Oregon wineries feel the economic squeeze

Vintners in the state are trying a variety of strategies to retain hard-fought brand strength

Over the past five years, Oregon's $1 billion wine industry has done nothing but rocket upward -- doubling from 200 commercial wineries to more than 400 and setting annual records for sales, acreage planted and volume produced.

But now, winery owners are struggling with the same financial crunch chilling virtually every other segment of the economy.

With restaurant sales dipping and opportunities for increased distribution closing fast, wineries are cutting profit margins, dropping prices and increasing advertising in efforts to retain the brand strength they've fought for decades to achieve. 
   
 
"I've worked in wineries for 23 years now, and I've never felt more caution than I feel right now," said Bill Hatcher, a principal with A to Z Wineworks in Dundee. "Some people are suddenly finding themselves in a world of hurt."

Industry veterans are quick to note that, until the past handful of years, selling Oregon wine was never easy. In the industry's early days, they note, aficionados elsewhere were usually surprised to learn that Oregon even made wine.

The 2004 movie, "Sideways," which virtually starred Oregon's flagship grape, pinot noir, is credited with changing much of that. Today, the red-grape varietal remains the country's fastest-growing wine, increasing at an annual clip of nearly 15 percent.

The recession, however, is throwing immediate and significant challenges at winery owners, who already had their hands full with increases in the costs of materials and services such as glass, corks, fuel and freight.

At Sokol Blosser Winery in Dundee, that means working with national distributors to trim by-the-glass prices on red and white blended-grape offerings sold in restaurants. Sales of those wines are critical in financing the production of premium pinot noir.

"Our blends have definitely been hit the hardest by contractions in the economy," said Alex Sokol Blosser, the winery's co-president. "The good news is that pinot noir is holding steady. We're very pleased about that."

The winery, in an effort to stimulate wine-country tourism over the long Thanksgiving weekend, also paid for its first radio ads. "We're working very hard at trying to keep our name out there," Sokol Blosser said.

At Cooper Mountain Vineyards in Beaverton, staff members braced for a 10 percent drop in Thanksgiving weekend foot traffic and sales. They were pleasantly surprised when both statistics, while not increasing as in the past, at least matched last year's figures.

"We're all expecting higher price points to suffer," said Barbara Gross, the winery's marketing director. "Restaurants, in particular, started asking for lower prices points a long time ago."

If past recessions are any measure, alcohol consumption won't go anywhere but up, said Craig Eastman, director of business development for Northwest Core Collection, a Portland-based company that distributes and helps market wine for seven Oregon wineries and two in Washington.

But current indications are that consumers are "trading down" by buying less-expensive wines. That means vintners will have to increase sales of so-called value brands if they want to maintain profit levels.

Benjamin Kirschner, domestic portfolio manager for Frederick Wildman & Sons distribution company in New York City, said he is seeing a slight slowdown in retail sales of Oregon wines.

"But relative to other categories in the marketplace, Oregon pinot noir is doing well," Kirschner said. "It has a very loyal following."

Jacki Bessler, co-founder of Barbara Thomas Wines in Yamhill, saw sales start to slacken a month or two ago but remains optimistic.

"This is not an economy to be increasing prices, obviously," she said. "But things will turn around at some point. We're confident that as long as we continue to make a good product, people will continue to buy it."