The outlook is bright for Washington State’s wine industry. Wine sales continue to post gains, retail wine prices have strengthened, and Washington’s 2013 crop was a record, with excellent quality. But with an ever-expanding number of wineries in the state, distribution will be key for the success of small wineries.
“Washington’s wine grape crop is estimated to come in around 220,000 tons,” said Trent Ball, director of Yakima Valley Community College’s Vineyard and Winery Technology Program. “That’s a dramatic increase from last year’s production of 188,000 tons.”
The increased volume is due to new acreage coming into production, but also reflects the lingering impact from a 2010 Thanksgiving freeze that killed vines in Horse Heaven Hills and damaged buds in other locations. It took until 2013 for those vines to fully recover. Industry sources estimate that 50,000 acres are now planted to wine grapes in Washington, up from the 43,000 acres reported in the last industry survey conducted by the National Agricultural Statistics Service in 2010.
Last year’s long, warm summer resulted in a record number of heat units measured as growing degree-days.
Degree-days are calculated by taking the average of the daily maximum and minimum temperatures and comparing it to a base temperature of 50°F. Degree-days for the 2013 season (April 1—November 1) totaled 2,860, recorded at Washington State University’s Irrigated Agriculture Research and Extension Center in Prosser. A record number of 2,910 degree-days was recorded by WSU in 2003.
For some growers, Merlot yields were down last year because of high heat, but others reported Cabernet Sauvignon yields higher than expected.
“The warm temperatures allowed just about every grape to ripen, even those that sometimes struggle,” said Colin Morrell, grower and vineyard director for Hogue Cellars in Prosser. “It was a good year for Cabernet Sauvignon.”
Joy Andersen, winemaker at Snoqualmie Vineyards in Prosser, agreed that 2013 was a good year for Cabernet, a variety that needs warm temperatures to fully ripen.
Ball reports that off-premise U.S. wine sales, tracked by A.C. Nielsen, continue to increase. Domestic wine sales were up 6 percent in 2013 over the same period of the previous year. The total sales volume has climbed from 639 million gallons in 2003 to an estimated 856 million gallons in 2012.
But while Americans consume more wine each year, the retail value slipped in 2009 when consumers tightened their spending habits due to the economic recession.
“In 2007, ’08, and ’09, table wine consumption went up, but the retail value of wine went down,” said Ball. “But since 2009, retail values have been increasing, and it looks like we’re back into normal buying patterns. Americans spent an estimated $34.6 billion on total wine sales in 2012.”
Two of Washington State’s leading varietals—Chardonnay and Cabernet Sauvignon—also are leaders in wine market share. Chardonnay makes up 27 percent of the U.S. wine sales, with Cabernet Sauvignon following at 20 percent. Merlot, another leading Washington varietal, makes up 11 percent of the market, as does Pinot Grigio, also known as Pinot Gris.
Red blends posted the highest increase in sales (21 percent) over the past year, although the category makes up less than 10 percent of the market, he said.
“A varietal trend to watch is Riesling,” he said, adding that the Riesling fad appears to be waning. Riesling sales were down by 3 percent from the previous year, and Merlot sales also declined slightly.
Other retail wine trends he shared include:
• Moscato wines are still hot.
• Sweet reds are one of the fastest growing wine categories.
• Pinot Noir continues to stay hot.
Cabernet Sauvignon is one of Washington’s signature varietals, and the state’s wineries have developed a good reputation for producing valued-priced, premium wines.
“The price points showing more than 10 percent growth in sales are the $11.00 to $14.99 and the $20-plus categories. Those are our strong price points.”
While there’s industry optimism in Washington, a report released last fall by Northwest Farm Credit Services highlighted concerns of market accessibility for some wineries and off-balanced inventory levels.
Although there were record low inventories before the 2012 crop, the huge California crop of 4 million tons in 2012 topped all records and quickly filled the wine pipeline.
“Spot prices for bulk wines are expected to be soft until inventories are better balanced,” the Farm Credit outlook reported.
Washington State is not a large bulk wine producer, but wine inventories in California, the nation’s largest wine producer, greatly impact the nation’s wine market. The 2013 wine grape crush in California is estimated to be around 4 million tons, which could be a record or near record crop.
“Due to continued consolidation among distributors, wineries’ market access will remain an ongoing challenge, especially for smaller brands,” stated Farm Credit.
Consolidation is not a new trend, but as the number of wineries in the state continues to increase—at last count, there were about 800 wineries bonded in Washington—the wine shelves only get more crowded.
Small wineries that produce more than they can sell directly must rely on the services of a distributor. A good distributor can help expand the market reach of a small winery. But with consolidation in the distributor world, there are fewer distributors interested in representing the low volume of small wineries. •