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01.10.2014  
 

Outsiders Increase Northwest Winery Profile

National distribution and recognition may grow with vineyard purchases

 
by Peter Mitham
 
 
“columbia
 
In recent years E. & J. Gallo reduced production volumes at Columbia Winery, which is purchased in 2012.
Benton City, Wash.—The prospect of greater national distribution—and, in turn, greater recognition for Northwest wine—is one of the benefits many vintners mention when talking about the spate of deals completed in the region during the past few years.

E. & J. Gallo’s purchase of Woodinville, Wash.-based Columbia Winery and Covey Run Winery from Ascentia Wine Estates in 2012 and the joint venture Charles Smith and Charles Bieler struck with Trinchero Family Estates a year ago to handle distribution of their Charles & Charles label were seen as bringing national attention to the region.

“Now the American wine business and the consumer is going to take Washington (state) even more seriously,” winemaker Charles Smith told Wines & Vines at the time.

Within weeks, Jackson Family Wines was closing acquisitions of hundreds of acres of vineyard in Oregon, becoming the single-biggest vineyard owner in the state. The moves were big enough to change the state’s game, bringing attention to a state that has long sought to extend its national presence (see “Start Spreading the News”). 

Awareness of wine quality
“There’s just beginning to be much more openness to look at the wine quality that’s being produced up in Oregon and Washington,” Mario Zepponi, a partner at Santa Rosa, Calif.-based Zepponi & Co. told Wines & Vines in a review of the deals done in 2013. “That openness typically comes when you see transactions where larger wineries enter.”

A large, well-connected winery brings the clout many local wineries don’t have.

“There’s not a lot of real big horses in those markets. So the ones that are going to be able to come in and change the market are the outsiders,” Zepponi said.

This is the hope many have for Duckhorn Vineyards of St. Helena, Calif., which succeeded in purchasing 20 acres on Red Mountain in late December 2013 after losing out to Canada’s Aquilini Investment Group for a slice of the mountain a month earlier.

Aquilini’s snap purchase of 670 acres at auction Nov. 23 was greeted with shock. Many in the industry questioned what value an unknown buyer and unproven grower could deliver Red Mountain.

Duckhorn, by contrast, is seen as better able to raise the mountain’s profile. It’s an established player with enough production to have national reach—something just a few Washington state wineries enjoy.

“They’re an established brand. For Washington, that’s been our weakness. We don’t have enough wineries with volume to go national,” said veteran grower Dick Boushey, who advised Duckhorn on the purchase of its parcel.

Big players think local
But if the big players are welcome, they’re thinking local.

Rutherford, Calif.-based Cakebread Cellars last year launched Mullan Road, a label producing wine with fruit from Walla Walla. Duckhorn hopes to craft a unique complement to its California portfolio with Canvasback, its Washington state brand. More recently, Gallo has reduced production volumes and streamlined production at Columbia Winery (production of 2012 wines is reportedly 80,000 cases—sizeable for Washington state, but down significantly from past years).

The strategy these producers are pursuing reflects the luxury large wineries have to pursue smaller projects without compromising established markets—something smaller, growing wineries often lack.

It’s that balance between large-scale production and service to boutique wineries that Boushey feels the Aquilini family will need to bear in mind as it drafts plans for its Red Mountain holdings.

Wineries aren’t standing in line to buy fruit from a new operator with a new vineyard, regardless of how well-regarded the Red Mountain appellation is, Boushey said. They’ll take small quantities of grapes at first, if they’re interested, and cultivate the relationship as well as find how the fruit fits with their wine program.

Moreover, production of Red Mountain’s coveted fruit is increasing, creating more competitive conditions for growers. More than 500 acres of vineyard have been developed in the past three years alone.

Red Mountain’s reputation was built on the production of fruit for premium wines, but rising production will see how much demand there is from other segments of the market.

“It’s got a good name, but boy, that’s a lot of fruit,” Boushey said. “It will be a good gauge of how strong this wine market is for Washington.”

It’s h ere that Boushey believes an untested producer like Aquilini has opportunities to develop the market for Red Mountain grapes. Channeling the grapes that reflect the character of Red Mountain to larger wineries will bring Aquilini the revenue it needs to make business sense of its purchase, and may help to pique interest in the appellation among consumers.

“You need to talk to the big guys,” Boushey said. “That will be your foundation, and then you can break off certain parcels to the small guys. But all these small guys will only want to take (some fruit) to play with it, to see what kind of fruit it is, and see if it’s something they want to commit to long-term.”

But any grower that succeeds in both expanding distribution and recognition for the mountain’s fruit and developing vineyards serving top-tier producers will write the next chapter in the history of Red Mountain.

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