Navigating a New World

Industry leaders examine shutdown effects, solutions

By Paul Omundson

There’s a gaping hole in Oregon wine country and the service industry, and no one knows exactly when it will be filled. Since wineries, tasting rooms, restaurants and bars abruptly closed doors in mid-March to help mitigate the spread of COVID-19, customers are thirsty for a return to normal. Owners and workers feel parched, too.

There’s no hard data yet, but a common assumption among winery owners is that social distancing closures created a sales shortfall of about 80%. Curbside sales, home deliveries, phone, online specials and virtual wine tastings help move product and maintain customer relations, but they can’t begin to compensate for person-to-person sales loss.

The downturn is an immediate concern for industry organizations, including the Oregon Wine Board (OWB), a semi-independent state agency tasked to manage marketing, research and education initiatives for Oregon growers and winemakers; and the Willamette Valley Wineries Association (WVWA), a member-based group. Tom Danowski, OWB president/CEO, and Morgen McLaughlin, WVWA executive director, are concerned for the state’s 800 wineries, particularly the 500 small, family-owned enterprises with distribution heavily reliant on tasting room traffic.

The two team up on Tuesdays to host a weekly phone/Zoom information update, listening to representatives in AVAs statewide. It’s also a forum for progress reports on Small Business Administration’s EIDLs (Economic Injury Disaster Loans) and the Paycheck Protection Program (PPP). McLaughlin conducts a similar Friday phone meeting with her association’s stakeholders.

Danowski and McLaughlin face a challenge, with wineries at various levels of panic and uncertainty. Managing expectations and sharing marketing information to help owners work their way through the crisis remain their key tasks right now.

“None of us have the resources to operate indefinitely like this,” says Ross Allen, president of the Rogue Valley Vintners and owner/vineyard manager of 2Hawk Vineyard & Winery. “The longer winery owners have to wait for funds, the harder it becomes. A lot of people are anxious.”

Allen gives high grades to Danowski and McLaughlin for their clear, consistent communications and ongoing Tuesday virtual meetings, an effective platform for feedback and discussion. The sentiment is seconded by Terry Brandborg, president of Umpqua Valley Winegrowers Association and owner of Brandborg Vineyard & Winery in Elkton. “I don’t see the occasional divisiveness that sometimes happened in the past,” he notes. “We’re all working together. Communications and teamwork between regional and state groups during this crisis is excellent.”

“Especially now it’s critical to get the messaging right,” stresses Jessica Thomas, president of the South Willamette Valley Wineries Association. “As things start to open up again, we need to make sure everybody works together. When it’s time to start the process, we need to go about it cautiously and safely. So we’re looking at all the scenarios ahead.” She’s another fan of the statewide Tuesday briefings. “There’s a lot of good information that comes out of those sessions. It makes it easier for all of us to be in the loop and speaking in one voice.”

Uneven Impact

“The effects of this emergency are different, depending on the sales mix of a winery,” Danowski explains. “The forces at work here (the pandemic) are things we’ve never encountered before. So many pieces of the economy are shut down. The demand system is locked up.”

As an example of that lock-up, Danowski points to Oregon’s own $800 million-a-year wine tourism business. “It’s gone for right now, and there’s a great need to have it back again. If your winery sales are related to tourism, you’re probably feeling a pretty big impact.” On a positive note, he says Oregon continues to succeed in off-premise sectors, such as fine wine shops, mass merchants and grocery stores, where 65% of the country’s wine sales occur.

“Wineries with diversified sources of volume that include direct-to-consumer, restaurant, retail and global sales are better positioned to absorb unexpected demand shocks,” Danowski says. 

He notes the number of U.S. wineries has grown to more than 10,000, “adding more intensive competitive pressure than ever.” But creative solutions are ahead.  One example: “With so many restaurants and wineries finding themselves in similar predicaments,” Danowski muses, “we hope our common circumstances inspire inventive collaborations since the path for many consumers into fine wine is through food.”

According to former OWB chairman Steve Thomson, there are three phases at work: “Right now, wineries need to survive the immediate crisis,” he says, “shepherding cash flow, creating sales at every possible opportunity, gathering financial options and staying close to customers and employees. Mid -term (July through June 2021) is the time to get business back on track,” Thomson suggests. “Get sales revenue, inventory and cash flows going again before the 2021 harvest cycle starts up late next summer. Then, it’s full speed ahead long term, but perhaps at a level or two below what it was.”

He indicates mergers and acquisitions may happen and some wineries will close completely. “It’s going to be a real challenge for those with weak distribution,” Thomson predicts. On the other hand, he emphasizes “wineries with solid, strategic plans can make up temporary losses and take things even higher than before in the new tomorrow that’s coming.”

Sally Murdoch, OWB marketing manager, metaphorically points to blue sky she sees beyond the COVID-19 storm clouds. “Look at how accomplished Oregon wines are in relation to how small we are in the global landscape,” she says. “We make a lot of noise and net a lot of awards for being only 0.15% of production across the globe.”

That’s an observation worth noting as the wine industry pivots and looks ahead.