Is Malbec Washington’s Next Big Thing?

Celebrate! April 17 is Malbec World Day

Every year Seattle magazine publishes a list of Washington’s top wines and wineries and identifies an “emerging” wine variety to highlight and promote. This year it was Grenache and there are some great Grenache and Southern Rhone-style Grenache-blend wines made in Washington state, so I think this was a good choice. The wines we sampled at the Taste Washington Grenache seminar were delicious (see list at the end of the post).

The Big Freeze

But Grenache, as good as it can be here, is probably pretty far down the list in the search for The Next Big Thing in Washington wine. There is only a tiny bit of it planted and I don’t think there are any “old vines” left (old vine Grenache is said to produce more complex wines). Grenache was more widely planted in Washington wine’s early days, but the vines didn’t survive the hard winters that strike the Columbia Valley every few years. Now, with greater attention to vineyard location and management practices, Grenache is making a welcome comeback.

Grenache is an up-and-comer and there are great wines being made already,  but as it is probably best viewed as the Next Next or Next Next Next Big Thing until more and older vines are on line.

But what about Malbec?

When you say Malbec everyone thinks Argentina and, since I’ve recently returned from doing fieldwork in Mendoza, naturally so do I. But what about Washington Malbec? Seattle magazine named it their hot wine variety in 2009 and so I decided to use this year’s Taste Washington event to evaluate the Malbec status quo. (Click here to view a video of last year’s Taste Washington Malbec seminar.)

Mendoza del Norte?

Argentina makes distinctive Malbec wine and there is good reason to think Malbec might do well here in Washington, too. Mendoza and the Columbia Valley are both basically deserts (the Andes and Cascade mountains respectively provide rain shadow effects) where irrigation is a necessity. Both areas get plenty of sunlight although I think vineyard elevations are higher down south.

There are many patches of Malbec planted in AVAs from Lake Chelan to Yakima Valley to Snipes Mountain, Red Mountain and Walla Walla. Statistically Malbec is the fifth most-planted black grape variety after Cabernet Sauvignon, Merlot, Syrah and Cab Franc and ahead of Sangiovese, Pinot Noir and Lemberger (according to Washington Wine Commission data).

The vines are relatively young, reflecting Washington’s comparative youth as a quality wine producer. Most of the wines I tasted were made with grapes from roughly 10 year old vines, but I know there have been recent plantings that should begin to appear in forthcoming wine releases.  Argentina has some old vine Malbec (80 years and more) in Luján de Cujo, but a lot of the vineyards (especially those in the Uco Valley) are about the same age as Washington’s.

When I ask Washington winemakers why they started making varietal Malbec they usually say that it was because the wine was too good to hide in a blend and, while I don’t dispute this, I suspect Argentinean Malbec’s market success did not unnoticed.

Malbec was originally planted here to use as a blending grape — Malbec is one of the five classic Bordeaux varietals along with Cabernet Sauvignon, Merlot, Cab Franc and Petit Verdot. Seven Hills released a what I think was the first varietal Malbec (from very young vines) in 2001, but most other makers restricted it to blends until more recently.

Price and Cost Differences

If Washington and Argentina share certain aspects of geography, they differ tremendously in terms of production cost and retail price. There are precious few Washington Malbecs below the $20 price point. The most frequently observed Malbec price at Taste Washington was $28 and many more were priced above than below this figure. Reininger’s 2007 Walla Walla bottling was the highest priced Malbec on the published listing at $51 and I think that the Eliseo Silva was the cheapest at a listed $10.

Argentinean Malbecs can be found at all price points from about $10 up, but they are biggest in the sub-$20 arena. In other words, Washington and Mendoza compete in the Malbec market, but exactly not head-to-head.

Cost differences account for some of the price difference. Malbec is in short supply at the moment in Washington (only 1100 tons were crushed in 2010 compared with 31,900 of Cab Sauv). Malbec is Washington’s most expensive wine grape according to USDA average price data. Malbec cost $1,540 per ton on average in 2010, putting it ahead of Cab Franc ($1,325) and Cabernet Sauvignon ($1,297).

Malbec is in short supply in Argentina, too, but land and labor costs are a lot less there. High quality Malbec costs 5-6 pesos per kilo in Argentina these days and good quality costs 4 pesos (both figures have risen significantly in the last two years).  At an exchange rate of 4 pesos per dollar and figuring 5 pesos per kilo, that converts to about $1100+ per ton, a lot less than in Washington.

Taste Washington Malbec

There was a lot of Malbec at Taste Washington, mostly from small producers.  Nineteen wineries listed Malbec on the program but I think there may be nearly 100 different Malbecs made in this state by the 700+ large and small registered wineries.

I am not an expert wine taster (which is why you won’t find wine ratings on this website), but I sampled enough quality Malbec in Argentina to begin to understand it a little. In general I found the Malbecs at Taste Washington to be very good representations of the varietal, with well integrated oak in most cases, and able to reflect the different vineyard terroirs. I think they compete very well with the Mendoza wines in the same price ranges, which is a high complement.

My favorites, for what it is worth, were from Fidelitas, Gamache, Hamilton Cellars, Nefarious, Reininger, Saviah and William Church. Special marks go to Hamilton Cellars for making Malbec in three styles: Rose, straight Malbec and a Malbec-heavy Bordeaux blend.

So is Malbec Washington’s Next Big Thing? Not yet — not until there are more vines on line and Chateau Ste. Michelle or  Columbia Crest get into the market and help develop it. Interestingly, Columbia Crest’s newly-appointed chief winemaker, Juan Muñoz Oca,  is Argentinean and Columbia Crest recently released it’s first Malbec — maybe that’s a sign! I’m looking forward to finding out.

Cost is still a big issue and perhaps Washington cannot compete with Argentina at the key price points. But in terms of quality? Yes, it could happen. Malbec could be Washington’s NBT.

[Thanks to Sean Sullivan and Guillermo Banfi for help tracking down Malbec grape prices in Washington and Argentina respectively.

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Taste Washington Seminars: Washington’s Emerging Varieties: Grenache Panache
Presented by Seattle Magazine

The rising popularity of this new-to-the-Washington-scene grape variety in recent times is a boon for wine drinkers.  Seattle Magazine recognizes that Washington State’s offerings with this amazing grape are truly delicious, having awarded it Best Emerging Varietal in their 2010 Best of Washington Wine Awards. Bob Betz MW, an admitted Grenache fiend, will join Seattle Mag’s wine columnist Shannon Borg and an esteemed panel as they help you discover why our region’s Grenache offerings are fast becoming some of the New World’s most distinctive and respected.

Moderator:
Bob Betz MW (Betz Family Winery)
Panelists:
Shannon Borg (Seattle Magazine)
Brian Carter (Brian Carter Cellars)
Sara Schneider (Sunset Magazine)
Sean Sullivan (Washington Wine Report)
Wines:
2008 Milbrandt Vineyards “The Estates” Grenache, WS $25
2009 Maison Bleue “La Montagnette – Upland Vineyard” Grenache, SM $35
2008 Darby Winery “Stillwater Creek Vineyard” Grenache, CV $45
2009 Betz Family Winery “Besoleil” Grenache, YV $50
2007 Brian Carter Cellars “Byzance” Red Wine, CV $30
2008 Syncline Wine Cellars “Cuvée Elena” Red Wine, Columbia Valley $35
2008 Rôtie Cellars “Southern Blend” Red Wine, WA $35

On the Oregon [Terroir] Trail

Don’t know how I missed the big news. The folks in Oregon’s Yamhill-Carlton District AVA have been successful in their petition to change the appellation’s name. Henceforth they’ll be known as Yamhill-Carlton not Yamhill-Carlton District.  Wow, I’m glad they finally got that fixed! “District” was redundant, according to one report, and the name was said to be too long to fit on a wine label.

Oregon winemakers are a bit intoxicated with appellations, so I suppose they can be forgiven for being so particular about them.  Oregon imagines that it is Burgundy West (not without some justification) and longs for the fine grid of appellation and vineyard designations that Burgundy is famous for.

Never Satisfied

Not satisfied with the Willamette Valley AVA and six sub-AVAs, many Oregon winemakers have taken the Burgundy-inspired next step, releasing portfolios of vineyard designated wines.  While I admire their efforts to deeply mine their terroir, I am a bit concerned that they might also be undermining the regional brand.

The idea of Oregon wine is not necessarily an easy one for many consumers outside the region to get their heads around. Adding a couple of layers of complexity seems like it could make the big sell even harder. Fortunately, as Paul Gregutt noted in a Decanter article a couple of years ago, particular AVA names are essentially meaningless to many buyers, invisible to all but the most ardent enthusiast, so perhaps I am misoverestimating the confusion factor.

Even so, there are two concerns. First, if everyone is looking after their own little patch of dirt, who’s paying attention to the bigger “Willamette Valley” regional brand? I do think this is a serious issue because regional reputation is hard to earn and easy to lose.

I was shocked a year ago when I saw my first sub-$10 Oregon Pinot Noir, but that sticker shock has passed.  Willamette Valley Pinots in that $10 range are a common sight now and I have seen prices as low as $5.99. Yikes!

The Oregon industry with its low yields and high costs can’t afford to be defined as a “value” region and the marketplace seems to be going in that direction. Maybe, as some have suggested, it’s time to look up and consider the big picture in Oregon.

So is the focus on micro-terroir misguided when these bigger problems loom? Well, not necessarily if there’s really a there there. (Did that make any sense? Let me try again.) Not if the fine geographical divisions are valid and the wines made therein are truly distinctive. But are they?

Target: Archery Summit

With this question in mind we went in search of clear evidence of Oregon terroir. Our target: Archery Summit, chosen because they are owned by the same corporate parents as Napa’s Pine Ridge, which I examined in my Stags Leap District project, and because of their terroir-driven focus on single-vineyard bottlings from distinctly different parts of the valley.

Was there a there there? Well, yes, even I could taste it (and I don’t claim to have a particularly  educated palate), especially the Looney Vineyard wine. Of course Archery Summit has resources unavailable to many others to vigorously pursue terroir. It may therefore be a mistake to generalize from this one winery or others with the same intense focus (Ken Wright Cellars, for example), but it is clear to me that those Bugundian dreams are not wholly unfounded.

One wine that we tasted, made when Archery Summit (and Pine Ridge) founder Gary Andrus was still in charge, was sort of an über-terroirist experience. The 1996 Chêne d’Oregon Pinot Noir was actually aged in barrels made from an oak tree that grew on the vineyard site. As the Archery Summit website explains …

Creating a distinctively ‘Oregon’ Cuvée originated with a desire to marry the taste of Oregonian Pinot Noir and native Oregon oak. Our French cooper François Frères crafted six barrels of Quercus garryana Oregon white oak for the inauguration of Chêne D’Oregon. This Pinot Noir blend aged in 100% new Oregon oak barrels displays the true embodiment of Oregon’s forests, vineyards and soils.

Terroir squared. Very intense. Not to everyone’s taste (maybe this much terroir is too much?) but very interesting nonetheless. Quite an experience!

Rational Exuberance

Oregon winemakers can be forgiven for not caring one iota about my concerns about their AVA structures (or why Stags Leap District fits on a wine label while Yamhill-Carlton District apparently does not). The reviews are just in for their 2008 wines and the scores and comments are fantastic.

One wine broke through Wine Advocate‘s long impenetrable (by Oregon) 95 point ceiling. The Shea Wine Cellars 2008 “Homer” received a 96-point rating (the highest I have seen in WA for an Oregon Pinot) and the Antica Terra “Bontanica” was rated 95.  These great wines and their rave reviews (not just the big numbers)  give the whole Oregon industry the recognition it has long sought.

2008 may be the best vintage in Oregon’s relatively brief  history, according to Wine Advocate critic Dr. Jay Miller. A good thing, too, since it comes after the problematic 2007 wines, many of which are still awaiting buyers. Vintage matters in Oregon, just as it does in Burgundy where the weather is famously variable from year to year.

I’m still concerned about the future of the region if supply and demand cannot be brought into better balance so that economically sustainable prices reappear. (Even Pine Ridge, Archery Summit’s parent, has responded to the soft market by releasing a $20 value brand called Forefront. No idea where the grapes might have come from …).

In the meantime, however, maybe it is best to simply appreciate what Nature has provided. Open up a bottle of ’08 Oregon Pinot and enjoy. Happy Thanksgiving!

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Thanks to Chris Hayes for showing us around Archery Summit and helping us dig into its terroir.

Washington Brands vs Brand Washington

Lettie Teague’s column in today’s Wall Street Journal provokes a post on Washington wine’s identity crisis.

Teague writes in “Stalking the Wines of Washington” that the Washington wine industry has expanded rapidly in the last few years and that there are many great wines and great wine values. Yet Washington wines are hard to buy (she had trouble finding them in New York wine shops) and hard to sell (she quotes several winemakers in this regard, including Chris Camarda of Andrew Will, who is holding back wine and reducing capacity by 40%). What’s the problem?

I Can Get it for you Wholesale

Well, as in most cases, it is not a single thing but a confluence of forces at work. Although she says that fine wines from Washington have a reputation for good value, Teague suggests that many are currently over-priced relative to Napa Valley products. Judging from my email inbox, the reason for this is that a lot of Napa producers are selling off their wines at deeply-discounted prices.

The typical deal I am offered is “limited time only” 50% off the retail price plus discounted shipping. A great deal, except I can sometimes find even lower prices on these wines at local stores. The wholesale prices must be rock-bottom if wineries can do better with these low revenue direct sales. Teague writes that

One Washington winemaker lamented to me, “We can’t compete when Pahlmeyer Cabernet that used to be $90 a bottle is now $45 a bottle.” And so, while the quality has never been higher—Washington has had three excellent vintages (2006, 2007 and 2008)—the wines are getting harder and harder to find in stores outside of Washington state.

[Interestingly, some of the offers have six bottle limits -- a psychological ploy in most cases, I think, to make customers believe that surplus wines are really quite scarce. Wine people tell me that it works every time.]

I think that Washington wines are still a great value, given their high quality, but deep discounting by the competition is never a good thing for producers.

Napa Valley vs Columbia Valley

The lack of a strong regional wine identity is a second issue that Teague identifies (she also cites the small scale of most Washington producers as a disadvantage). Everyone thinks they know what Napa Valley wine is (although it is a large and very varied AVA that produces lots of different types and styles of wine). Napa was a strong brand.

What is Washington wine?  Washington apples have a strong identity and Washington cherries, too. But Washington wine — not so much. A stronger, more prestigious identity could be a real advantage, especially in this economic climate, Teague notes.

… Napa Valley has just done a much better job of marketing itself, according to Marty Clubb, whose L’Ecole 41 Winery in Walla Walla is probably one of the best known and oldest (circa 1983) wineries in the state. “Nobody really knows where our wines are from. People recognize our brand but not as a Washington-state winery.”

Washington has well-known wine brands at nearly every price point from Columbia Crest to Quilceda Creek, but there is no well-established Brand Washington. This is an issue that Paul Gregutt identified in his terrific book,  Washington Wines & Wineries: The Essential Guide (watch for a second edition on bookstore shelves this fall). He interviewed leaders in the Washington wine industry about their vision for Brand Washington and, while most considered this an important issue, no consensus emerged.

I’ve heard that Allen Shoup (the godfather of Washington wine: former head of Chateau Ste Michelle, now the driving force at Long Shadows) wanted to promote the idea of the Columbia Valley as Washington’s equivalent of Napa Valley — building the Columbia Valley brand to compete with California.

But this plan ran into a collective action problem as individual producers invested in their own private brands and sub-AVA brands instead. I’m sure some buyers today see Columbia Valley as a generic designation, not the prestige brand originally envisioned. And I’m sure a lot of people don’t associate it with any particular place (some people still confuse Washington  State with Washington DC; maybe they think the Columbia Valley is in … Columbia!).

Although the lack of regional identity may be a serious issue in the long run, I think other problems are more pressing right now. After all, most of those deep discount emails I’m getting aren’t coming from Washington, they’re being sent out by famous wineries in famous Napa Valley.  A strong identity surely helps, but can’t completely compensate for competitive market forces.

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One area where Washignton’s wine identity is strong is in Riesling. Riesling Rendezvous — sponsored by Chateau Ste Michelle and Mosel’s Dr. Loosen, begins tomorrow. Riesling makers from around the world will gather near Seattle to discuss the problems and opportunities they face. Look for a Riesling Rendezvous post in the near future.

AVAs: Good, Bad or Ugly?

The birth of a new AVA (American Viticultural Area) is generally greeted like the birth of a baby – a good thing, a cause for celebration.  So a recent Wine Spectator article was somewhat bittersweet – it announced two successful births (Snipes Mountain AVA and Lake Chelan AVA – both in Washington State) and one failure.  But I’m not sure that that “two cheers” is necessarily the right toast (and I found myself quoted to this effect in the Wine Spectator).  My problem, I guess, is that I can’t stop thinking like an economist, even when it comes to good news like new AVAs.

It isn’t that AVAs are bad, it is just that they are complicated and new AVAs produce both benefits, which are celebrated, and costs, which economists like me can’t seem to ignore.

Good or Bad?

As I have said in a pervious post, the American Viticultural Area is an ill-defined concept.  It is a geographic indicator, of course, telling the buyer that a high percentage of the grapes used to make a particular wine come from a specific geographic area, but its significance beyond that is unclear.

An AVA doesn’t necessarily indicate a particular style of wine, for example, the way some European AOC rules do.  AOC protocols often specify region, grape varieties, levels of ripeness and even the nature of particular blends that are permitted or sometimes required.  Chianti is a region in Tuscany, for example, but it is also a recipe (albeit a flexible recipe) for the wines that carry that label.  There can be great variation among wines from a given AOC, but the idea is that they represent variations on a theme rather than completely different wines.

AVAs don’t necessarily define terroir either.  Many AVAs are quite large and contain many different soil types and microclimates.  The Napa Valley AVA, for example, encompasses rather different condition in the North than the South and on the hillsides and valley floor.  The Columbia Valley AVA in Washington State takes this to the next level in terms of terroir diversity.

Even the relatively small Snipes Mountain AVA (a sub-AVA of the Columbia Valley) includes rather dramatic differences in growing conditions.  As Kevin Pogue of VinTerra Consulting said in a comment on a previous Wine Economist post:

It’s impossible to equate US AVAs with terroir. They’re just too big and there’s too much variability in all the physical parameters (soil, bedrock, climate, geomorphology). I had temperature monitors on Snipes Mountain (one of the smallest AVAs) during the growing season last year, and they showed huge variations in several important climate parameters. The top part of Snipes Mountain rises above the cold air pool that regularly forms in the Yakima Valley and so it’s much warmer and has a much longer growing season. The Walla Walla AVA has at least 4 distinct soil terroirs and the average annual rainfall varies from 7 to 24 inches within its boundaries!

In Economics Veritas

While the viticultural idea of AVAs is ill-defined the economic idea of AVAs is relatively clear.  AVAs are brands, but not the type of brands you are used to thinking of.  Brands have a bad reputation among wine consumers because they are associated with insipid wines sold as package goods – Franzia, Yellow Tail, Two Buck Chuck.  While these wines clearly serve a purpose in the marketplace and are obviously a satisfactory choice to the people who buy them, they are seen by wine enthusiasts as an insult to the concept of fine wine.  They are industrial wine, not terroir wine, if you see what I mean.

Economists don’t react so strongly to the idea of a brand, however.  To us brands are just devices that producers use to send signals to buyers in markets with costly information. You may or may not like to eat at McDonalds, for example, but you know what to expect when you go there.  Brands do the same thing for Budweiser, Coca Cola and Starbucks.

Private brands do the same thing for wines if you think about Robert Mondavi, Clos du Val or Screaming Eagle. You have a good idea of what you are getting in terms of style and quality because producers invest in the brands to establish reputations.  Having a well known and reliable brand is a great advantage in the marketplace.

The main difference between private brands like these and AVAs is this: AVAs are communal brands.  They don’t belong to any single producer but rather to anyone who sources grapes from the region.  Hence the great difference in style that appears as different makers first seek the AVA designation to differentiate themselves from wineries in other areas and then further to differentiate themselves from other makers within the AVA.  The result is not necessarily harmonious and so the AVA concept loses value to consumers.

Essentially the problem is that the incentive to invest in the communal brand is ultimately weaker than the incentive to invest in the private brand once the AVA has been established.  This makes sense since benefits from an improved communal brand must be shared while benefits from improving your own private brand are yours alone. The market significance of the AVA can quickly disappear.

The problem gets worse as AVAs increase in number, making it more and more difficult for consumers to understand what qualities are associated with each.  As I say in the Wine Spectator article, each new AVA benefits a small set of producers by giving them a new brand, but the collective result (the number of AVAs is now approaching 200) is in fact to reduce the significance of AVAs generally.  I think it is possible that private brands gain market power as collective AVAs proliferate.  And that’s exactly the opposite of what AVAs are supposed to do.

The Ugly Side

I felt bad in raising my doubts about AVAs because I know and admire some of the winemakers in the new Lake Chelan AVA (especially Tsillan Cellars and Nefarious Cellars) and I didn’t want to rain on their parade. But I stopped feeling guilty when I discovered an article by A to Z Wineworks CEO Bill Hatcher on the Oregon Wine Press website. The continued proliferation of AVAs and sub-AVAs in Oregon, Bill says, isn’t good or even bad.  It’s downright ugly!

Oregon’s wine industry is tiny compared to California and small relative to Washington State.  But it is big in AVAs, as the map above indicates, with sixteen AVAs overall and six sub AVAs within the Willamette Valley region itself.  Wow!  Bill writes that …

Our fixation on sub-appellations at the expense of raising the profile of Oregon over the past years is coming back to haunt us. As the economy tailspins, consumers, restaurateurs and retailers are returning to familiar roots. The results are pruned wine lists, repetitive shelf facings of monolithic national brands and small wineries being culled from wholesaler books. Gone are the halcyon days when someone picked up a $50 bottle of Oregon Pinot Noir in Memphis and said, “Cool, I didn’t know they were making wine in Oregon; let’s give it a try.”

If the majority of Americans cannot point to Iraq on a world map, do we really expect them to pinpoint the Eola Hills or Chehalem Mountains, let alone deconstruct the subtleties between the two? Further underscoring that presumptiveness, a recent study commissioned by the Oregon Wine Board revealed that over half the respondents in our target market were largely unfamiliar with Oregon as a wine-producing region. The sub-appellation movement reached absurdity with the Snake River AVA, containing one Oregon vineyard and no wineries, meaning that we had, in fact, finally parsed an appellation to someone’s backyard.

Bill Hatcher is smart and bold.  His A to Z Wineworks is now the largest single producer in Oregon and he thus has an unusually strong interest in seeing the Oregon brand strengthened since this would strengthen his own brand as well.  He argues that a complex web of sub-AVAs provides few benefits and potentially large costs. An ugly situation, but an understandable one.  It is what Mancur Olson characterized as the tension between narrow and encompassing interests. Bill Hatcher concludes

The industry has come to be driven more by politics and narrow self-interest rather than collective marketing economics or common sense, a polemic we can no longer afford (if we ever could) in these precarious times. More than a few wineries will fail in the coming months and more than a few vineyards will not be harvested. This is not the time for intellectually bankrupt parlor debates as to whose soil is redder and whose vineyard practices are greener, but rather a time to unite and underwrite the commonwealth of Oregon.

The economic crisis is likely to intensify the tension between narrow and encompassing interests and between private and communal brands.  The strong are likely to get stronger in this environment, I think, and as Bill Hatcher suggests, some of the weak will fade away.

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