small vineyards complain of an uneven playing field when it comes to selling their wines in Canada. (Dave Chidley/Canadian Press)

In Ontario alone, the industry was worth $575 million in 2008 — almost double its value a decade ago.

But this year, winemakers across the country have had to deal with inclement weather, new passport rules that have dissuaded U.S. oenophiles and a global recession that ate into the purchasing power of the Canadian industry's domestic clientele.

Worse still is a labelling loophole that they say is killing the burgeoning industry at the roots.

In Canada, an agency known as the Vintners Quality Alliance is responsible for overseeing Canadian-made wine, ensuring that it adheres to regulations regarding proper wine appellation, quality control, and labelling issues. The agency bestows the "VQA" label on all approved bottles.

In Ontario, some 106 wineries meet the designation. But under a separate program, a handful of large Canadian wineries are allowed to import cheap foreign wine, blend it at Canadian facilities and bottle and sell it under the "Cellared in Canada" label.

"It's a mealy-mouthed term for wine that's almost exclusively a blend of imported wines," international wine author Jancis Robinson told CBC News. "It's a wine given superficial 'Canadianness'," she said.

Pinot Grigio grapes ripen on the vine of a California vineyard earlier this month. Cheap wine from foreign wine regions such as California is often imported and blended and classified as Cellared in Canada. (Eric Risberg/Associated Press)

Under the program, Ontario producers are allowed to use the label "Cellared in Canada" on wine as long as 30 per cent of the wine is domestically sourced. That means up to 70 per cent of the wine actually comes from cheaper wine-producing regions in South America and elsewhere.

British Columbia rules are even more lax — the label can be used on wine bottled in the province even if it's made entirely of foreign wine.

Some 40,000 tonnes of wine a year are imported to be used in bottles that will be labelled with the CIC banner.

"It's a much more romantic term," Ontario winemaker Seaton McLean of Closson Chase winery in Prince Edward County, Ont., tells CBC News. "It conjures up images of cellars and dim lights and barrels and oak.

"It's a lot more romantic than saying 'trucked in via flexi-containers'."

Grape wrath

John Peller is CEO of Andrew Peller Ltd., one of the large Canadian wineries that uses the "Cellared in Canada" label.

"I think [some of the critics] are being a little unfair," he told CBC News. Calling the Cellared in Canada division a "key segment" of his business, he estimates it makes up roughly 30 to 40 per cent of Peller's total sales.

"We're really proud of these wines. These are wines consumers are really happy with," he said. "It's the winemaker's art with these blends — less about origin, more about taste and value."

He rejects the notion that it's somehow misleading. The company complies with all labeling laws, and indeed, is in the process of putting more information on the labels for discerning consumers.

"We're not hiding anything," he said. "We're anxious to be transparent about it."

In many cases, he points out, the domestic grape content is well above 30 per cent for many wines labelled Cellared in Canada, often reaching as much as 80 to 90 per cent.

'Vast, vast percentage of the market'

But the Cellared in Canada label is killing the Canadian wine industry, small winemakers say, because it makes consumers think they're buying local product when that may not necessarily be the case.

It's particularly hard to swallow for local grape growers when they see their harvest die on the vine because they can't find buyers. St. Catharines, Ont., grape farmer Don Wylie said he will have to dump 80 per cent of his crop this year because he can't find a buyer.

Customers at a liquor store in Ontario. (Darren Calabrese/Canadian Press)

"Eight-thousand tonnes of grapes will drop on the ground because there's no home for them," he told CBC News. "This is the third year [that's happened] and we're in very serious shape."

The large wineries hold an insurmountable advantage, they say.

"They have a vast, vast percentage of the market," McLean said. According to VQA data, in 2008, more than 3.3 million litres of VQA Ontario wines were sold at the retail level in Ontario, bringing in $77 million. "At the same time, [Cellared in Canada] brands sold 23 million litres for total revenues of $193 million," McLean said.

"I would call it useful for people using it, but I'd rather just see them calling it what it is — it's blended wine made from domestic and imported juice," he said.

Few are arguing for the abolishment of cheap, foreign wines being available to Canadian consumers.

Blended wines are prevalent across Europe, despite the presence of stringent labelling laws.

"The people who buy it couldn't care less where it comes from and that's fine," Robinson said. "But I think Canada is a grown up country and I think Canadians deserve truth in labelling," she said.

"The worst thing about the CIC phenomenon is what it says about Canadian wine — its existence tarnishes the reputation of all Canadian wine, some of which is extremely good," Robinson said.

"If a country can't sort out its wine labelling, why should the rest of the world take it seriously?"