Discounts Boost Northwest Wine Sales

Vintners cut prices and create brands to keep cash flowing
 
 
Willamette Valley Vineyards bought surplus juice from neighboring vineyards to create a 2007 Pinot Noir, which will retail for less than $30 per bottle.Victoria, B.C. -- Wine is one of a handful of products economic pundits deem recession-proof, but many Pacific Northwest producers are reducing prices to keep stock moving.

Consumers have shown a willingness to pay less for wine since last fall, with the degree of the shift clearly seen in figures released earlier this year by the British Columbia Liquor Distribution Branch. Sales of B.C. wines bearing the Vintners' Quality Alliance (VQA) label fell 15.9% in the first quarter of 2009 compared to the same quarter a year earlier, while sales of bottles in the $13 to $15 price range were off a mere 3.1% after posting growth of 2.5% in the 12 months ended March 31, 2009.

The strongest growth was seen in bottles priced at less than $7 (the foregoing prices are all in Canadian dollars; $1 CAD = US$0.93).

The trend mirrors shifts in the U.S., where Northwest vintners have been responding to the trend by reducing their prices. A sale this week at Valley View Winery in Oregon's Rogue Valley saw price tags on a number of wines slashed by at least 15% per bottle, with greater savings on purchases of one and two cases.

A bottle of 2007 Viognier that regularly retails for $22 was reduced to $18, while bottles of its 2008 Chardonnay have been reduced from $14 apiece to $10 each. Buy a case of the 2008 Chardonnay, and the per-bottle price drops to $8.

The discounts aim to attract new customers at a time when price-sensitive consumers are open to change, Michael Wisnovsky, co-owner of Valley View, explained to Wines & Vines. "Instead of losing market share we want to gain market share," he said.

The initiative has been a success in its initial days, he said, with 10 new accounts added to Valley View's distribution list. The longer-term payoff stands to be in securing steady supplies of prime grapes from local growers and reducing overall production costs.

Wisnovsky said Valley View produces about 6,000 cases per year, but if production of reasonably priced Chardonnay could boost that to 8,000 cases, then fixed production costs could be spread across a larger number of cases and improve overall margins. "Even if we can make some money on those 2,000 cases, your (per-case production price) on those other 6,000 cases just plummets," Wisnovsky said.

Generating cash to help adjust to ongoing demand is partly what prompted Turner, Ore.-based Willamette Valley Vineyards Inc. to increase its production of value-priced wines. WVV has run short of some of its Pinot Noir wines in recent years, but it is taking advantage of excess juice from the 2007 vintage that other wineries can't use to boost supplies of wines it can retail for less than $30 a bottle.

WVV president Jim Bernau told Wines & Vines earlier this year that such offerings help keep cash flowing, giving smaller producers an outlet for juice that might not be suited to premium products (especially when customers are more discriminating) while helping wineries such as his own meet demand and fund ongoing improvements.

A move earlier this year by CedarCreek Winery in Kelowna, B.C., to simplify its wine list also is intended to meet a more price-conscious consumer. CedarCreek winemaker Tom DiBello is currently bottling a  blend of six red grape varieties that will retail for CAD$19. Next week, he'll be bottling a Merlot that will retail for $1 more. Both will hit store shelves in September, and will be sold under the standard CedarCreek label.

Using juice that would otherwise have gone into upper-tier Bordeaux-style Meritage wines, DiBello said the cheaper wines make sense in an economy where consumers are more price-conscious. "The economics right now, people--at least in Canada--aren't willing to pay more than $20 for a bottle of wine," he told Wines & Vines, noting that the goal is to keep the wine flowing--"and hope (consumers) don't get used to good wine at that price."

Whatever the long-term impact on consumer buying habits, Walter Gehringer of Gehringer Brothers Estate Winery, Oliver, B.C., said lower-priced wines are finding favor with consumers. "It has made a significant difference for us," he said of a discount Gehringer Brothers started applying to its list of 22 products this past March.

New releases are hitting the shelves at a dollar less per bottle than last year, mirroring the trend Gehringer saw gaining ground in the U.S. last fall. The discount has helped sales stay on track. "We were down, and then that brought things back up," he said of the discount.