High Quality Fuels Demand

By Ken Wright

If you believe the media, our world is falling apart.  It is impossible to pick up a newspaper, read the latest online blog or watch the evening news without hearing more about the devastating impact that we are experiencing as a result of a lack of control on financial institutions. Blame whom you will, there is plenty to go around on every side of the political spectrum. No party is innocent. 

What has the impact been on the Oregon wine industry? So far, thankfully, it has been negligible. Fire sales of vineyards or wineries have not been evident.  Why?  As my lovely and talented CPA Carol Harriet says, “Let’s back up the bus”.

The Oregon field office of the National Agricultural Statistics Service has dutifully reported data to our industry for years. For me, one of the most meaningful statistics is the percentage of new plantings versus established vineyard acreage. Since 1989 those numbers are listed in the side bar.

The average comes out to 22 percent over nearly 20 years. By any measurement this is a phenomenal rate of sustained growth.

Given the incredible investment by Premier Pacific (CALPERS) over the last several years in new vineyard development, it is reasonable to assume the percentages of new plantings to bearing acreage is still  at least at the same levels.

Each time I have received this report I have thought, “My God, where will all of this fruit find a home?”  Somehow, each year, it has.

What do these figures suggest? Simply, that the wine world has an incredible appetite for Oregon Pinot Noir. Why is this so? I would argue that the quality of our vineyard practices has fueled the growth. This has not been arbitrary. The willingness to reduce crop level, which began in the mid-1980s through acreage contracts, started the revolution.We changed the way in which we purchased fruit by agreeing to pay a set price per acre to have the right to control crop level. Huge. 

Since then, we have embraced practices such as shoot positioning, which means separating and fixing the shoots in the trellis so that every leaf is exposed to the sun and not shaded by other leaf surface. This practice has turbo powered the vines photosynthetic engine.

The long standing lore that thinning crop before color would increase berry size (increased berry size equals less skin to juice and wine of less intensity; read: dilution) was proved wrong through a decade-long experiment that we initiated and then partnered with our friends at Bethel Heights, Cristom, Penner-Ash and Soléna.

This discovery meant that rather than waiting to thin at six weeks from harvest we could remove unwanted fruit immediately after bloom, some 45 days or so earlier. That’s 45 days of the vine sending nutrition only to the fruit you intend to keep rather than wasting reserves on crop that will end up on the vineyard floor. Those who follow this regime are seeing greater intensity and higher levels of physiological maturity at every point in the year, compared to those who still thin late.

Focused organic amendments that provide health to the vineyard are now the norm rather than the exception.  The resulting rise in quality of wine from all of these improvements has been unilaterally embraced.

At the recent Yamhill-Carlton District AVA annual meeting we asked several financial experts to assess the current state of the industry and to forecast what they thought was to come. Our panelists were Jack Irvine, widely acknowledged as the leading vineyard and winery accountant in Oregon, Kurt Wittman of Farm Credit, one of our leading bankers for the industry (along with Mark Freund of Silicon Valley Bank) and Ellen Hunt, an experienced wine industry consultant from Napa Valley. 

Their thoughts were very meaningful to me: First, don’t hide bury head in the sand. Accept the reality that the market is challenged and assess what the impact is for your company. Monitor your cash position on a regular basis. Expect that your out-of-state distributors will be slower than usual in their payments. 

Second, keep the lines of communication open with your lenders so they are prepared to work with you before serious cash-flow issues arise. They don’t want a phone call in the last week of the month for an urgent cash need to cover payroll. 

Third, be ready to travel in support of your brand.  There is no substitute to having the owner, winemaker or vineyard manager putting shoe leather on the street and meeting face to face with the public or the trade.

Each of these individuals also agreed that Oregon is uniquely positioned. There are very few places on our planet where Pinot Noir thrives. We happen to be living in one such unique place. This is an asset that we are privileged to enjoy and know will not evaporate no matter what type of economic cycle may be prevailing.

There are plenty of indicators that suggest difficult times are ahead. What none of the forecasting can measure is the impact of human invention and creativity when need demands or opportunity knocks. Glass half-full? You bet.

What else can we do to encourage sales? The food scene in Portland is nationally recognized, and deservedly so, but as good as it is, it is caught up in the national trend of people choosing to dine at home. Encourage your mailing list to support their favorite restaurants on as regular a basis as they can afford. Also, ask them to use their expendable wine dollars to support our homegrown industry. Ask them to be provincial. Ask them to think when they buy: “Buy Oregon.” 

Oregon’s Acreage Growth

1989—35% new plantings
1990—32% new plantings
1991—44% new plantings
1992—29% new plantings
1993—25% new plantings
1994—22% new plantings
1995—no data available
1996—23% new plantings
1997—20% new plantings
1998—21% new plantings
1999—25% new plantings
2000—23% new plantings
2001—21% new plantings
2002—22% new plantings
2003—20% new plantings
2004—19% new plantings
2005—21% new plantings
2006—19% new plantings
2007—21% new plantings