06.23.2010  
 

Northwest Wineries Retrench

Some facilities close, brands are retooled and prices scaled down as industry seeks equilibrium

 
by Peter Mitham
 
Diageo tasting room Canoe Ridge Walla Walla Washington winery
 
Diageo is closing the tasting room at Canoe Ridge near Walla Walla, Wash., along with other facilities in the state, but the winery will remain in operation.
Walla Walla, Wash.  -- Growth may have come to an end for the Washington wine industry, with the number of bonded premises in the state listed in the Wines & Vines IndustryBase dropping to 591.That’s down two from the first quarter, with signs of more to follow as vintners retrench.

While many wineries have weathered the economic challenges of the past two years, the dust is starting to settle as vintners decide to shut tasting rooms or close down altogether. Corporate heavyweight Diageo PLC is closing the tasting rooms for Canoe Ridge Vineyards in Walla Walla and Wapato’s Sagelands Vineyards later this month, while Seattle-based Precept Wine Brands is reducing production at its Alder Ridge facility to focus on production at its wineries in Prosser and Walla Walla.

“We’re really excited about the growth we’re seeing in our Washington wine portfolio. It was more in this specific vintage: How are we going to maximize our production capabilities?” Alex Evans, vice president of marketing with Precept Brands, told Wines & Vines.

Alder Ridge has a production capacity of 25,000 cases, but Precept plans to crush a mere 100 tons of grapes this season as it retools its portfolio to accommodate labels it adds as part of the Corus acquisition in January 2010. Precept has 12 core brands in Washington, Idaho and Oregon, with key labels including Washington Hills, House Wine and Waterbrook. It also produces dozens of regional and private label wines.

“(We’re) strategically trying to figure out our production,” Evans said, noting that the issue was discussed most recently at an executive meeting this morning. “As we’ve merged these two entities and we’ve added to our core portfolio through acquisition and building facilities over the past few years, what we’re doing right now is assessing our core brands we want to drive over the long term, our core facilities that we want to continue to be substantial pieces of our portfolio, and figure out what that mix means.”

Precept has approximately 3,000 acres of vineyard in Washington, Oregon and Idaho, and a production capacity of 600,000 cases. Its Willow Crest facility in Prosser produces aromatic white wines, but its flagship facility is the new 350,000-case Waterbrook Winery on the road into Walla Walla.

Alder Ridge, a boutique brand, is dwarfed by comparison, but the 800-acre Alder Ridge vineyard produces wines for which Precept sees a market.

“The Alder Ridge brand we do want to maintain, because it’s just such a spectacular vineyard site and we do want to have an estate wine that can really represent the quality that we’re making (from) that vineyard,” Evans said. Precept hopes to offer the facility to another winery until it can make use of the facility itself.

Diageo spokeswoman Zsoka McDonald also characterized her company’s move as a paring back of its operations rather than an outright closure. “In May, Diageo announced that as part of a review of its wine business in the United States, it would be making some fundamental changes to its U.S. wines business, Diageo Chateau & Estate wines,” she said in a statement e-mailed to Wines & Vines. “As part of this review, Diageo will be closing visitor centers at several locations, including the visitor center at Canoe Ridge. While we are closing the visitor center, the Canoe Ridge winery will remain operational.”

Competition among tasting rooms in Walla Walla has increased with the growth of local wineries in recent years. Several have opened tasting rooms in the Seattle suburb of Woodinville, but some Walla Walla wineries we spoke with this past February (including Saviah Cellars) said drive-by traffic was steady last season with people vacationing closer to home.

Alternate strategies
While the past two years have seen wineries pursue a number of retrenchment strategies like shifting production into more affordable brands or increasing their focus on direct sales, Alex Sokol Blosser, president of the Willamette Valley Wineries Association, said shutting down a tasting room isn’t something he’d do.

Sokol Blosser’s Dundee, Ore.-based Sokol Blosser Winery has actually added sales staff, something Precept Brands has also done, in a bid to increase its market penetration. “Everyone’s making good wine. There’s a lot of good wine out there. It’s just who is able to better communicate it to the marketplace so consumers want to buy it,” Sokol Blosser said.

Neither has he seen other wineries shutting the tasting room doors in the year since the Oregon Wine Tasting Room in Amity, Ore.,   shut down -- something he might well have expected to happen.

Rather, wineries have cut prices in order to move stock. “I’m seeing a lot more under-$10 bottles of Oregon Pinot Noir in the marketplace,” he said. “That has never been a reality for the past five years. And now you’ve got under-$10 bottles of Pinot Noir out there. A lot of it.”

With 178 members, the Willamette Valley Wineries Association, “has never been bigger,” he said.
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