Wine Chris Bitter

Chris Bitter, second from left, a wine economist at Vintage Economics, speaks about Washington state’s wine economy.

KENNEWICK, Wash. — Washington state wine industry leaders are encouraging growers and wineries to correct an imbalance in supply and demand by removing more vineyard acreage from production this year. Their message to grape growers is clear: many grapes could go without a buyer this year.

Wine business analysts say up to 30% of grapes went unharvested last year because of wet and freezing weather, and a lot of fruit wasn’t crushed for economic reasons, yet Washington vineyards still overproduced by about 41,250 tons, bringing down the price for producers as wineries sought to reduce their inventories.

“Last year was tough for many growers,” said Chris Bitter, wine economist at Vintage Economics. “And if you’re in the mass market for grapes, you should expect a few more lean years to come.”

Bitter spoke at the Washington Winegrowers 2020 Convention and Trade Show.

The surplus, or as Bitter calls it, the “big inventory glut,” is a result of asymmetry between supply and demand. Industry data show that Washington has had mammoth growth in inventory in the past seven years: from 14 million cases in 2012 to 31 million cases in 2019. Meanwhile, the market has plateaued.

“Supply is constantly outstripping demand,” said Bitter. “It’s a big hole to dig out of.”

According to the Washington State Wine Commission, the state has more than 400 grape growers and 59,000 acres of wine grapes.

To address the glut, Bitter said one of two things would need to happen: Either 8,500 acres of grapes would need to be removed from production in Washington, or shipments would need to grow to 15.5 million cases.

Higher demand may be preferable, said Bitter, but it’s unlikely, leaving cutting back production as the alternative for growers to increase prices.

Washington doesn’t have a network of wine grape cooperatives managing production quotas the way some cooperatives manage the milk market, so vine acreage removal is optional.

Some grape varietals face a larger surplus than others, he said. Bitter calls Cabernet Sauvignon the “poster child for being oversupplied.”

Mike Veseth, economist and editor of The Wine Economist, suggested repurposing Cabernet Sauvignon surplus in a few market categories: red blends, rosé and sparkling rosé, which are in-demand products.

Bitter added that although growing for a large commercial market is challenging, growing wine grapes for a small or niche market can be more profitable during a glut.

Big Washington wine businesses — which Bitter defines as those shipping at least 250,000 cases annually — are seeing a 0.6% decline, while small wine businesses are experiencing 5% growth. Those smaller, specialty markets are where there’s still demand for grapes, said Bitter.

“Small wineries are, in aggregate, doing quite well,” said Erik McLaughlin, CEO of Metis, a marketing firm focused on the beverage industry.

But vineyards looking to partner should be cautious. Not all small wineries are thriving. Based on economic data, one in six small state wineries is struggling.

Dick Boushey, manager of Boushey Vineyards LLC in Grandview, Wash., said growers need to adapt to retain and gain winery clients in an oversupplied market. Boushey said growers should brand their vineyard, work with trained winemakers, visit competitors’ vineyards to learn what others are doing and connect with the local research community.

“I’m on a research committee, and I get out more than I put in,” he said.

Washington grape growers, Bitter said, need to be creative and strategic to succeed.

“I’m still optimistic — and realistic — about Washington’s wine future,” he said.

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