SPOTLIGHT/OREGON: Branching out

Their wines enjoy cult status at home, but now Oregon’s producers are looking much further afield – starting with Japanese and British sommeliers, says Fionnuala Synnott

It is clear from the number of people drawn to the International Pinot Noir Celebration in McMinnville that Oregon wines have something of a cult following. Yet, because Oregonian wine producers sell more than half of their wine in their home state, few consumers outside the US know much about the region or what it has to offer.

Domestic demand for Oregon wines has greatly risen of late with sales increasing by 24% between 2004 and 2005. Even though Oregon produces some wonderful Pinot Gris and Chardonnays, it is best known for its Pinot Noir, which accounts for 49% of total wine production. Demand for Pinot Noir is proving insatiable and prices have risen accordingly. In 1995, a ton of Oregon Pinot Noir cost an average of $1,130. This figure rose to $2,100 in 2005.

The growing demand for this variety is often attributed to the film Sideways. But Steve Thompson, director of sales and marketing at the King Estate Winery, has an altogether more logical explanation for the boom. “We experienced the Pinot Noir phenomenon about a year before Sideways came out when US producers began releasing their wines earlier,” he says. “The brighter fruit profile appealed to the US palate and opened the door to Pinot Noir for a lot of people. It also helped to finance growth in Oregon.”

With so much demand in their own backyard, it is easy to see why Oregonians may not have the incentive to export their wine. For many producers, low yields are also a barrier. The average winery in Oregon produces around 5,000 cases a year with only a handful producing 70,000-100,000 cases. Supply is also an issue for the bigger wineries. Thompson says, “Our export strategy has been tempered by big shortfalls of Pinot Noir and Pinot Gris in the US. We produce around 80,000 cases of Pinot Gris but only around 30,000 cases of Pinot Noir. As we are trying to preserve our domestic market,
we only export around 3,000 cases but we could sell 5,000 or more abroad.”

But the Oregon wine industry is entering a new phase in its lifecycle with more producers looking to build a presence outside the US. Dynamic producers of quality wine such as Elk Cove, Bethel Heights and King Estate are becoming increasingly active abroad. Katie Stoll, senior marketing manager at the Oregon Wine Board, says, “We have to have an international presence if we are to be considered a real world player.” Marilyn Webb, owner of Bethel Heights Vineyard, agrees. “We need to be in the international market if we’re going to be reviewed by the international press,” she reasons.

Drivers for change
Stoll feels the growing interest in exports is partly due to the maturity of the industry. She explains, “We have been established for almost 40 years and, as we have grown up, we have developed a more strategic plan for business.” The Oregon Wine Board has been very proactive in persuading the industry to take a long-term, committed attitude to the export markets.

Volumes, although still low, have also increased in recent years. Oregon produced and crushed a record number of grapes in 2005 thanks largely to newly bearing vines planted three or four years before. Yields were also up last vintage. In the Willamette Valley, the cradle of Pinot Noir in Oregon where yields are traditionally between 2 and 2.5 tons per acre, the 2006 harvest saw yields rise to an average of 3 tons per acre. As Matt Novak of Results Partners in McMinnville, a firm that oversees vineyards throughout the Willamette Valley, points out, this will not negatively affect quality but will provide additional fruit to help with wine supply. Ted Farthing, executive director of the Oregon Wine Board, comments, “The surge in popularity of Oregon wine has led to a noticeable shortage in the marketplace. This year’s rare combination of greater yields and ideal flavour development will allow our industry to restock those empty shelves.”

Target markets
Historically, Oregon has sold much of its wine to California, New York, Washington and Canada. Now, it appears that most producers are focusing on building their Asian and UK business. “We have put 99% of our effort into the Japan, Canada and UK markets,” says Stoll. In fact, 12,760 and 10,000 cases respectively were sold to Japan and Canada last year, whereas only 1,420 cases were sold to the UK. However, Oregon has the UK market clearly in its sights. Stoll explains, “The UK sets the wine trends for the whole of Europe and is the hub of the wine press.”

Thompson, who also chairs the Oregon Wine Board’s Export Committee, says, “The UK has always been difficult for us, because knowledgeable consumers are often Francophiles who appreciate mature, aged wines. Although this has changed recently with Australia exporting a large volume of inexpensive wine to the UK, New Zealand’s entry into the UK market with a focused message on Pinot Noir has made it harder for us. We want to build relations with sommeliers in the UK rather than go for low-hanging fruit via the retail route.”

At the moment, Japan is Oregon’s strongest export market. Once again, supply is an issue. Thompson explains, “We went into Japan three years ago with Asahi brewers as an agent but we couldn’t satisfy their demand for our wines. We are now looking for a smaller agent whose needs we can meet.” Shirley W. Brooks, vice president of sales and marketing at Elk Cove Vineyards, is also keen to build Elk Cove’s business in Japan: “The Tokyo market is very sophisticated and very French-influenced so consumers are very knowledgeable about Pinot Noir.”

Although relatively new, Elk Cove’s foray into the export market has been gathering momentum over the past five years. This year, Elk Cove made its first concentrated effort to crack the European market by appointing a UK agent, Playford Ros, proof that the winery is taking a long-term approach to exporting. Brooks says, “We want to have a presence in the UK and be part of a growing Oregon scene. The UK market is one of the most visible wine markets and is greatly under-served by not having wider representation from Oregon.”

Volume constraints
However, even the most dynamic wineries cannot afford to export in any significant volume. Elk Cove exports less than 5% of the 28,000 cases it produces every year. Brooks says, “A lot of our sales are done through the cellar door but we will continue to feed the export market and hope to increase our exports to 8-10%. We want to export enough to give people a sense of who we are and what we do.” Bethel Heights exports only 25 cases to the UK.

Although a number of new vineyards are being planted, it will be many years before Oregon reaps the fruit of these new vines. In the meantime, smart producers will make sure that they don’t overstretch themselves. Webb says, “It is very hard to turn people down but we have to ask ourselves if we want to be in 35 different states or in just a few select markets. We have five key markets in the US. We take care of them and make sure that they get the allocation they need.”

Thompson thinks it is important to send out the right message when marketing Oregon wines abroad: “Oregon Pinot Noir is clear and bright and should appeal to the British palate for Pinot Noir. We should show off this bright fruit instead of trying to imitate the Burgundian style.”

Webb believes that building and marketing brand Oregon is important for the development of the industry. She says, “Making trips abroad is necessary as this is a relationship business. We need a bigger group of producers to create excitement in the marketplace.” But, for a small winery, buying a plane ticket to show off its wines at trade fairs such as the LIWSF can represent a significant outlay. Luckily, Oregonian wine producers are not expected to go it alone and have the support of the Department of Agriculture as well as the Oregon Wine Board, which makes grants available to producers looking to market their wine abroad.

Wineries such as Bethel Heights see exporting as a long-term investment that is important to the longevity of their brand. Brooks sees building Elk Cove’s export business as vital to the future of the business, “We’ve always believed that we make world-quality wines in Oregon and we can’t be judged unless our wines have an international presence.”

Oregon obviously has what it takes to compete in the international wine market but growing up will also involve a mental shift. Producers will have to cooperate to build brand Oregon and will have to invest considerably before they reap the rewards. 

© db January 2007