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Remaking Oregon's Image

By Bill Hatcher

The departure of Ted Farthing as director of the Oregon Wine Board offers a timely opportunity to reconsider the organization and mission of the OWB.

As conceived seven years ago, the OWB was to be a single industry clearinghouse for marketing, education and research; however, experience has shown that under the best of circumstances, the board's commission is virtually impossible to oversee. These diverse functions demand unique skill sets; no one director could possess the range of expertise to successfully manage them all.

That said, bringing focus to the board might not be too difficult. Under proper direction, the Oregon Wine Research Institute can effectively absorb the research and education activities previously performed by the OWB. The $640,000 or so allocated to the OWB for research and education could be redirected to the wine institute with a sufficient number of industry members on its board to ensure applied research rather than academic self-perpetuation.

This would leave marketing as the sole purview of the OWB. With a singular focus and proper direction in this arena, Oregon would have a chance to finally establish a cohesive brand image and coherent national marketing program that have never been effectively achieved despite a million dollars of annual expenditures over the past several years.  The most recent efforts have been illusionary-lots of bells, whistles and tweets, but no wires behind the buttons.

By now, it should be readily apparent that the industry faces serious challenges. Not only did the dollar volume of wine sales fall 15 percent in 2009, but case sales also declined 5 percent. California case sales decreased 1.6 percent in the same period but national consumption increased 2.1 percent, corroborating anecdotal market evidence that consumers are increasingly reluctant to pay what they once did for a bottle of wine.

In the near term, this changing behavior is largely due to economic conditions and an unprecedented glut of wine worldwide. However, the largely ignored longer-term phenomenon at work is comparatively tectonic. As recently as 20 years ago, wine quality in itself was enough to guarantee success and command premium pricing. This is no longer the case as technical knowledge has matured and been disseminated. The ability to produce inexpensive, good quality wine is global.

In this respect, whatever our pretensions, wine is subject to the economic physics governing any industry. Those physics dictate that, over time, the price-to-value ratio of competitively traded products will decline. The plethora of well-priced good wine before consumers today is not going to disappear with improvements in the economy or with production equilibrium.

It is highly unlikely that the clock will ever be turned back to the heyday of $60 splurge wines that have no brand equity. Even those wineries with brand equity will be hard-pressed to recoup their pricing of just a few years ago. A prominent wine lender recently volunteered that in one week alone he had to turn down financing for three erstwhile high-flying producers that two years ago were enjoying scores of 96 points, fetching three-figure prices and selling their entire production on allocation.

This is a particularly troubling trend for Oregon Pinot Noir. We are saddled with uncompetitive production costs, owing both to yield limitations and the relatively small scale of producers. What has historically passed as marketing in Oregon is a digressive apologia for low yields and excruciating viticulture in order to justify the price of the wines.

Similarly, as laudable and purposeful as the Oregon Certified Sustainable Wine third-party certification might be, it is not a sufficiently broad marketing strategy. Moreover, as sustainability increasingly becomes essential for viticulture and winemaking, it loses its uniqueness as a marketing tool.

But even if sustainability were a self-standing campaign, an evocative slogan, such as "Oregon was green before green was the new black," would be much more effective - in an attention-deficit world - than a treatise. We seem to think every consumer wants to be tweeted when we top a barrel. They don't. How many people who buy a car want to know, in detail, how it was manufactured? And that's a $50,000 purchase, not a $50 one.

The last 18 months have begun to demonstrate Oregon's lack of a foothold in the national wine market. For those who would dispute that assertion, the next year should sufficiently convince them. Distribution is not only all but closed to new brands but incumbents are being culled from shrinking books. While some producers will still be trying to sell the 2007 vintage into 2011, others have abandoned it entirely to sell 2008. With two or more unsold vintages, it will be financially and/or physically impossible for some to produce or bottle any wine in 2010.

This, coupled with the excess of supply over demand, means that many growers will not have contracts for the 2010 vintage. Additionally, those who are also still unpaid for 2009 fruit will find business survival difficult, if not impossible. The conditions are ripe for a collapse in prices. While wineries burdened under high production costs over the past few years may welcome that, it is a shortsighted view if a spiraling decline degrades fruit quality.

Under the best of circumstances, economic conditions and global overproduction would have adversely affected Oregon, but the absence of a broad and clearly defined marketing message has seriously exacerbated the problem. Even in the supposed salad days of 2004 through 2008, Pinot Noir shipments grew only 2.4 percent to 5.4 percent, with the exception of the "Sideways" boom year of 2005.

We can't undo past mistakes, but we can stop repeating them. Many years ago, when retail maven Dorothy Shaver was president of the iconic fashion house Lord & Taylor, she would insist that her buyers visit Coney Island, Sea World and the like every six months to "see what people really wore." From this vantage point, she created The American Look in the early '30s to challenge French couture. It was style that dominated through the war. Lord & Taylor was still an arbiter of fashion but one that catered to a wide range of women.

Over the years, the Oregon wine industry has marketed narrowly - when it has marketed at all. Homilies about vineyard practices have been preached to the choir. Those about sustainability certainly reinforce good notions about Oregon to the general consumer, but the small segment who makes it a fundamental buying determinant is not sufficient to sustain an industry.

The problems confronting Oregon cannot be solved overnight. Even if the industry could reach an accord today on a comprehensively engaging marketing plan, it would take five years for that plan to take root and bear fruit in the collective mind of the consumer. However, if we don't start today, the time lag will be five years plus however long we delay.

A reconfigured Oregon Wine Board would be responsible for one thing and one thing only: marketing Oregon as an unmatched place where gemstone vineyards and highly individual winemakers craft alluring, compelling wines. The message needs to be at the highest level rather than specific to varietals if only to obviate the internecine politics that so far have hobbled any attempts to serve the collective interest of the industry.

However, a singular marketing mission for the OWB is not enough. It is equally critical that the resulting plan be successfully executed. To do so, the industry must appoint a small marketing committee chosen on the basis of marketing acumen and objectivity. Then, it must accept, trust and underwrite the committee's leadership. The current marketing collective of two-dozen competing self-interests has produced a string of aborted initiatives that in the past have defaulted to vanilla mass tastings in hotel ballrooms.

If, on the other hand, we continue to stumble on the path we have followed for years, there will be a steady attrition of our numbers and the ultimate marginalization of Oregon to a regional producer like Virginia and Texas. Good sustainable wine is no longer self-sufficient - it's merely the ante to play in a high stakes marketplace. However it might offend tender artistic sensibilities, the business is inexorably marketing-driven and with an ever-increasing choice of good wines on the shelf, those that sell will be the ones that capture the imagination. 

Bill Hatcher founded A to Z Wines, along with his wife, Deb, and partners Sam Tannahill and Cheryl Francis. He is the CEO of Rex Hill Vineyards, as well as the owner and winemaker for William Hatcher Wines.

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