A glance at trends for Washington state’s leading wine brands suggests trouble in the marketplace. Five of the top ten declined last year, while the others showed only modest growth, according to Impact Databank. But that snapshot doesn’t tell the whole story. “We’re seeing a trend toward premiumization, especially at the above-$15 price point,” says Peter Ayling, vice president of business intelligence at Ste. Michelle Wine Estates, Washington’s dominant player.
The problem area for Washington wine is at the below-$12 tier, where a number of major brands have been losing volume. The biggest of those brands belong to Chateau Ste. Michelle. Ayling acknowledges the issue. “The lower end of the market has been softening for a while,” he says. “Ten years ago there was a period where the $7-$10 price band was a sweet spot, and that’s when some of these brands really performed. But consumers have continued to trade up—which is a good thing. We’re certainly aware of the challenges the lower-end brands face and where the consumer is moving.”
All three of Washington’s biggest wine brands are owned by Chateau Ste. Michelle. Its eponymous flagship label is the overwhelming leader, having hit 3.28 million cases last year, but the other three brands struggled. “Our 14 Hands ($12 a 750-ml.) label rose to 2 million cases rather quickly, and as a result, saw more than its fair share of attention from competitors, especially in the red blend space,” Ayling says. The brand hit 2 million cases in 2016, but fell to 1.65 million cases by 2018. Columbia Crest ($6 a 750-ml.) and Two Vines ($6) both showed double-digit declines last year “in large part due to the price segments where they play,” Ayling says.
Doug Charles, co-owner and co-founder of retailer Compass Wines in Anacortes, Washington, devotes roughly half his offerings to Washington wines. He’s not seeing softness, but understands the national perception. “With the dominance of Ste. Michelle, a slip in their sales will make the entire state appear as though it’s slipping as well,” Charles says. He adds that softness at the lower end has been more pronounced in states where marijuana has been made legal. “The demographic that buys sub-$15 wine is now spending some of those dollars on marijuana instead,” he says. “As so much of the Ste. Michelle portfolio is at that price point, it’s only natural that they would be taking a hit on those wines.”
While Washington wines may be saddled with an image of softness due to performances of select lower-priced wines, they’re also grappling with the reality of being small fish in an extraordinarily large pond. For Charles Bieler, proprietor of Bieler Family Wines, the larger wine market—encompassing domestic and international wines—is his competitive set. “I don’t think the average consumer cares much about origin,” Bieler says. “They want something delicious that they can identify with at a fair price—whether it’s from California, Washington, or France. It’s a competitive environment, so we’re bringing our wines and philosophies to life, ensuring that people understand who we are and what we stand for.”
Andrew Browne, CEO of Seattle-based Precept Wine, notes that the labyrinth producers must navigate is made difficult by the fact that thousands of other wines are attempting to follow the same path. “The product needs to be on a restaurant wine list, in a grocery store, and in a wine shop,” he says. “We need the distribution world to follow through on that. We have to have a good-looking package and a respectable price, and we have to do training at the account to make sure the staff has tasted the wine, understands the wine, and likes the wine. It’s getting the gatekeepers engaged with and passionate about the product, so that they’ll walk someone over to a sea of Cabernet, Pinot Noir, or Chardonnay and be able to pull out your products.”
Steve Warner—president and CEO of the Washington State Wine Commission, which represents almost 1,000 wine producers and 350 growers—touts Washington’s performance with Wine Spectator ratings. “Nearly half of the Washington wines reviewed by Wine Spectator scored 90 points or higher,” he says, adding that the average price of 90+ rated wines from Washington was $45—far lower than counterparts from California or France.
In fact, Warner says, the emergence of Washington Cabernet Sauvignon—a relatively new phenomenon given the state’s historical reliance on white wine grapes—has been reinforced by strong quality-value relationships when compared to the varietal’s counterparts from the Napa Valley and elsewhere. “We’re getting a lot of traction with Cabernet because we’re over-delivering on price,” Warner adds.
Pacific Northwest Pride
In recent years, Washington’s own appellations have come into the spotlight, showcasing the diversity and quality of the Pacific Northwest. The Columbia Valley is by far the region’s largest AVA, and most of the state’s nearly 1,000 wineries are located within it. There are 13 other AVAs in the state, including Yakima Valley, Horse Heaven Hills, and Walla Walla Valley. These and others have turned out a broad range of super-premium wines in recent years.
Of the five Washington wines that made the Wine Spectator Top 100 list in 2018, all but one hailed from the Columbia Valley. The exception was the highest-ranked wine, No.-30 2015 Delille Yakima Valley Signature Syrah, which scored 94 points. Daniel Wampfler, who serves as co-winemaker with his wife Amy Alvarez-Wampfler at Abeja Winery in Walla Walla Valley, says he’s excited about the evolution of Washington wines. “There’s so much talent coming out of the new programs,” he says. Abeja produces 9-12 labels each year, although just three are available through the three-tier system. “We have national distribution,” Wampfler says. “We want to see slow, methodical growth. We want to be 2,500 miles wide and an inch deep. Only three of our wines produced in a given year are in the wholesale market, and they’re allocated. Direct-to-consumer wines are a much higher return on investment, but we feel strongly that we have to have both.”
Precept’s Browne also notes the new breed of winemaker expanding throughout the state. “I’m more excited about the next five years than I’ve ever been excited about any other period of time,” Browne says. “Our quality is rising, and we’ve got a new generation of leaders in our industry. I think that will show over the next half-decade.”
Charles of Compass Wines says the popularity of individual brands drives enthusiasm in his store. “We get great traction from famous labels like Leonetti and Quilceda Creek, but folks also come looking for the tiny brands, which get almost no press but are stunning wines, like Sight Glass, Lobo Hills, Hightower, and Two Vintners,” he says. “For volume, wines have always needed to hit the shelf at below $20, unless there’s some serious buzz or a great review. For more premium brands, the sky’s the limit. For the most part, even the most expensive cult wines in Washington are still far less expensive than similar wines from California.”
Some say Washington wines still need to carve out a unique identity. Jeff Cox, the wine, beer, and spirits buyer at Seattle area food cooperative PCC Community Markets, says Washington wines are having trouble defining themselves. “People don’t really know what to expect from Washington,” says Cox. “There’s so much diversity in this state, and there are stories waiting to be told. Washington is still just coming into its own—and it’s not just one region. There are about six or seven regions, packed into one state.”
Cox contends that the state’s producers need to do a better job of embracing the region’s attributes and telling their stories to consumers. “People are only now beginning to express both the varietals and the regions,” he says. “We’re seeing better and better wines. The next step is messaging on a broad scale.” At PCC Community Markets, the top performers among Washington wines include the Savage Grace and Syncline labels, both priced at $20-$30 a 750-ml. At slightly lower price points, the Isenhower I Cabernet Sauvignon ($20), Dusted Valley Boomtown range ($16), Kiona lineup ($15), and Charles & Charles range ($13) are among the leaders.
Winn Roberton, head sommelier at Bourbon Steak at the Four Seasons Hotel in Washington, D.C., is helping to raise the profile of Washington wines. He devotes a full page of his 38-page wine list to Washington Cabernet Sauvignons and Bordeaux-style blends, as well as various other Washington wines. “With three sommeliers on staff, we can definitely hand-sell,” despite the fact that Washington may not be an obvious draw, Roberton says. “All three of us are really keen on the state’s wines. They’re consistent. They have a lot of power and tension, along with fruit and minerality. Price point-wise, they punch above their weight class.”
The Sweet Spot
While rising renown at Washington’s higher end has coincided with the lackluster performance of the sub-$10 sector, there’s also a huge swath of wines in the middle, priced between $10 and $20, that’s garnering attention. “It costs a lot of money to make 96- or 97-point wines, and they should charge for that,” says Precept’s Browne. “But when you look at Washington from a price-to-value standpoint compared to California, we’re still a value proposition. You can get incredible Washington wines for under $15, so I think we play there very well.” For his part, Browne is always looking ahead. “Every year there’s something new,” he says, adding that he sees opportunity in packaging innovation and is particularly enthusiastic about canned wines.
Chateau Ste. Michelle continues to develop its product mix, pointing toward wines at higher price points. “During our last three or four years of introductions, we’ve been going to market above the $10 price point,” Ayling says. “As we further assess the long-term portfolio strategy, I think you’ll see even more of that.
Ayling says four launches are slated for 2020. Altered Dimension, sporting a “visual perception-bending package,” will carry a suggested retail price of $15 for its Cabernet Sauvignon and $13 for its Sauvignon Blanc and rosé. Fruit & Flower Chardonnay will retail for $12 a 750-ml. and will also be available in cans. Liquid Light, a single-SKU Sauvignon Blanc, will sell for $13 a 750-ml. Finally, Chateau Ste. Michelle will extend Borne of Fire, initially a $25 Cabernet Sauvignon, to include a Chardonnay, priced at $17.
Like Browne, Ayling is also keen to continue innovating with new packaging. “As the consumer for this space continues to emerge and evolve, and as millennials and now the older Gen Zs are being introduced to wine, we’ll need to experiment and innovate,” he says. “Washington and the Northwest in general have led the way in different packaging styles, and now the rest of the country is starting to pick up.”