Liquid Assets Podcast: Can U.S. Wine Win Back Its Mojo?

268x0w“Can U.S. Wine Win Back Its Mojo?” That’s the title of the lastest Rabobank Liquid Assets podcast, which I recorded along with  Rabobank’s Global Strategist Stephen Rannekleiv and Analyst Bourcard Nesin in Sacramento during the annual Unified Wine & Grape Symposium meetings earlier this month.

The mojo question was at the front of our minds because earlier that day the speakers at the State of the Industry session had painted a complicated picture of American wine’s prospects. There are still opportunties in the U.S. market (the rumors of wine’s death are exaggerated, I said in my presentaiton, paraphrasing Mark Twain), but there are undeniable problems, too.

The best guess is that 200,000 tons of wine grapes were left on the vines in California in 2019 for lack of buyers. Perhaps 30,000 acres of wine grapes need to be taken out of production to balance demand and supply. So it is no surprise that our discussion centered on ways to boost demand and therefore lesson the supply-side pain.

The podcast is fast-paced and raises interesting points about the potential for wine exports (my contribution to the discussion), the need for increased attention to e-commerce sales (Bourcard’s point) and Stephen’s analysis of the challenges of building brands for a changing market environment.

Interested? Follow this link to “Can U.S. Wine Win Back Its Mojo?”

Second Thoughts about the Wine Wizards of Oz

The Wizards of Oz” (see below) appeared on The Wine Economist a dozen years ago in  February 2008. It looked to Australia for insights about what might be ahead for the wine industry. I’d forgotten all about this old column until it started getting  “hits” recently, which caused to me give in another look.

The basic idea was that what’s happening in the global wine market sometimes happens in Australia first or most clearly. I think this might have been one inspiration for my book Extreme Wine, which argues that the best place to see the future of wine is at the edges, where change is happening fast, not in the more stable center.

Re-reading this column makes me think how quickly things change (Fosters?) and how much some things persist. Do you think the argument stands the test of time? I am not sure how far I would push it now and maybe I pushed it too far then, too, but the climate change and ecological limits analysis still seems timely.

Let me know what you think in the comments section below (or tell me in person if you are attending the Unified Wine & Grape Symposium in Sacramento). Here’s the 2008 column as it appeared then.

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The Wizards of Oz (February 19, 2008)

20_australian_wine_industry_segments.jpgWhen I think about the future of the global wine market, my thoughts frequently stray to Australia because that’s where I see so many current trends originating or being most effectively exploited.

Export driven marketing strategy? That’s Australia. Branded varietal wines? Everyone talks about Gallo and Constellation brands, but who has done it better than [Yellow Tail]? Foreign market penetration?  The Aussies again, replacing the French as the strongest competitor in the British market and a strong presence in the United States.

Australia even wins the prize for the most sophisticated national wine strategy. Click on the image above to see a representation of the latest Australia wine strategy, which divides the market into twenty (20!) key segments where Aussie wines can compete.

Australia’s Boom and Bust

No doubt about it, if you want to learn about wine economics and integrated wine business, you should look to Australia. But that doesn’t mean that all is well down under. As I have written in previous posts, Australia has experienced a roller-coaster of wine market problems. First it was the problem of over-supply, which pushed prices down to unsustainable levels. And then, just when it seemed like things couldn’t get worse, they did and the early signs of wine shortages began to appear, which caused me to declare that the era of cheap wine was coming to an end. In each of these cases, trends that I see in many places now were first apparent in Oz. No wonder that I’m starting to view Australia as my leading indicator of global wine market trends.

This makes the news in Jancis Robinson’s column in Saturday’s Financial Times particularly sobering (not a good word for wine lovers). Robinson’s article suggests that Australia has hit ecological limits to the production of cheap wine. Water is scarce and expensive and this means that the cost (and therefore price) of bulk wines like [Yellow Tail] must rise — from A$0.40 in 2006 to A$1 in 2007 according to the article. That’s not quite a leap from unsustainable to unaffordable (the A$ is about 91 US cents today), but it presents a completely different business model. More to the point, however, the price rises exist because costs are high and the product is in short supply. Robinson is optimistic that Australian winemakers can compete and even thrive in the new market environment, but adjustment won’t be easy.

Robinson reports that Fosters has started sourcing some of its Lindeman’s brand from its vineyards in Chile (for the British market) and South Africa (in the U.S.). This continues the practice we have seen in the U.S. for some time for short-supply Pinot Noir. U.S. brands like Pepperwood Grove and Redwood Creek frequently contain Chilean and French wines respectively. Now, Robinson reports

There is much talk, though not much evidence, of basic bulk wine being imported into Australia from southern Europe, South Africa and South America to fill the so-called “casks” (boxed wine) and the cheapest bottles and flagons for the bottom end of the domestic market, prioritising export markets for such inexpensive Australian wine as the brand owners can afford. Australia has swung from famine to feast and back to famine in terms of its wine supply recently and bulk wine imports are nothing new. I remember encountering a director of one of Australia’s largest wine companies looking very shifty round the back of some fermentation vats at Concha y Toro outside Santiago de Chile in the mid-1990s.

Ecological Limits?

Now the problem here is not that the Australians are passing off foreign wines as their own. The wines I have seen have been clearly labeled and the few cases I know about where winemakers have tried to fool the public (some years ago in New Zealand, as I recall) ended badly for the dishonest producers. They were punished pretty severely in the marketplace when their tricks were revealed.

No, my concern goes more to the heart of the problem. Maybe Australia’s ecological constraints are a short term problem that will disappear. Maybe it is an Australian problem with no implications beyond the land of Oz. Maybe ready supply from Australia wannabe producers in South America, South Africa and Europe will always be there to fill the gap.

But that’s a lot of maybes and economists are trained to get nervous when it’s maybe this and maybe that. We know that the effect of climate change on the wine industry is real. And we know — or at least I think I know — that Australia has often been a good indicator of emerging trends in global wine. If this is the case, then we are indeed about to enter a new wine world, one where the natural constraints on wine production may be about to become as important as marketing strategies.

It’s Going to be Huge: 2020 Unified Wine & Grape Symposium

 

The Unified Wine & Grape Symposium is just a few weeks away (February 4-6 in Sacramento) and I am already excited. The Unified is North America’s largest wine industry event with about 14,000 in attendance for the trade show and seminars.

Bursting at the Seams

The 2020 Unified promises to be bigger and maybe even betterthan ever before. The event has been moved out to the Cal Expo fairgrounds for 2020 while the Sacramento Convention Center is expanded and remodeled — the Unified  simply outgrew the old facilities. The one-year move means even more room than in the past for trade show exhibitors, including outdoor space for big machines and equipment. It’s going to be huge — literally!

And the program organizers have gone to some trouble to expand seminar offerings, too, with 110 speakers divided among about 30 sessions. Something for every need and interest with programs for growers and winemakers, marketing and business management. As has been the case for several years, some of the technical sessions are offered in both English and Spanish.

Labor cost and availability is an important issue in the wine business, so I am interested in one session that examines mechanization in the vineyard and includes a wine tasting. I’m guessing that the audience will be offered the opportunity to see if they can taste the difference between wines made with machine-harvested versus hand-picked grapes. Should be interesting.

State of the Industry

I’ll be moderating and speaking at the “State of the Industry   general session on Wednesday morning. Danny Brager (Nielsen), Steve Fredricks (Turrentine Brokerage), Jean-Marie Cardebot (University of Bordeaux), and Jeff Bitter (Allied Grape Growers) will be joining me on the big stage. A great team with deep understanding of the wine market.

Jeff O’Neill of O’Neill Vintners and Distillers is giving the Tuesday luncheon keynote speech this year and I am looking forward to hearing what he has to say. These are uncertain times for wine in the United States and it is easy to be pessimistic about the future. O’Neill’s company has been remarkably successful in navigating the treacherous seas, taking advantage of favorable winds. Everyone will be looking for lessons and insights they can take back to their businesses.

This is important because one cloud hanging over the meetings is a structural surplus of grapes and wine in some categories. U.S. wine demand is plateauing, which is better than some countries where demand has been falling for years. Overall wine expenditures are still rising even if overall volumes have declined.

The surplus creates a problem that may take years to correct through a combination of rising sales in old markets, development of new markets, and adjusting production capacity. Heidi Scheid is leading a session that will address the issues directly titled Strategies for Managing Through Over-Supply. Should be a standing room crowd.

Trade Wars Shrink the Pie

Trade wars are another concern. President Trump has said that trade wars are good and they are easy to win, but the wine industry has found little to celebrate about being in the center of the battlefield. Having invested years of effort and lots of dollars opening up Chinese markets, for example, many wineries have watched hoped-for opportunities disappear with retaliatory Chinese tariffs on U.S. wines.

It looks like French wine producers have dodged a bullet, avoiding sky-high U.S. tariffs that were threatened as retaliation for France’s digital tax scheme. You might have expected U.S. wine producers to celebrate tariffs on wine imports because some buyers are likely to shift from imports to domestic wines. But this substitution effect is not the only impact the tariffs have.

Prohibitive tariffs on imported wine are more likely to shrink the wine market pie at every stage of the product chain. It is hard to see how retailers or distributors can justify investment in the wine category when overall sales fall and uncertainty about future conditions is high. The uncertainty effect looms especially large, despite the recent wine tariff trade truce. If wine was caught in the trade war cross-fire before, there’s no reason it couldn’t happen again. And truces are by their nature temporary and fragile.

When tariffs work to protect an industry they tend to do so only temporarily and at high cost (struggling Harley-Davidson is a good example of this). But they more often backfire. The recent tariffs meant to protect manufacturing jobs in the U.S., for example, seem to have only accelerated the decline of the manufacturing sector generally because of the complex international interweaving of manufacturing chains and other factors.

Food (and Drink) for Thought

There a lot to think about as the wine industry moves into 2020, so I encourage readers to check out the Unified’s seminar programs and start working on a strategy for the trade show.

I’ve been to a lot of wine meetings both here and abroad, but there’s nothing like the Unified. Hope to see you there.

Air Provence: Provence Rosé Takes Flight

airp2The list of regions around the world that make good Rosé wine is very long because Rosé is a style of wine, not a wine grape variety. But the word-association game answer is easy: Rosé? Provence.

And although my friends in California and the Languedoc and other places that have nice Rosé  hate it when I say this, if you are talking Rosé here in the United States the conversation begins with Provence.

#1 Export Market: USA

The wine producers in Provence are understandably happy with this situation because they have come to depend on the U.S. market to drink up their Rosé wine exports. According to data provided by the Conseil Interprofessionnel des Vins de Provence (CIVP), the U.S. was Provence’s #1 export market in 2018, happily emptying 26.3 million bottles of Provençal wine, 98% of which was Rosé.

Rosé is one of the hot segments of the U.S. wine market and the Rosé from Provence is very strong. But it would be a mistake for the Provençal producers to become complacent about their signature wine’s position in its most important export market.

This is especially true given that the overall U.S. wine market seems to be reaching a plateau and that the current trade war environment is not friendly to Rosé wines from France that have less that 14% abv and so are subject to the recently implemented 25% tariff. And then there is the threat of more tariffs in 2020.  Yikes!

Now Boarding: Air Provence

So the Provençial producers have organized an ambitious trade event called Air Provence that is scheduled for April 6 – 7, 2020 to keep their wines on U.S. radars and deepen market penetration.  Incredibly, given their success in the U.S. market, they have even more to share. The program offers wine trade members an intense immersion in the region and its wines, with 200 producers and more than a thousand wines on offer in addition to dinners, masterclasses, and so on. The event website summarizes the program like this:

The very first edition of AIR PROVENCE, organized by the Provence Wine Council for Côtes de Provence estates, invites you to take off on a unique immersive journey at the heart of the leading rosé wines appellation. For two days, experience a business class trip to meet producers and wine merchants, discover terroirs and landscapes, and taste wines as well as Provence art de vivre.

I’m interested in Air Provence in the context of the recent discussions about generic wine promotion in the U.S. We often focus on consumer-facing strategies (the “Got Milk?” approach), but there are many places in the product chain where leverage can be applied, either as a substitute for or complement to other tactics. The Provence producers are working to get the attention of trade actors (importers, buyers, etc.) who can become active  partners in selling their wines.

Provence Rosé wines are hot, but the trade wars are creating turbulence and headwinds for the wine market generally and for French wines in particular. Provence Rosé producers are smart to be proactive, using programs like Air Provence to build on their successful market foundation at this moment of uncertainty. I wish them good fortune, but as Bette Davis said  in All About Eve, better fasten your seat belts!

What Can We Learn from the Wine in Moderation Movement?

paul-giamatti-drinking-a-001Some say that it is time for the wine industry to take the initiative to change perceptions through a generic promotion program.  The “Got Milk?” campaign made people think about milk a bit differently. Maybe a similar initiative could shift the needle on wine?

One concern, as I wrote last week, is that as memorable as “Got Milk?” was, it didn’t prevent milk’s ultimate marketplace decline. Maybe “Got Wine?” isn’t the answer. But what would a better approach look like?

Wine in Moderation

I think there are lessons to be learned by studying the Wine in Moderation movement  that began in Europe a decade ago and has now spread to many corners of the wine world.

new_branding_slideshowWine in Moderation was founded in 2008 at a time when the European wine industry faced a growing threat. It wasn’t just that wine demand was falling — that had been going on for a couple of decades. And it wasn’t just the global financial crisis, either, although that didn’t help. It was rising anti-alcohol sentiments and policies that threatened wine both as an economic activity and also as an integral part of European culture.

I asked George Sandeman, President of the Wine in Moderation Association, to explain WiM’s objectives and the lessons they have learned.

Although a message of “moderation” seemed to be well aligned with the way wines are presented on a day to day basis, focusing quality rather than quantity, we encountered difficulty in waking up the wine sector to the cold wind blowing from Geneva.

Initially there was no recognition of the social responsibility attributed to the “wine sector” (“leave it to beer and spirits!”). At best it was a reluctance to accept the fact that wine needed to be part of the social responsibility which the category required, and at worst we were sleepwalking into the same treatment as tobacco.

The traditional culture of wine was frequently overridden by need to compete in new market environments … Add to this a powerful health lobby working to demonize wine …

So the first two lessons are that the wine industry needs to wake up to sector-wide issues. And the positive story of wine doesn’t tell itself. Someone has to do it.

What wine needed, the group’s founders proposed, was an organization that would help its members tell the counter-story of wine’s benefits when consumed in moderation, and would lean against the wind of damaging anti-alcohol regulations. This was no easy task, Sandeman notes. “The concept of ‘moderation’ is not a simple concept to communicate, varies with different cultures and viewpoints, and is difficult to translate for non-English speaking countries …”

Strength in Numbers 

Wine in Moderation has evolved in the 10+ years since it was founded (you can read about its progress here). As its efforts have gained traction, it has moved from a tight European policy focus to an approach that is broader in both geography and strategy. The map of Wine in Moderation activities is now global and its focus is shifting to education of professionals. Although there are Wine in Moderation activities in the U.S. I suspect that the impact is somewhat limited by the lack of a national coordinating organization,  a role played, for example, by Vinos de Chile, Unioni Italiani Vini, ACIBEV, and FEV in Chile, Italy, Portugal, and Spain respectively.

Seventeen national organization plus several global wine companies (Pernod Ricard, Möet Hennesy, Sogrape), and a host of other groups including WSET and the Institute of the Masters of Wine now support and implement Wine in Moderation programs around the world.

So the third lesson is that there is strength in numbers. It is important to work together on several levels to address important issues.

I first learned about Wine in Moderation from George Sandeman and Susana Garcia Dolla when I was speaking at ACIBEV meetings in Porto a few years ago. Since then I have noted the group’s participation at national and international meetings, always presenting a message of wine in a cultural context.

Wine in Moderation announced a major rebranding in November 2019 with the theme of Choose – Share – Care, which the leaders hope will carry the organization forward into even more ambitious professional and consumer programs in its next decade.

  • CHOOSE to make informed choices; choose the best wine for you to enjoy, choose whether or not to drink.
  • SHARE wine with friends & family, pair with good food and water. Drink slowly and take the time to fully appreciate.
  • CARE about the wine you serve, care about yourself and about others. Avoid excess and enjoy your wine in moderation!

Increased focus on wine tourism is another element of future work. Wine in Moderation’s association with the United Nations World Tourism Organization is one step along the path to providing wineries and regional groups with more tools to shape perceptions and develop the wine tourism experience.

Strike the Right Chord

Two things about Wine in Moderation are especially relevant to the current U.S. concerns. First, while I will admit that Choose-Share-Care does not have that “Got Milk?” punch, the message is one that I think might strike a chord with some of the groups that wine is currently failing to engage.  Health, community, and culture is a strong positive message and one that resonates with young the old alike.

And the way of getting the message out is relevant too. One thing that impresses me about Wine in Moderation (another lesson?) is its multi-layer approach. Here’s how it works:

  • The international coordination is provided by a not-for-profit international association, the WiM Association.
  • In each country, there are one or more WiM national coordinators that support the planning, coordination, implementation and accountability of the programme in their respective countries.
  • WiM supporters join the programme at national level. They actively support a wine culture that inspires well-being and healthy lifestyles and contributes in the prevention and reduction of alcohol related harm.
  • Leading wine companies further support the efforts made at international and national level setting the example with their leadership in social responsibility and high contributions. These leading companies are the Wine in Moderation Ambassadors.

Wine in Moderation movement members are given the tools they need to spread the word, which is a model that could work here in the U.S. Leadership is needed, of course, but it seems to me that our many regional wine associations and wine companies, too, would benefit from bringing a coordinated message into their diverse communications programs.

I can imagine a program with a general message agreed at a high level, but implemented with creative local twists and turns by the dozens of regional wine associations around the U.S. Such a plan would share the creative energy (and cost) while leveraging wine’s broad and diverse base.

Work together? Is that realistic? Well, what’s the alternative? In Europe, as George Sandeman said, the alternative was being regulated like tobacco. The alternative here in the U.S might be a  gradual (and then sudden) wine market bust.

This Changes Everything?

Everyone would like to find a silver bullet that would change everything for wine — in a positive way. But silver bullets are hard to come by and they show up in unexpected places. Do you remember the impact of the 60 Minutes “French Paradox” broadcast? Or the Sideways boost for Pinot Noir? (BTW Miles’ “dump bucket” scene from Sideways is definitely not an example of moderate wine consumption!)

Wine in Moderation has moved the needle in its target regions according to its most recent report. Worth further study, don’t think?

Got Wine? Is It Time for a Generic Wine Promotion Campaign?

 

I’ve had several conversations recently that circled back to the idea that the wine industry should invest in a generic promotion campaign. You know what I mean. Not “Got Milk?” (maybe the most celebrated generic promotion of all time), but something along the lines of “Got Wine?” or “Got California Wine?” depending on who’s talking.

“Got Wine?” is too copy-cat to work, of course. You can come up with something better if you give it some thought. But you get the idea.

Subsidy Wars?

One argument for generic promotion of wine is based on the realization that wine isn’t connecting with new, younger consumers the way we hoped or expected. If we want consumers to have a particular image of wine (or of the wine-drinker identity), maybe we should be more proactive in shaping perceptions.  Laissez-faire isn’t working so well. Let’s do something.

A second argument, which would support “Got California Wine?” or “Got American Wine?” is provoked by the  subsidies the European Union is giving to its member states to promote their wines in the U.S. market.

Years ago the EU used to support prices and winegrower incomes directly, but buying up surplus grapes and wine (we called the result the European Wine Lake). Now the EU has changed tactics and supports the modernization of wine production and the promotion of exports. Basically, they want the wines to be marketable and if the EU market won’t buy it all (and it won’t), then exports are promoted to avoid re-filling the dreaded lake.

This is a better approach from an economic standpoint, but you cannot blame American producers for thinking that it creates an uneven playing field. It might be better, many argue, to get the EU to stop subsidizing wine export promotion. But that would be complicated and take time. In the short run, the argument goes, generic promotion of U.S. wines might even things up a little.

Milk is All Over

Talking about wine promotion got me thinking about milk. That “Got Milk?” promotion ran for 25 years and attracted lots of attention. All sorts of celebrities posed with milk mustaches (aka moo-staches) to draw attention to milk and its broad appeal.  Everyone enjoys milk — that was the message. The Whoopi Goldberg ad was my favorite.

But, memorable as these advertisements are, they were fighting a losing battle. Increasingly, American consumers don’t follow the “Got Milk?” path.

milkI first realized this a few years ago when I heard wine economics guru Karl Storchmann talk about trends in various consumer beverages. He examined Google data about searches for wine, tea, coffee, milk, and water and concluded that  while water was rocking it, milk was fading fast. “Milk is all over,” Karl said at the time (here is a pdf of his study).

Karl wasn’t wrong. Dean Foods, America’s largest milk producer, filed for bankruptcy in November 2019.  Milk sales fell for 4 years in a row as Americans shifted to plant-based cow-milk alternatives, including oat milk and especially almond milk.

Wine vs Milk?

Got Milk? Yes. Always. But increasingly it doesn’t come from a cow.

When you think about it, what happened to milk is a little bit like what seems to be happening to wine. There are lots of new products available that compete with wine including craft beer, craft spirits, and alcoholic sparkling water.  Some of these products are popular in part because they have less alcohol than wine, addressing a health concern  in the same way that almond milk avoids a health problem for some dairy-intolerant consumers.

Is wine all over? I don’t think so. But the industry is obviously not as healthy as we’d like it to be.

So what should wine do? A generic campaign is fine, but it matters a lot who it is aimed at, what it says, and how it is organized. And someone has to pay for it. A “Got Wine?” style consumer-focused campaign isn’t the only option.

Sue and I recently attended a promotional event for Italian wine that was aimed at trade — importers, distributors, sommeliers, journalists, and various “influencers” — but not consumers themselves (there was no consumer tasting).  The product chain for wine is long and complex and there are several points where promotion can be effective.

Come back next week for thoughts on some of the issues that a “Got Wine?” push needs to take into account. In the meantime, I have discovered that there already is a GOT Wine — GOT stands for Game of Thrones!

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The chart comparing Google search term data for wine, milk, etc. is taken from Karl Storchmann, “Wine Economics.” Journal of Wine Economics 7:1 (2012), p. 3.

The video above is the very first “Got Milk?” commercial.

The Future of Wine on “The Rocks”

mfrocks2The Rocks District of Milton-Freewater is a distinctive wine region. Small in size, it is defined, more or less by an alluvial fan. The rocks go very deep and draw vine roots down with them. To provide perspective To Kalon, the famous Napa Valley vineyard that is the source of many cult wines including Opus One, is also an alluvial fan. Terroirist territory to be sure.

Rock Power

Early settlers to the Walla Walla region and those who followed planted fruit trees in the rocks. Grape vines? Some for sure (see Kevin Pogue’s comment below — and a few of the Cinsault vines are still there), but things really took off when Christophe Baron of Cayuse Vineyards came along and drew attention to the area’s potential. Cayuse, Horsepower (another Baron project), Reynvaan Family Vineyards and others made the rocky region a focus of intense interest among wine-makers and wine lovers.

The wines can be amazing. Sue and I visited Cayuse a few years ago and I was prepared to be disappointed. Clearly the wines themselves could not live up to the hype that surrounded them. But I was wrong. Powerful, aromatic, elegant. Terrific. The Horsepower wines, which come from some of the most densely-planted vineyards I have ever seen, are powerful, too, and intimidate me a bit.

Rocky Finesse

rockA recent visit with the Reynvaan family reinforced our enthusiasm for the wines from this area. The Reynvaans purchased the land for their “In the Rocks” vineyard from Baron and started making wine with his help. Now Matt Reynvaan makes the wines and his sister Amanda (who was my student at the University of Puget Sound) handles operations.  Rich, elegant — that’s what my notes say for Syrah co-fermented with Viognier. A classic Cabernet blend from the “In the Rocks” vineyard blew my mind with its finesse and surprised me because I tend to think of the rocky vineyards here in terms of Rhone grape varieties. Think again.

Cayuse and Reynvaan command Napa-style attention and critics’ praise, but if you are thinking Napa Valley when you visit Milton-Freewater to see the rocks, you will be very disappointed. Although it is part of the Walla Walla AVA, The Rocks District sub-appellation is over the border in Oregon, away from the fine-dining restaurants and tasting rooms of Main Street Walla Walla. Milton-Freewater is what it has long been, a real agriculture town that serves the needs of farmers and workers more than tourists.

We visited Watermill Winery, which has one of the few tasting rooms on the Oregon side of the border. You almost can’t miss the big Watermill Building, which once stored fruit from the owners’ orchards and now houses cider production (and associated tasting room) and the winery, too.  Watermill’s owners are fortunate to have considerable acreage in The Rocks District and are intent on expanding wine production in the next few years. The wines are excellent — Sue is especially fond of the “Hallowed Stones” Cabernet Franc — and they are more available and affordable than cult wines.

Far From Napa

stonesThe small footprint of The Rocks District limits wine production in the long run,  but many new vineyards are in the works today. Water is an issue, of course, and so is profitability. High quality tree fruit from The Rocks District exported to Asian luxury markets can be more profitable than wine grapes at this time according to one source.

Land prices and grape prices here are far below Napa levels. $45,000 buys an acre of vineyard land with secure water rights, we were told. How much prime vineyard land do you think $45,000 buys in Napa these days?

Driving through the rocky area presents a different scene from Napa, too. Orchards, vineyards, a few residential houses, and open fields.  I wonder what it will look like in twenty years? Very different, I think!

The Milton-Freewater local leaders want to encourage wine-fueled economic development in order to capture value-added beyond grape production. So, in partnership with Willamette Valley Vineyards, who have vineyard interests in the area, the city is working to develop a shared-use wine production facility and high-end tasting room.

If You Build It They Will Come

The tasting room is intended to draw wine tourists across the border with the hope that they bring some cash with them. The shared-use concept, where several wine “studios” exist under the same roof,  takes advantage of a quirk in wine regulations that currently limits the number of wines that can use “The Rocks District of Milton-Freewater AVA” designation.

Most of the local wineries are located on the Washington side of the border, but the grapes are in Oregon. A Washington winery can use Walla Walla Valley to designate its wines from The Rocks District because the WW appellation spans the border, but the wines actually need to be produced in Oregon to use “The Rocks District” designation.

Most wines that come from “The Rocks District” today therefore cannot say they are from The Rocks District of Milton-Freewater appellation, which limits the AVA brand’s value. Investors in The Rocks District are caught in a sort of Catch 22 situation and Milton-Freewater hopes to break the deadlock by attracting a critical mass of producers, who can use the AVA name by producing at the new facility.  It’s kind of a “if you build it they will come” business strategy and marketing studies are in progress to see if the idea as promising as proponents believe. 

Force Majeure has built production facilities on the Oregon side and Rotie Cellars, which is known for its Rhone Blends, is just finishing a production and tasting room facility. Everyone we met is watching these projects closely to see how they are received along with a handful of other serious projects currently in process.

Steve Robertson, President of the Rocks District Winegrowers, is an enthusiastic advocate of the AVA he helped create. He writes that

As you know, there are only 340 prox. planted acres today within the AVA, and most of that is controlled by estates. Additionally, today’s modest volume of Rocks District wines are highly sought after in the marketplace….many of which are allocated. This will all begin to change over the next handful of years. New vineyard development will push planted acres to over 500 within this time frame. And a majority of those planned-to-be-planted acres will be delivered by new entities to WW Valley. Indeed, a couple hundred of those acres wine grapes will be available to other producers. A transition is surely in the making!

Robertson sees a critical mass of vineyards, wine grapes, and wineries using The Rocks District appellation on the horizon. Certainly there is a lot of excitement and interest. And the wines we have tasted merit the attention they receive.

Wine on “The  Rocks” District? I’ll drink to that!