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09.29.2010  
 

Oregon Winemakers Try New Strategies

New négociant brand takes advantage of grape, bulk glut as harvest begins

 
by Peter Mitham
 
 
Guild Winemakers
 
Portland, Ore. -- Oregon winemakers are on tenterhooks awaiting the 2010 harvest, but many are preparing for another two years of low wine prices with value-oriented brands in the fore.

The past two years have seen consumers gear down in what they’re willing to spend on a bottle of wine. Decent bottles of Pinot Noir are available from Oregon vintners for less than $10 apiece, and the trend shows no signs of stopping. The value proposition is still key, as four winemakers in Portland demonstrate.

John Grochau (Grochau Cellars), Vincent Fritzsche (Vincent Wine Co.)  and Anne Hubatch (Helioterra Wines), as well as the enigmatic Patrick “X” (he works at a Willamette Valley winery and prefers to remain anonymous), recently formed the Guild Winemakers and use their expertise to produce négociant wines. Taking a leaf from the playbook of California’s Cameron Hughes, the quartet has started producing numbered lots of red and white wines: First, 40 cases of white wine made from Oregon grapes and 300 cases of a red blend using fruit from Washington state’s Columbia Valley. The wines recently hit store shelves in Portland, the group’s target market, at $12 and $13 per bottle, respectively.

“Bulk wine is still showing cheaper than the fruit. It seems the cost of the grapes has not come down as much as the bulk wine,” Hubatch told Wines & Vines this week. She noted that a ton of Pinot Noir can be had for $1,100, while a gallon of the wine sells for $15 per gallon, bulk.

Between the economics of grape production in Washington state, which she feels are better than in Oregon, and the ongoing abundance of grapes in Oregon, Hubatch said there are opportunities for winemakers to produce wines that serve a niche market with reliable, drink-now wines -- and not just cheap Pinot Noir.

“We would rather fill the niche of sub-$15 red blends (mainly big reds) than compete with the local value-priced Pinots,” she said. “We offer a means for others to sell excess wine that they might not have a method to move.…There is a lot of wine out there that fits that requirement that is between $8 and $14 per gallon.”

Guild Winemakers released its Lot No. 1 wines in September, and Hubatch expects subsequent lots to appear on a quarterly basis, or as demand allows. The second lot, for example, is slated to appear in November. She hopes it will be able to capitalize on the momentum of the first lot, with the third and fourth lots responding to consumer demand and the selection of bulk wine available.

Hubatch didn’t rule out the Guild buying grapes and producing its own wines, which it did with the first lot of white wine. “I think there’s going to be a lot of fruit left hanging and a lot of growers scrambling within the next couple of weeks to get anyone to take their fruit, and then maybe we would consider producing as well as bulk wine purchasing,” she said. “Despite the fact that it’s almost Oct. 1, I think there’s a lot of change that’s still going to happen within the grape market within the next month.”

Value A to Z

The vagaries of the current market in Oregon mean the Guild brand will likely have legs for some time. Hubatch noted that A to Z Wineworks in Dundee, Ore. has succeeded with its own value-oriented wines since 2002. Sam Tannahill, director of viticulture and winemaking at A to Z, agreed with Hubatch’s assessment that Oregon grape prices aren’t poised to rebound any time soon. In fact, he anticipated further declines.

“I don’t think we’ve hit the bottom of pricing deflation in Oregon,” he said. “I think we’re actually seeing the start of it this year, and it will probably get worse before it gets better, the ‘worse’ being next year.”

With harvest in Oregon set to start (A to Z expects to receive some fruit today from the Columbia Gorge AVA), Tannahill expected growers will find it difficult to sell fruit this year and next, precipitating price decreases for the next two to three years depending on the strength of the economy.

While this will put pressure on growers, and allow some wineries to take advantage of tough times, he pointed out that many wineries are stepping back from purchasing in an effort to avoid tying up much-needed cash in inventories. (The quarterly release strategy Guild Winemakers is embracing promises a steadier cash flow, as it doesn’t require a single massive purchase of grapes or wine.)

“There is fruit out there to purchase but no one’s really buying, therefore (grape) prices have in essence stabilized to a certain degree,” Tannahill explained.

On the other hand, if wine sales go well in October and November -- and there’s no guarantee this will happen, given lackluster summer sales --  then there could be an uptick in demand for grapes that would benefit growers. This year’s late harvest is benefitting winemakers by giving them time to assess their requirements closer to the peak holiday buying season.

The combination of uncertainties means 2010 could yield a lot of cheap fruit or bulk wine. While this would create short-term opportunities, Tannahill doesn’t consider this strategy viable over the long term. And if too much goes unsold, he fears some growers may mothball vineyards.

It would be an ironic counterpoint to the 2010 harvest, which Tannahill expects will yield fruit on a par with 1999. While heavy September rains swelled grapes and prompted some to split, boosting disease pressure, most sites are drying out and sugars are accumulating nicely. The forecast for the next two weeks is promising,

“We have the potential, at least, for a very good vintage. Where I was very worried about the weather two weeks ago, I’m now less worried,” he said.
A to Z expects to begin harvesting from its Willamette vineyards next week.

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