June 2009 Issue of Wines & Vines

Winemakers Over a Barrel

They want to cut costs, but stay loyal to their choices of oak

by Peter Mitham
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Marty Clubb says L'Ecole No. 41 of Washington will be purchasing fewer barrels this year..

  • Many small wineries with loyal customers aren't backing away from barrel aging in principle, because they say that would jeopardize sales. They are, however, trimming new purchases.
  • California, hit by a short crop last year, is leading the downturn as some winemakers make do with leftover barrels and spend less on new ones. A better exchange rate than last year is helping.
  • Slower sales after years of rapid growth are prompting some Northwest winemakers to hold steady or decrease purchase orders.
  • Winemakers contacted for this article say they are not switching from barrels to alternative oak products for wines above $15 or $20.

Demand for barrels in the three major grapegrowing regions of the United States may be softer this spring than in past years, but that doesn't mean smaller wineries see less value in barrel aging their wines. They're just thinking a bit harder about the decisions they're making as a tough economy squeezes cash flows and, in some cases, demand.

Many small wineries with well-established markets and loyal customers aren't backing away from barrels at all, because that would jeopardize sales. But that doesn't mean they're not reducing what they're planning to buy in 2009.

California, where wineries ambitiously bought barrels last year before being hit by a short crop, is leading the downturn as winemakers make do with barrels left over from last year, while slower sales after years of rapid growth are prompting some Northwest winemakers to hold steady or decrease purchase orders.

"We're just trying to be smarter," said Jeff Cohn, owner and winemaker at JC Cellars in Oakland, Calif. Cohn typically spends about $80,000 per year on barrels, primarily French oak with an incidental amount of American oak. He expects to spend about half that sum this year, because last year's small grape harvest left him with extra barrels.

The economy is also a factor, as it is for many smaller wineries. "You have to be wise to the economy, because it costs you a certain amount of money to make that wine," Cohn said. "If people aren't willing to pay that much, by making a few adjustments here and there you're able to lower your expenses, lower your costs and lower the price to the general public."

Cohn's own strategy, in addition to making do with barrels purchased last year, includes shifting 1-year-old barrels used for aging white wines into red production this year. They'll lend a softer finish to his reds, without modifying the flavor profile as much as a shift to cheaper U.S. barrels. Meanwhile, he's invested in a second concrete vessel on the strength of success with an initial concrete vessel acquired last year for fermenting and aging his wines. He knows other wineries are keeping an eye on pricing to see if they can pick up new and used barrels at a discount.

"We're all being very cautious about our spending this year," he said. "They're trying to find the best price they can get.…But they also want to stick to what they've been doing."

Cutting back in Washington

While consumer trends have not been a significant issue for Cohn, last year's sales figures prompted L'Ecole No. 41 in Walla Walla, Wash., to pare its barrel purchases this year.

The winery remains committed to barrel aging--indeed, it currently has 2,500 barrels aging in a facility constructed in 2003--but winemaker Marty Clubb said wine sales in the last quarter of 2008 were a quarter below tallies in the final quarter of 2007.

The drop trimmed annual sales to 33,000 cases last year, down 1,000 cases from the previous year, leading Clubb to plan a 5% reduction in this year's production to approximately 35,000 cases. While remaining ahead of sales, the move will reduce his requirement for new barrels from 400 last year to between 360 and 370 this year.

The shift just reflects the slowdown the industry is seeing overall, and the fact L'Ecole No. 41 in particular has met its current growth objectives. "When you're in a growth mode, you can absorb more new barrels than you can when you're in a stable mode," Clubb said.

Clubb won't only be buying fewer barrels, but a shift in exchange rates means he'll save additional cash on imports from Europe because the cost in U.S. dollars is also cheaper. The euro cost US$1.40 when he paid for last year's barrel order; this spring, the dollar (while not immune to shifts) is sitting in the US$1.30 range.

The expense remains worthwhile to Clubb, who said it's upper-end wines (such as L'Ecole No. 41's single-vineyard Bordeaux-style blends) that are being hit hardest by the widely reported shift down in consumer buying patterns.

"While this may have some long-term reverberations for wineries competing in a $75 to $150 price-point range, I don't think it's going to have that much impact on what we're doing long-term," Clubb said.

The current economic woes certainly aren't pushing Clubb to explore staves or other alternatives to barrels. While they're fine for wines that retail for less than $15 per bottle, Clubb hasn't found a product that can deliver the results he'd like to see for wines in the $25 to $60 range at which the majority of his wines retail. And, since his $25 wines are still selling, there's been no pressure on him to economize.

Clubb's comments echo those of winemakers at other small wineries. While many would love an alternative to barrels, winemakers we spoke to at small wineries said that staves, chips and the like just don't deliver the results they want, even in a down economy.

Rollin Soles, Argyle Winery

While Rollin Soles at Argyle Winery in Dundee, Ore., would love to find cheaper alternatives, he feels there's nothing that treats wines from Willamette Valley grapes as gently as oak barrels from northern France. Oak from other parts of France, Europe and the U.S. tends to deliver flavors that overwhelm the fruit of local Pinots and Chardonnays.

"The style of Pinot that most folks make, including Argyle, seems to match best with French, northern forest oaks," Soles said. "If I could get away with oak from less expensive forests, I would have long ago."

Since demand for $20 to $30 bottles of Pinot Noir from Oregon remains strong, Soles said Argyle can afford to import from France the 150 barrels it requires each year.

"Our Pinots are above $20 per bottle, and so it gives us some leeway to afford to use better oak in our case--what we would call better oak," he said.

Any change in the kind of oak he uses would change the profile Soles has established for his wines, effectively putting sales at risk. He noted that he's better off using older barrels that have been somewhat neutralized than buying barrels from beyond northern France.

While the growth of cooperages in the U.S. is leading to greater awareness of regional variation in barrels made from U.S. oak, a development that could lead to a domestic alternative, Soles' experiments haven't yielded a satisfactory alternative to date.

 Average Barrel Prices  
   2002  2008 2009 est.
 French oak  $520  $945 $900*
 European Oak  $450 $600  $625
 American Oak  $310 $352  $360
 *The reduction in price is due to a lower euro value

"We continue to try those oaks, one or two barrels at a time, in the hopes to some day expand into that program, because if the barrels are just as good as French and they cost less, that would be awesome," he said.

Alternatives to barrels haven't yielded satisfactory results, he said, though he acknowledges he just might not have found the right way to use them with local wines. But extraction differs in significant ways, he said.

Whereas the process of barrel-aging includes evaporation and the absorption of wine into the staves, extracting different flavor compounds, placing staves or chips in a tank effectively allows the wood to steep.

"It's more important to us to have that transfer in a new barrel between the aqueous inside and the non-aqueous air outside," Soles said. "With a plank or with a block, they're just sitting surrounded by an aqueous solution so they don't have that exchange going on."

Keith Bown, vice president of winemaking with Vincor Canada in Niagara-on-the-Lake, Ontario, echoed the comments from smaller wineries, noting that Vincor Canada keeps close tabs on the $2 million ($2.5 million Canadian) it spends on oak annually, with a view to keeping production costs in line with retail pricing. This year is no different.

Barrel programs are relatively consistent for wines selling at prices in excess of $15 per bottle, while anything less will have a greater chance of being aged with a barrel alternative.

"If you can sell your wines at $15-plus, you can invest in a 30% new barrel program for the volume that you're working on a four-year-cycle basis, which is pretty much the standard program on which we work," Bown said.

Vincor Canada is taking heed of the situation in California, however. With the prospect of winter damage leading to a short crop in British Columbia's Okanagan Valley this year, it asked winemakers at its B.C. properties to order just half the barrels required this spring. A second order is set for June, once they've determined if losses--initially projected to be upwards of 70% in some areas--would be realized.

Making room for experimentation

Tough economic times can be a goad to experimentation, says Jeff Cohn of JC Cellars in Oakland, Calif., some of which may have lasting impacts on winery practice.

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Jeff Cohn, JC Cellars
Cohn's own experience with concrete fermentation and aging vessels could be a case in point, he says. The latest concrete tank cost $6,000 and reduces Cohn's need for barrels, effectively reducing one of the major recurring costs wineries face.

Unlike steel, concrete is porous, and it lends a mineral character to wine that Cohn finds appealing. His experience with an initial concrete vessel last year was positive, and he hopes to continue using the vessels for the foreseeable future, barring any difficulties.

While the key for him is being able to deliver high-quality wine on a consistent basis, being able to reduce costs is an added benefit.

But experimentation has to be respectful of basic economics.

"You don't want to change your total program, because if you start changing your total program, people will notice," he says. The attention that changes attract could skew reviews and compromise the winery's niche.

"You don't want to lose perspective," Cohn says, urging wineries to implement change slowly--especially during tough economic times.


Our Northwest correspondent Peter Mitham is a freelance agricultural writer based in Vancouver, B.C. Look for his weekly dispatches at winesandvines.com Headlines. Contact him through edit@winesandvines.com.

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