Washington Wine: A Tale of Two Industries | Wine-Searcher News & Features – Wine-Searcher

Washington state wine had a terrible year in 2020, with overall shipments down 8 percent in a year when California and Oregon wineries did relatively well.

But the findings presented this week at WineVit’s State of the Industry session also show a big divide between two unequal groups: Ste Michelle Wine Estates brands, which account for more than 65 percent of the wine produced in Washington, and everybody else.

Ste Michelle wines have been struggling since 2016, but in recent years the state’s small and medium-sized wineries were able to pick up the overall slack. That didn’t happen in 2020: many small Washington wineries did well, but not enough to make up for a 10 percent drop in Ste Michelle’s “depletions” – wines sold by distributors to retailers.

That said, plenty of smaller Washington wineries did well in 2020, especially those that already sold much of their wine directly to consumers. Wineries with tasting rooms in Woodinville, a Seattle suburb, were more likely to avoid sales drops than wineries based solely in Walla Walla, said Chris Bitter, founder of Vintage Economics.

Washington currently produces more grapes than it can sell, even after two vintages that were small for environmental reasons, said Bitter, who is not related to Allied (California) Grape Growers president Jeff Bitter. This is ironic because Jeff Bitter garners wine industry headlines annually for saying exactly the same thing about California.

“When we started this slowdown four or five years ago, we continued to plant grapes as if we were going to continue to grow at that rate,” Chris Bitter told Wine-Searcher. “Given that we actually had demand down in 2020, and we didn’t see a lot of removals of acreage, that gap between supply and demand still exists.”

Dick Boushey, who owns or manages more than 600 acres of wine grapes in Yakima Valley, said 2020 started with small wineries canceling grape contracts because they were afraid of what might happen to their sales in the pandemic.

“Then they started selling and these wineries came back to me and said: ‘We want our grapes back.’ I didn’t have them all,” Boushey said. “This past year I had to hustle a lot, but we ended up selling everything.”

Boushey and Bitter both said that the grape market was toughest for vineyards that had planted Cabernet Sauvignon, hoping to sell it to Ste. Michelle. For wineries, much depended on whether they sold their wines primarily to restaurants or to retail stores and DTC (direct to consumers).

“The most successful year I’ve ever had was last year,” said John Bookwalter, owner of J. Bookwalter Winery in Richland. “My DTC sales were up 50 percent. I think a lot of wineries of smaller size achieved that same result because they reached out to their club members. People were consuming plenty of wine at home. We’re seeing that continue now, even into this year.”

It’s all relative

Still, a dropoff for Ste Michelle can have an impact on other wineries because Washington is still under the radar for many US consumers, despite being the second-largest wine producing state. Washington makes more than three times as much wine as Oregon but doesn’t get three times as much attention. And California, which makes about 85 percent of all US wine, isn’t anxious to give up shelf space.

“When 70 percent of your state is one producer, they sneeze and we all catch a cold,” Bookwalter said.

Ste Michelle wines actually sold 5 percent more in 2020 in the chain retail stores measured by IRI, but not only was that not enough to make up for the loss of restaurant sales; it wasn’t the same enormous growth in grocery-store sales that other regions saw, meaning the company actually lost market share.

Ste. Michelle has had big management shakeups since 2016. Juan Muñoz-Oca, Ste Michelle’s chief winemaker, said it is making several changes to try to attract younger consumers, including a redesign of the 14 Hands brand that coincides with a change in winemaking style.

“It’s important for us to pay attention to what the consumer wants,” Muñoz-Oca told Wine-Searcher. “We’re paying a lot more attention to people having wines with a meal. We went through a period as an industry when people were really happy with the first sip of a wine. Could you have two glasses? Probably not. There’s a bit of an evolution with the way we eat and the way we drink.”

Muñoz-Oca said the flagship Chateau Ste. Michelle brand is also getting a redesign, and he cited a new brand, Fruit & Flower, that has a low-alcohol wine spritzer as well as a more traditional-looking Chardonnay.

“This year the first Gen Z folks are turning 21,” Muñoz-Oca said. “Maybe we can hook them into a spritzer and they graduate to the Fruit & Flower Chardonnay, which is in a 750. Hopefully they keep evolving until they become collectors.”

But in the meantime, last year and this year Ste. Michelle will pay growers by the acre instead of by the ton, and ask them to deliver smaller crops.

“That will give us more expensive tonnage but should also result in better wines,” Muñoz-Oca said.

Washington is coming off of two challenging vintages, with harvest season bedeviled by frost in 2019 and fire in 2020. Muñoz-Oca is optimistic about 2021, both in vineyards and in stores and restaurants.

“We have already seen people flooding our tasting rooms as soon as they are able to go,” he said. “I feel like the roaring ’20s are going to be good for our wine industry.”