Direct to consumer market key for Oregon wine
Oregon wineries, with their premium-priced Pinot noir, continue to thrive on direct to consumer marketing, a researcher and banker told the Oregon Wine Symposium.
Portland — Consumers who “traded down” to lower-end wines during the recession are now willing to spend more per bottle, market research experts say.
While overall wine consumption is rising, fewer people report spending less than $10 per bottle, said Christian Miller, proprietor of Full Glass Research.
Many wine buyers were reluctant to buy premium wines even though they hadn’t lost their jobs or taken pay cuts — it was a matter of psychology, he said.
“Those people are coming back to the market,” Miller said Tuesday during the 2014 Oregon Wine Symposium.
The trend is good news for Oregon wine producers, whose product is typically sold at a higher price point than Washington or California.
The average retail price per bottle in 2013 was $15.39 for Oregon, $9.47 for Washington and $6.23 for California.
While Oregon’s total output is still a small fraction of total U.S. wine production — about 1 percent — it has a proportionally large share of the “direct to consumer” market, at more than 3 percent, Miller said.
“Oregon punches above its weight in the direct to consumer market,” he said.
This is particularly true for Pinot noir, where Oregon controls 13 percent of the direct to consumer market, Miller said.
A larger proportion of drinkers who buy Pinot noir report increasing their consumption of Oregon wine, especially from the Willamette Valley, he said.
“Pinot noir people are more pro-Oregon than wine consumers broadly,” he said.
Oregon wines have traditionally faced barriers in distribution and general awareness, but the situation is starting to improve, Miller said.
The percentage of merchadisers who said Oregon wine was easy to find increased from 33 percent to 52 percent in the past five years, he said.
Smaller wineries in Oregon and elsewhere have long known to emphasize direct to consumer sales, said Mark Freund, managing director of Silicon Valley Bank’s wine division.
“The big boys have realized it’s a way for them to make hay as well,” Freund said.
Survey respondents project increased wine sales of more than 10 percent in 2014, though the bank expects the growth to be about 6 percent, he said.
While the U.S. wine industry hasn’t seen a drop in consumption volume in more than two decades, the sluggish recovery in employment is an impediment, Freund said.
While stock prices and corporate earnings have climbed, many consumers haven’t been affected by those economic improvements, he said.
“Companies are doing better but they’re not creating more jobs with that money or paying their employees more,” Freund said.
Consumers in the “millennial” generation are particularly affected by this phenomenon, he said.
Even so, these young drinkers seem to have discovered wine earlier than other generations, which could lead to healthy sales once they have more earning power, Freund said.
The “baby boomer” generation is wealthiest, but their children — Generation X — spend the highest proportion of their income on wine, he said.
Another factor wine producers should watch is the value of the dollar, which is likely to strengthen against major currencies in 2014, he said.
That eventuality would make foreign wine imports more competitive in the U.S., Freund said.
Two years of bumper grape crops in California have boosted bulk wine inventory, which will affect producers’ ability to raise prices, he said.
“Don’t take your foot off the pedal because there are still some headwinds out there,” he said.