Hindsight of 2020

Report shows tough year yet resilient sales

While the majority of Oregon winemakers made wine from grapes harvested in 2020, the year was challenging, to say the least. Some rare weather disruptions combined with naturally lower yields, wildfire smoke and COVID-19-related labor shortages and restrictions made for a roller-coaster year. The Oregon Wine Board’s 2020 Oregon Vineyard & Winery Report reflects these difficulties, showing declines in the state’s grape tonnage and wine production.

Since 1981, the University of Oregon’s Institute for Policy Research and Engagement (IPRE) has compiled the annual report. The latest study shows the estimated farm gate value (market value of a product minus the selling costs) of wine grape production decreased 34%, or by nearly $80 million, to approximately $159 million.

Additionally, the 2020 report revealed the following downward movements:

1. Due to cooler late spring weather reducing cluster sizes and weights, yield per acre decreased by 24%.
2. Total grape production dropped 29% as yields and September wildfires resulted in 30,000 fewer tons harvested than the previous year.
3. Case sales remained roughly flat, growing less than a percentage point (0.7%) to 4.69 million across all channels. Compare this data to 2019, when case sales were 4.66 million, making a leap of 1 million cases over a two-year period from 3.60 million in 2017.
4. Sales through direct-to-consumer (DTC) channels declined by 27% overall. Some tasting room losses were offset by wine club and other channels.

The report also revealed a handful of bright spots in a year disfigured by calamities. What was a brutal year on the production and supply side remained favorable for demand and sell-through (percentage of a product sold by a retailer after being shipped by its supplier). This is evident in Oregon’s volume growth of more than 9% nationally in an extremely slow-growing national market, due, in part, to the highest level of national market penetration ever recorded for Oregon.

Positive notes included:

1. Planted acreage increased 6%, or by more than 2,100 acres, from 37,399 to 39,531. Plantings expanded in every region of the state.
2. Grape tonnage harvested rose in the Rogue Valley and Columbia River regions by 5% and 4%, respectively, accounting for 28% of Oregon’s wine grape tonnage in 2020.
3. Oregon wine sales to national distributors climbed 3.5%.
4. Global sales increased 24%, with notable growth in all markets. Canada continues to lead export markets, accounting for 46% of export sales.
5. Consumer takeaway during Oregon Wine Month improved 29% in Nielsen scanner-store data versus the comparable pre-COVID baseline in 2019, while the overall wine category grew just 9%.
6. Similarly, during that period, DTC shipments rose 31%, outpacing the wine category’s growth of 24%.

Wines and Vines

Some 995 wineries now call Oregon home, an increase of 10% compared with 2019. In addition, the number of vineyards increased from 1,297 in 2019 to 1,370 in 2020, representing growth of 6%. Leading the charge, the Columbia River region, which includes the Oregon side of the Columbia Gorge, Columbia Valley and Walla Walla Valley AVAs, as well as the Rocks District of Milton-Freewater, shows a 20% increase in wineries in 2020 over 2019. The Rogue Valley AVA, which includes the Applegate Valley AVA, now contains 122 wineries, an uptick of 12%.

Varieties

The leading variety in Oregon remains Pinot Noir, accounting for 59% of all planted acreage and 49% of wine grape production. The Willamette Valley in 2019 was responsible for 70% of the production of wine in the state, which dropped to 63% in 2020. Similarly, its harvest acreage slipped from 71% of the state’s harvest in 2019, down to 67% in 2020.

Production plummeted for Pinot Noir statewide, except in the Rogue Valley and the Columbia River regions, which observed increases of 20% and 76%, respectively. Pinot noir production in the Willamette Valley fell over 41%.

Some emerging varieties gained popularity across the state in 2020. Albariño production rose almost 45% in the Willamette Valley, and acreage increased from 8 to 25 planted acres in the Rogue Valley. Tempranillo saw a slight uptick with 124 planted acres in the Umpqua Valley and a 13% hike in the Rogue.

Exports

International Oregon wine exports grew to 143,541 in 2020, compared to 115,434 cases sold in 2019. All countries counted, including Canada, Mexico, United Kingdom, Europe, Hong Kong, and Japan, bumped up in case sales. Canada represented the largest increase of 23% at 65,459 cases of Oregon wine sold, reflecting the residual effects of pre-COVID promotions.

Sales

As noted above, sales of Oregon wine crept up less than a percentage point; however, dollar-wise, that number increased almost 4% from $673.9 million statewide to $699.6 million. A key to Oregon’s continuing growth remains the fact its dollar sales are growing faster than its case volume. Longtime industry analyst Danny Brager says this helps explain why “Oregon is a growth standout,” and continues to be a profitable segment for retailers.

Brager notes the average price per bottle of Oregon wine shipped directly to consumers continued its upward climb in 2020 at $41.88, second only to Napa Valley wines, averaging $59.92 per bottle.

As noted in previous research, the average bottle price of Oregon wines remains high in retail stores measured by Nielsen at $16.72 compared to $8.19 for the overall category.

OWB also tasked IPRE with a similar breakout report called Impacts to Oregon’s Wine Industry: Covid-19 and the 2020 Wildfires. Important indicators show 62% of growers reported impacts from the 2020 wildfires, and the COVID-19 pandemic affected about 35% of vineyards and 45% of wineries, posing a series of challenges for businesses. These include but aren’t limited to: labor shortages as workers either became ill or avoided working altogether; increased costs due to supply constraints and having to invest in health and safety measures; decreased revenue due to occupancy limitations (to comply with social distancing) and stay-at-home orders shuttering restaurants and tasting rooms.

For more data, find the complete report on the OWB website, www.industry.oregonwine.org, including past years’ reports dating to 1981.