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Sunday, Feb. 07, 2010

Consumers shift to value vintages for wine

Consumers still love their Washington wines but have adjusted their palates to match their pocketbooks.

Washington winemakers say they largely are thankful 2009 is a memory, but some believe one impact the nation's economic recession wrought on wine lovers may linger well into the new year.

Growers and winemakers who gathered at the Three Rivers Convention Center in Kennewick last week for the Washington Association of Wine Grape Growers annual meeting, convention and trade show say they generally are optimistic 2010 will be a better sales year than the last.

Some believe consumer preferences, however, may have shifted permanently to so-called value wines, which affect small growers and winemakers more than larger ones.

"The economy has hurt the sale of mid-priced wines," said Fred Artz, president and CEO of Artz Vineyards on Red Mountain. "Everyone is looking for better wines, better bargains for their buck."

Paul Beveridge, winemaker of Wilridge Winery in Seattle, grows grapes in Naches Heights near Yakima. Last year was "terrible," he said, but he saw increased visits to his tasting room in January, lending some optimism about sales prospects this year.

"It's almost impossible to sell anything over $20 now, and it's really almost $15. I think it could be a permanent shift," Beveridge said. "It's been tougher on those of us with premium wineries. I'm not a high-volume producer, so I have to figure out a way to get my costs down."

Longtime growers Dick Boushey of Boushey Vineyards in Grandview and Tedd Wildman of Prosser, who owns StoneTree Vineyard on the Wahluke Slope, have seen Washington wine grow in popularity -- and consumer preferences shift in the past year.

Boushey also said several winemakers he grows grapes for already have cut back on their orders for the 2010 harvest.

"Our state is selling more wine, but the wine that's doing really well is in the $10 range," Wildman said.

He then added with a chuckle, "The big fear in the marketplace is the consumer is going to get used to it."

Washington produced 165,000 tons of grapes last year and is the No. 2 wine-producing state in the country, a distant second to California, which crushed 3.44 million tons of wine grapes last year.

But California saw its first decline in wine shipments in 16 years last year, to 236 million cases, according to industry sources.

In Washington, wine sales at the state's roughly 300 state and contract liquor outlets were $34 million in 2009, down from $37.3 million the previous year, said Steve Brunell, marketing manager for the Washington Liquor Control Board.

The number of cases of wine sold in 2009 also declined to 432,000, down from 500,000 cases in 2008, Brunell said.

The recession was in part to blame. Another reason could have been the proliferation of outlets, including large retail stores, now selling wine, Brunell said.

Ste. Michelle Wine Estates owns or contracts more than 60 percent of the grapes in Washington. It saw the volume of its wine shipments in 2009 decline by 2.1 percent to 6 million cases, in part because restaurants and stores reduced their inventories and consumers cut back spending on wines above $30, said Ted Baseler, president and CEO of Ste. Michelle Wine Estates.

"Consumers were going to their wine cellars more frequently than they were to their wine stores," Baseler said.

Total revenue in 2009 was $403 million for Ste. Michelle Wine Estates, whose wineries include Columbia Crest in Paterson, Chateau Ste. Michelle in Woodinville and Snoqualmie Vineyards in Prosser, according to year-end financial statements of its parent corporation, Altria Group Inc.

Baseler, who has three decades of experience in the wine industry, views consumer preferences last year for so-called value wines to be a cyclical occurrence -- not a permanent shift.

"We're seeing this year a bit of a trend back to restaurants, back to stores, and a slight uptick in the quality of the wine sold," Baseler said.

As the economy improves, those who want and can afford premium wines will seek them, he said.

"People will gravitate back to these special experiences -- rare, exquisite wine," Baseler said.

Washington wine veterans Mike Hogue of Hogue Cellars in Prosser and Kent Waliser, general manager of Sagemoor Vineyards in Pasco, say they are bullish about continued growth in the state's wine industry.

"I'm very comfortable where we're at," Hogue said. "We have advantages in our quality and pricing."

Waliser said Washington's wines are "priced right. We don't have to change prices to get where we are. Our growers are better, our winemakers are better, and we produce great quality wines in this state."