By Fred Delkin

     By the middle of October, the Oregon wine grape harvest will be 
completed, with a record yield expected to exceed last year's 25,000 tons by some 3,000, but the market value faces a sharp decline.  That value 
climbed to $3,000 per ton three years ago, an all-time high, but doday's 
tonnage is fetching just $1,000-1,500 per ton.

When American industry's dot com craze flourished, new and younger wine consumers were not loathe to part with their dollars to enjoy their recent discovery of vino as the "in" thing.  Oregon wine labels had gained international attention for the high quality of Pinot noir and cousin Pinot gris, and our wineries were pricing these varietals accordingly ($30 and up per bottle of Pinot noir).

However, planting a profitable harvest from vines takes at least four years, and wine growers are forced to bet on the "come."  That brings on an  oversupply of grapes unless demand for premium wines grows apace. 

It hasn't, and the grape glut results in such ventures as California's Charles 
Shaw line, the " Two Buck Chuck" supply seen on the premium varietal 
shelves of Trader Joe's outlets...a desperate effort to get some return from the Golden State's recently vigorous vineyard expansion (several thousand acres of varietal-bearing vines have been plowed under in the past two years
as sales ad per capita consumption have contracted anemia).

Oregon harvest conditions continue to be ideal

Oregon harvest conditions used to be a real crap shoot until recently. However, warm, relatively dry falls have been the norm now for six years running, resulting in production  of optimum qualitay wines, and 2003 seems 
no exception.  This has been the stimulus for an explosion of new winery introductions here in the last few years.  There are now some 250 Oregon producers out there, in comparison to 78 wineries crushing grapes here in 
1992.

Now Oregon wineries are not only faced with too many good grapes, and a lagging economy, the competition in the marketplace has never been more fierce.  The United States has been identified as the world's most promising
premium wine market.  Yet domestic producers face higher production costs than virtually all nof the offshore wine regions...a status exacerbated by 
foreign governments commonly granting economic subsidies to their producers. Australia, Chile, South Africa, Spain and Argentina are now 
major premium wine exporters inundating American retail shelves and 
restaurant wine lists...and their wines are predominantly astounding values for the quality.  France has joined the wine sales fray in earnest, with production expansion and lower prices for premiums such as those from the Rhone and 
Loire regions.  Italy, leading all wine imports to Oregon and the U.S. measured by volume, is a source 

for both innovative marketing and breadth of varietals offered.  It's no wonder why Two Buck Chuck succeeds, but is it profitable?

Where do we go from here?

This is a great time to cultivate a wine habit.  There has never been a better selection of good wines at great prices...no great comfort to those invested in winery properties, particularly in Oregon.  Our $200 million industry is 
receiving a big hit from wine regions just across our northern and southern 
bordersf, let alone the flood of imports.  Washington state now has well over 200 wineries with the majority sited in central and eastern regions with lower investment and production costs than Oregon vineyards, and with several 
high volume producers in a category that satisfies widespread distribution far beyond the capability of any single Oregon winery.

It would seem there must be some consolidation of Oregon holdings to keep
our wine industry comfortably afloat.  Already we see small Oregon wineries lowering prices across the board...no more $30-50 bottles of Pinot noir 
unless you've established a true cult favorite.  The "medium" price range 
($15-20) is strongly beckoning Oregon labels wishing to survive.  Yet can the little guy make a profit at this level?  And battling at the middle ground of pricing is no lasting answer for increasing consumption of small producer wines that face the good value achievments of higher volume labels from both domestic and overseas sources.

Value becomes the determinant factor

Value will be the lasting gauge of wine consumption growth.  The U.S. per 
capita wine consumption rate has been relatively stagnant for years, and far 
less than any overseas wine region.  American beer sales continue to maintain excellent health (and growth) in both mass production and microbrew 
categories.  The vastly shrunken number of nationally distributed beer labels, fueled by mass media marketing, maintains command of adult beverages. Yet microbrews have gained spectacular popularity, predominantly with under-30 drinkers, and have caused a proliferation of taps in our urban areas.

Wine bars are a new phenomenon in our larger communities, and they are 
making our drinking habits more European because: (1) consumers can 
sample a wide choice of varietals and labels at reasonable  by-the-glass 
pricing; (2) consumers have a choice of inexpensive small plates chosen to 
match wining with dining.  This trend bodes well for educating Americans in 
the joys of wine and food, and increasing wine per capita consumption.

Oregon wine drinkers maintain a consumption volume at the top of per state 
produced here.  That is no encouragement to investors enamored of the 
romance of wine production.  There is bound to be a shakedown in the 
number of small Oregon wineries for all the reasons outlined here.  No 
wonder the average Oregon boutique winery achieves  40% of sales volume at the winery tasting room.

© 2003 Oregon Magazine