Washington and Oregon Wines in London

There is a special tasting of Washington and Oregon wines in London today, held at the Institute of Contemporary Arts at 12 Carlton House Terrace. More than 190 wines from 40 Pacific Northwest wineries are being sampled. Marty Clubb of L'Ecole 41 in Walla Walla is leading an educational seminar about the Washington wines and Howard Rossback of Firesteed is doing the same for the Oregon products. The event is funded in part by a $200,000 federal trade grant. I believe it is the largest organized effort (so far) by Northwest winemakers to break into the European markets. It will be interesting to see if this seedling can grow to bear fruit.

Washington and Oregon are important winemaking regions, of course, but their reputations and sales are concentrated in the United States. Although Oregon Pinot Noirs are always included in the discussion when people anywhere talk or write about new world Pinots, the fact is that not much of it is sold abroad. Oregon wine sales in the UK and France were just over 2000 cases in 2006, for example, out of total production of 1.6 million cases. The word may be out around the world about Oregon wines, but wine distribution and sales haven't followed -- yet.

I don't have figures for Washington wines, but I suspect that the situation is more or less the same. Washington makes excellent wines (better than Oregon wines, if you judge by the Wine Spectator and Wine Advocate ratings, where several Washington wines receive 95+ points), but so far Washington doesn't seem to have that one distinctive wine that could establish an international reputation. The state is too varied, I think, in terms of climate and geography for that to happen. Washington is Riesling country, judging by volume of production, but it hasn't yet established an international reputation with this wine (although it is trying to do so with the Riesling Rendezvous conference). A variety of reds do well here, including both the Bordeaux and Rhone varietals, but no signature style of wine has emerged as the champion. Marty Clubb is telling the people in London that Washington has the ideal climate for wine (that's the official Washington wine theme), which may be true but doesn't really define the product for confused international buyers.

Washington does have one advantage over Oregon in the export market: distribution muscle. The Washington wine industry features a few very large players that have the financial clout to potentially open up foreign distribution channels. Money is necessary; it isn't easy to establish a brand abroad in this crowded market and margins on exports are necessarily lower than for domestic sales, at least at the beginning. I have read that export sales by small scale winemakers are "vanity" projects and there may be some truth to this. That doesn't mean it's not worth doing, however.

The Chateau Ste Michelle family of wines have penetrated some European markets. I was surprised to discover a large display of CSM wines in an upscale supermarket next to the train station in Riga, Latvia, for example. I haven't been able to find out how the wines got there yet -- my guess is that CSM's deal to distribute Antinori wines in the U.S. may be reciprocated by Antinori in Europe but I don't really know. Other Washington wines including Columbia, Covey Run and Hogue are part of the Constellation Brands portfolio, which may aid in their international distribution, too.

The London tasting isn't the first effort to get Northwest wines attention in the UK. I remember being in London in about 1990 and walking into Fortnum and Mason only to be shanghaied by an excited clerk who was directing anyone she could to a lonely wine tasting display where they were sampling wines from Hogue Cellars of Yakima. Needless to say, no one had any idea where Yakima was located, but they were amazed that such a unlikely place could produce good wine. Today's London event is a much larger project than that Fortnum display, but the goal is much the same, to make friends, establish relationships, and get our foot in the door.

I hope the London tasting goes well. Many of the wineries are apparently looking for UK distribution, which makes sense. The UK is the most important wine market in the world. It is a good market to sell wine and to establish a worldwide reputation. A disproportionate number of the world's leading wine writers and experts are based in London, including Jancis Robinson, Oz Clark, Michael Broadbent and Steven Spurrier. A good word by any of these celebrity wine critics would encourage wine enthusiasts in the UK and around the world to give Northwest wines a try. But the real prize would be a distribution deal with Tesco or Sainsbury's, which dominate supermarket sales, or one of the big high street wine store chains, since you can't try wines you can't buy.

One reason this is a good time to try to break into the UK and European markets is that the exchange rates favor U.S. exports. The dollar fell dramatically in 2007 against both the Pound and the Euro, making U.S. wines relatively less expensive. This will help, but it will still be difficult to get British wine drinkers to think beyond Gallo and one end of the market and Napa Valley at the other.

It's tough to break into foreign wine markets. Ernie Hunter famously did the DIY way -- he brought his wines to London and entered them in the Sunday Times wine festival, where they won the people's choice award. Ernie was from New Zealand and his surprise victory paved the road for Marlborough Sauvignon Blanc's dramatic rise in the world of wine. Washington and Oregon are taking a direct and organized approach, with tastings and seminars. Every case is different. My next post will tell an unlikely story of how Washington wines first came to Sweden.

The California Bill and the Birth of Washington State Wine

I am spending this cold, wet day re-reading parts of Paul Gregutt's great new book Washington Wines & Wineries: The Essential Guide (University of California Press) and his chapter on the history of Washington wine got me to thinking about the origins of the industry. Is it possible to point to any one person or event that is responsible for the birth of Washington wine?

There are several possible choices. Some would say that it happened in 1937 when Washington State University horticulturalist Dr. Walter Clore, the godfather of Washington wine, began working in his research center north of Prosser. Dr. Clore and his team are responsible for many of the advances in Washington viticulture that we take for granted today. Without Clore and his colleagues, Washington winegrowers might still be planting Muller-Thurgau and Concord grapes.

Others might argue that Washington wine was born in 1967 when Andre Tchelistcheff, the famous winemaker from California's Beaulieu Vineyards, came to Washington and praised a Gewurztraminer made by Phil Church, a partner in Associated Vintners (now Columbia Winery). Tchelistcheff's endorsement lent credibility to Washington wine and his encouragement helped propel the industry forward. (Tchelistcheff even encouraged his nephew Alex Golitizin to make wine in Washington -- the result is Quilceda Creek Vintners, the maker of Washington's first 100-point cabernet sauvignon.)

A third important event occurred in 1976, when the Chateau Ste. Michelle winery opened at the former Hollywood Farms location in Woodinville. The $6 million winery and headquarters complex was the largest single investment in the industry to that time and it represented a great gamble by Ste. Michelle's corporate parent, the United States Tobacco Company (the makers and Skoal and Copenhagen smokeless tobacco). CSM, which was created through a merger of pioneer wineries Pomerelle and NAWICO before being purchased by US Tobacco, is now the Colossus of Washington wine, accounting for about 70 percent of all wine production in the state.

My choice for the key event in Washington wine history, however, didn't happen in the vineyards with Dr. Clore or the tasting room with Mr. Tchelistcheff or at the grand opening of the Woodinville winery. From an economist's viewpoint, the critical act (and it really was an Act) took place in March 1969. That's when the Washington legislature passed House Bill 100, the California Wine Bill. The California Wine Bill exposed the Washington wine industry to competition from both domestic (California) and international competition and forced winemakers to improve quality or disappear.

Here's the back story. Many wineries opened or reopened in Washington when Prohibition was repealed in 1933. Almost the first thing that they did was to seek protection from the state legislature from out-of-state competition. This protection was provided almost immediately in the form of the Steele Act of 1935, which set up a dual distribution system for wines. "Domestic" Washington wineries could sell directly to wholesalers, but "foreign" out-of-state wines (including wines from California) has to be distributed through the more rigid channels of the state liquor monopoly, the Washington State Liquor Board. The result was that "domestic" wines were relatively easy to purchase and widely available, but "foreign wines" including California products could only be purchased through state stores with their limited hours and strict controls. Later legislation provided for minimum prices in order to prevent competition from cheaper California wines.

The result of this protective legislation was exactly what you'd expect. With no competition to keep winemakers honest, quality suffered. The industry focused on the low end of the market, making large quantities of cheap, sweet, fortified wines like this NAWICO port. There was little incentive for winegrowers to seek quality (although some did) because good grapes and poor ones were all blended together. Although Dr. Clore was busy developing quality wine grapes in Prosser, Washington's most important grape crop for many years was the Concord grape that went into Welch's juice and Gallo's sweet sparkling Cold Duck.

Rather than thriving behind its protective wall, the Washington wine industry collapsed. There were only eight wineries in Washington in 1969 (down from 42 in 1937) and, with a few exceptions such as Associated Vintners, their wine was mediocre at best.

The paradox that protecting a wine industry actually destroys it is not unique to Washington. I have seen it time and again in my research, in New Zealand, Argentina and in France under the EU's old wine regime. The only thing that can protect a wine industry is competition, which forces winemakers to become more efficient and to raise quality.

With nothing to keep cheaper California wines out, Washington winemakers had no choice but to look upmarket. A quality wine industry emerged and has thrived -- there are now more than 500 wineries in Washington state and new ones appear every month. Washington is unusual in the wine world in that it has developed a major wine industry that is not built upon a base of inexpensive bulk wine. Only New Zealand (which cannot compete with Australia at the bottom end of the market) and Washington can claim to have pure premium wine industries.

You can thank competition -- and the California Wine Bill of 1969 -- for Washington's status as an important producer of premium wine.

Chateau Ste Michelle

I gave a brief talk to a university group at Chateau Ste Michelle in Woodinville, Washington yesterday and it gave me a chance to think at bit about the Washington wine industry in general, now with more than 500 wineries and growing, and Chateau Ste Michelle (CSM) in particular.

Sue and I were fortunate to be able to spend a couple hours in the afternoon with CSM Enologist David Rosenthal (pictured here) , who is a 2001 marine biology graduate of the university. He's worked at Mondavi as a chemist and at Oregon and Australia wineries and he now helps make the white wines at CSM. They produce about 400,000 cases of Chardonnay and 750,000 cases of Riesling in addition to smaller amounts of other white varietals. It is quite an operation and David was nice enough to answer all of our questions and take us through the cellar room, sampling wines starting from unfermented juice that had just arrived from Eastern Washington on through the various stages of fermentation and aging. I learned a lot -- thanks, David.

I've read that CSM uses its large scale wisely, treating size as a resource that permits experimentation and diversity, and I could see this pretty consistently through our tour with David. CSM's scale is tailored to give its winemakers a great deal of choice when it comes to blending their high volume wines and also to facilitate limited production products, including of course the single vineyard bottlings.

Chateau Ste Michelle is part of Ste Michelle Wine Estates (SMWE), which owns several other Washington brands, including Columbia Crest, Snoqualmie, Domaine Ste. Michelle (sparkling wines), NorthStar (which began as a high end merlot specialist label), Red Diamond, Stimsom Estates Cellars (up-market jug wines), 14 Hands (the manditory critter wine -- the critter on the label is a horse that stands 14 hands high) and the boutique Walla Walla producer Spring Valley Vineyard. If you've been reading this blog you know how important brands are in the wine market today and SMWE's strategy reminds me of the old Robert Mondavi company -- to have competitive brands from the popular premium shelf on up to the icon level, leaving the low margin bulk wine market (the bottom shelf) to Gallo, Yellowtale and Charles Shaw. CSM and Columbia Crest are the leading brands, with 3 million cases produced between them.

Although everyone associates CSM with Washington, the company's reach is much broader. Other brands in their stable include Erath (Oregon), Villa Mt. Eden and Conn Creek (Napa Valley) and Distant Bay (Monterey). They are the exclusive U.S. distributors of Antinori wines and have partnerships with both the Antinori family (to produce Col Solare, Washington's answer to Opus One) and, with the Mosel's famous winemaker Ernst Loosen (to make Eroica, an exceptional Riesling). SMWE is the largest producer of Riesling wines in the U.S. and possibly in the world! Together with the Antinoris, SMWE recently purchased Stag's Leap Cellars in Napa Valley, one America's most distinguished wineries.

In other words, this is big business, both in terms of volume and quality. Altogehter SMWE's brands produce 4 million cases a year, which is about two-thirds of all Washington wine, and it is a correspondingly huge influence on the whole industry here. Of course, Washington is still tiny, in quantity terms, compared to California. People say that Gallo produces about 70 million cases all by itself. (Since Gallo is family-owned, it doesn't report as much data as publicly-traded wine producers do, so we have to guess what's going on in the big warehouses in Modesto.)

SMWE makes a lot of very good wine, which is perhaps more important that quantity in today's market. SMWE's brands account for the largest number of Wine Spectator 90+ wines (and the most total top 100 wines) of any producer in the world. It is an interesting fact that Washington doesn't compete at all at the very bottom rung of wine ladder -- the very inexpensive bulk wines that account for much of the total volume in today's market. You know what I am talking about -- Two Buck Chuck and the lesser wines that make that brand look so good. Of all the New World wine regions, only Washington and New Zealand have been able to build a wine industry from the popular premium level up.

But it makes sense: Washington cannot hope to compete with California's Central Valley producers when it comes to cost-sensitive bulk wines, so it doesn't try. New Zealand is in the same position with respect to Australia. In both cases, I believe, this actually works to the smaller, higher-cost producer's ultimate benefit, since all of the focus is on quality and on the growing upper-tier of the market.