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Washington Wine’s Profile Rises, With Acreage Up Nearly 50% Since 2005

December 3, 2012

Washington state’s wine industry has made significant strides in recent years, and consumers are taking notice. Major players like Ste. Michelle Wine Estates and Constellation’s Hogue Cellars continue to drive the category, and with E&J Gallo entering the state with its acquisition of the Columbia and Covey Run brands from Ascentia earlier this year, Washington wine’s visibility on retail shelves is poised to expand markedly.

Washington’s leading wine brands were up nearly 7% to over 7 million cases last year, according to Impact Databank, and have shown total volume growth of nearly 2.5 million cases since 2005. In addition, since 2005 the number of Washington wineries has more than doubled to 740, while the state’s wine-bearing acreage has increased by 46% to 41,000 acres.

E&J Gallo’s investment is one of the biggest developments for Washington’s wine industry in years. Roger Nabedian, senior vice president and general manager of Gallo’s Premium Wine Division, has said the company intends to sell 1 million cases of Washington wine in the next five to 10 years, with Columbia—which will be repositioned to between $10-$15 a bottle—leading the way.

Ste. Michelle’s shipments rose 4% and revenue inclined 9.2% in the nine months through September. Shipments of its Chateau Ste. Michelle brand—boosted by its super-premium Indian Wells tier ($15-$18 a bottle)—were up 16% to 704,000 cases in the three months through September. Meanwhile, 14 Hands, formerly an on-premise only label, is now thriving at retail. “We knew there was a lot of demand for it off-premise, so we created the Hot to Trot red and white blends, and those just exploded far beyond our expectations,” says Ste. Michelle president and CEO Ted Baseler.

Ste. Michelle owns the top four Washington wine brands—and seven of the top 10. Constellation’s Hogue Cellars is the fifth-ranked brand. Riesling, Chardonnay and Pinot Grigio make up 65% of volume for Hogue, which said this summer it was moving 100% of its production to screwcaps, from its current 70%. Constellation also launched a new Washington-sourced brand, Thorny Rose, in July, which has already shipped 100,000 cases in its limited time on the market, according to Constellation CMO Chris Fehrnstrom.

Banfi Vintners, with its Riesling-focused Pacific Rim label (up 15% to 190,000 cases last year), is also mounting a charge. Banfi’s VinMotion unit, centered on the Pacific Northwest, also includes the Sweet Bliss brand, and will look to add more offerings in the coming years.

Seattle-based Precept Wine expects volume of over 900,000 cases this year, led by its House Wine (around $10) and Chocolate Shop ($12-$15) labels. House Wine’s Merlot, Chardonnay and Riesling extensions were recently repacked. “Overall, House Wine is up, but it’s not meeting our expectations,” says Precept president Andrew Browne, explaining that the brand is seeing 15% and 10% growth respectively on its Cabernet Sauvignon (known as Steak House) and Sauvignon Blanc (known as Fish House) wines, but that increased competition in the red blend category has hurt its House Red label.

Smaller operators like Prosser-based Mercer Estates—a collaboration between the Hogue and Mercer families that will produce 28,000 cases this year, up 15% from 2011—collectively comprise an important part of the Washington business. Mercer is extending its revamped Mercer Canyons line with a Chardonnay ($12) and a Merlot-based red blend ($15) this year.

After a light 2011 harvest tightened grape supply across Washington, producers say the 2012 crop is robust and of very high quality. Early estimates put Washington’s wine grape crop at a record 190,000 tons this year, up around 30% from 2011.

 

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