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Monday, Feb. 09, 2009

Economy puts squeeze on Washington wine industry

Amid the buzz about the 2008 vintage and Washington's mounting wine successes, some attendees at the Washington Association of Wine Grape Growers annual convention and trade show in Kennewick said they're starting to feel the pinch of the recession.

Though optimistic about the industry's continued growth, wineries and supporting businesses in Washington report that some consumers are buying less expensive bottles of wine and wineries are trying harder to keep costs down.

"We've definitely seen a slowdown in the last four months," said Marty Clubb, owner and managing winemaker for L'Ecole No. 41 near Walla Walla.

People are buying bottles instead of cases, he said, and restaurant wine sales seem to be struggling.

Still, retail sales are still holding on and Washington wines continue to be well-priced compared with those from other regions, Clubb said.

It's a little early to tell just how much the recession will affect the growing Washington wine industry, but Keith Love, vice president for communications and corporate affairs for Ste. Michelle Wine Estates, said the industry is "perfectly positioned.

"I think everyone is seeing the same thing, which is a focus on value," he said.

The company's Red Diamond brand is considered a barometer for sales and the $10-range wine that's sold nationwide was doing well through January, Love said.

"We know there's going to be an impact ... but we think the state industry will ride it out," he said.

The big question, Love said, is restaurant sales. "I think that's going to be where you see the big drop off," he said.

At Monterosso's in Richland, owner Aaron Burks has seen his wine sales slow about 10 percent from 2007 to 2008 because consumers are eating out less, especially at nicer restaurants.

"I would say that sales in general are more than a challenge in these economic times," he said.

Eric Denton, a Tri-Cities-based sales representative for Spokane's Vehrs Inc., a wine distributing company, said he's also noticed restaurants taking the biggest hit.

"I think restaurants are down just because people are wanting to stay at home more often and save their money," he said.

That was part of the reason Amici's, an Italian restaurant in Richland, recently closed.

Fewer customers overall meant the restaurant couldn't turn a profit, said Piper Strand, the restaurant's owner.

She's now working at Casa Vino in Richland, and said the wine bar seems to be getting busier.

On the retail side, people seem to be buying the same amount of wine but at cheaper prices.

"It seems like people are gravitating toward more affordable wine," Denton said. "Instead of buying the $20 bottle they're buying the $15 bottle. People are taking a step down, it seems."

Robin Pollard, executive director of the Washington Wine Commission, agreed.

"Rather than buying a $60 bottle, they'll buy three $20 bottles," she said.

Though she also said it's too early to see the full effect, Pollard said she attended a national wine industry meeting recently and the trend seemed to be that "flat is the new up" -- sales that remain even with prior years will be viewed positively.

On the floor of the Toyota Center at the trade show, Adam Schulz of CorkWest in Kennewick said many producers are moving down a step with the corks they buy.

"A lot of people that were buying the top grade last year have moved down a grade," he said.

The micro-granule cork -- which is made of ground, cleaned and re-formed cork -- is a popular seller right now for its price, he said.

When a higher end cork costs 5 cents more, that starts to add up, he said.

Others showing their wares said business is doing just fine.

At Richards Packaging Inc., which distributes and manufactures glass and plastic packaging, business also has continued as usual.

"We haven't been affected," said Kent branch manager Linda Sherman. "People might not buy a new car, but they still have to eat and drink."

December was the first month business didn't grow at Pasco's Central Industrial Sales Inc., a company dedicated to winemaking tools and ingredients, said president Jim Jarrett.

"Typically this is a slower time, so we're not really worried about it," he said.

Business might even be picking up for California-based StaVin, which sells oak products for winemaking.

"Instead of putting the wine in the barrel you put the barrel in the wine," said Jeff Murrell.

The products are cheaper than barrels, which means they're attracting more attention, he said.

"We're in a good position because people are looking to get away from prohibitive costs," Murrell said. "It gives us some consumers who haven't tried us before."

As consumers think twice before grabbing a pricier bottle of wine at the store, Clubb, Burks and others said they're working to increase their visibility as well as offering incentives for customers.

And Ste. Michelle's five-year plan for planting more vineyards is moving forward, Love said.

"You have to look down the road," he said. "You can't hit the panic button."