It was during a sales trip to China in 2017 that Ken Wright knew Willamette Valley wine had arrived on the world stage.
“Not only did they know of the Willamette Valley, they knew how to say it correctly and they associated it immediately with Pinot noir,” said Wright, founder of Ken Wright Cellars in Carlton, Ore. “Honestly, I was surprised.”
With increasing global recognition, Wright and fellow Oregon winemakers spent the next two years debating how to protect and burnish their brand. The result was a series of bills introduced in the 2019 Legislature that called for raising the state’s wine standards and enforcement.
But those measures did not sit well with everyone. A coalition representing 65% of all winegrapes grown in Oregon opposed the bills, arguing they divided the industry and created barriers to markets.
While a few of the less controversial bills did pass — including one that requires out-of-state wineries to pay the same $25-per-ton tax when buying Oregon winegrapes as in-state wineries — the coalition was successful in stalling others.
The Oregon Liquor Control Commission is now on a listening tour to hear from producers in major winegrape growing regions across the state. Settling differences may take some time, though industry officials are confident they will find a solution going forward.
“Demand for Oregon wine is unprecedented,” said Tom Danowski, CEO of the Oregon Winegrowers Association. “There’s always a little bit of tension prompted by growth.”
A growing industry
The modern Oregon wine industry dates back to 1961, when Richard Sommer planted the first post-Prohibition vineyard on an old turkey farm west of Roseburg in the Umpqua Valley.
Today, Oregon has 769 wineries and 1,114 vineyards. The industry generated $5.6 billion in statewide economic impact in 2017, an increase of 67% over the last three years. Oregon is also home to 19 American Viticultural Areas, or AVAs, federally designated appellations that denote a special or unique wine growing region.
Yet Danowski said Oregon still represents just 1% of all U.S. wine made annually. That means there is still tremendous market potential, along with new challenges.
“In an industry that has grown this large and this complex, it is not surprising that the different business models that make up the Oregon wine industry now would generate different interests and certainly different agendas,” Danowski said.
Over two-thirds of Oregon’s vineyard acres are in the Willamette Valley, which has blossomed into one of the premier Pinot noir-producing areas in the world. Wright said it is imperative that valley winemakers defend their unique qualities against deception by outside winemakers.
“Clearly, now that the Willamette Valley does have the kind of name recognition and market value that it has, we are ripe for those who are less high-character, for those who are just simply moving boxes, rather than (being) in this business because they’re passionate about Pinot noir or the region,” Wright said.
Oregon already has some of the highest wine production standards of anywhere in the country.
Under federal law, to label a wine as a single variety — say, Pinot noir or Chardonnay — it must be made from at least 75% grapes of that variety. In 1977, Oregon adopted even stricter rules, requiring 100% content. Seven varieties were exempted from the higher standard.
Thirty years later, in 2007, the Oregon rule was amended to 90% and increased the number of exempted varieties to 18.
Similar rules also apply to labeling wine from a particular AVA. Federal law requires that 85% of grapes come from within an AVA to include its name on the label. In Oregon, the standard is 95%.
Willamette Valley winemakers proposed two bills, Senate Bills 830 and 831, that would have gradually raised both standards to 100%. The rules would have applied specifically to the Willamette Valley AVA. Other AVAs could decide whether they wanted to participate, but it wasn’t required.
A third bill, Senate Bill 829, also called for “conjunctive labeling” within the Willamette AVA. That means that, if winemakers use a smaller sub-AVA on their label — such as Ribbon Ridge or Yamhill-Carlton — they also need to label it “Willamette Valley.”
Jim Bernau, founder and CEO of Willamette Valley Vineyards in Turner, Ore., said the goal is to protect the integrity of Willamette Valley wine.
“The consumer is looking for more than something to quench their thirst,” Bernau said. “The consumer is looking for a culinary experience.”
According to Nielsen cash register data collected over a 52-week period ending on June 30, 2018, the average price for Pinot noir labeled “Oregon” was $14.64, while the average price for Pinot noir labeled “Willamette Valley” was $25.06.
That added value could be lost if brand integrity is not protected, Bernau said.
“If you can take these grapes, truck them to California, make an Oregon wine and you don’t follow the rules and cheapen the wine, it’ll destroy us,” he said.
Senate Bill 111
Both SB 830 and 831 passed the Senate by a vote of 26-4, but were bottled up in the House Economic Development Committee. SB 829, the conjunctive labeling measure, did pass the Legislature and was signed by Gov. Kate Brown on June 17.
At the same time, the Oregon Winegrowers Association was pushing Senate Bill 111, which further directed the Oregon Liquor Control Commission to convene an advisory committee to review labeling rules.
SB 111 also authorized the OLCC to work across state lines to reciprocally enforce labeling standards, and would have increased maximum penalties for violations from $5,000 to $25,000.
The bill came after a highly publicized dispute with Copper Cane Wines & Provisions, based in Rutherford, Calif. Copper Cane was accused in 2018 of deceptively referencing Oregon AVAs on labels for two different brands of Pinot noir and rosé — Elouan and The Willametter Journal.
Copper Cane, which buys winegrapes from about 50 Oregon growers, voluntarily surrendered nine labels to the federal Alcohol and Tobacco Tax and Trade Bureau. The OLCC also moved to revoke the winery’s permit to do business in the state. An appeal is ongoing.
David Adelsheim, founder of Adelsheim Vineyard in Newberg, Ore. and one of the original pioneers of Oregon’s wine standards, said strong enforcement is essential.
“If you have a successful thing, people want to copy it,” Adelsheim said. “If those people don’t share your goals and your values and your passion, then they can use whatever loopholes that may exist in law for their own purposes.”
SB 111 passed out of the Senate Judiciary Committee, but eventually stalled in the Ways and Means Committee.
The primary opposition came from an informal industry coalition, formed by Rob Wallace of Del Rio Vineyards in the Rogue Valley, which argued the bills created confusion and uncertainty.
Wallace first heard about SB 111 from a customer in California, where he sells about 250 gallons of bulk wine a year. If passed, the customer told Wallace she could not longer buy his product. The rules were just too nebulous, and the penalties too severe.
“The complexity of the bill itself created so much uncertainty in our market that we had people backing out of commitments, just because they didn’t know what the rules were going to be,” Wallace said. “It was an overreach, for sure.”
The coalition claimed that SB 111 creates winners and losers, making it harder for Oregon producers to sell their grapes.
Scott Steingraber, president of the Southern Oregon Winery Association, said the Rogue and Umpqua valleys have warmer climates to grow darker, more full-bodied fruit. More than half the region’s acreage is currently in Pinot noir, which can be sold to Willamette Valley wineries for blending.
But Steingraber said the 100% AVA exclusivity standards would have made Southern Oregon grapes less valuable.
“We’re always going to have an excess of fruit beyond what we can make here,” said Steingraber, who also owns Kriselle Cellars in White City, Ore. “The legislation would cut out that market for us, and we’d have to go somewhere else.”
Chad Day, owner and manager of RoxyAnn Winery in nearby Medford, Ore., said limiting sales outside the region would be “very detrimental” to Southern Oregon growers.
“Rules written for one region don’t necessarily apply to the other,” Day said. “That just needs to be considered when we write these (bills).”
The primary intent of SB 111 was to deal with collecting taxes from out-of-state wineries that buy Oregon grapes. That provision was saved and inserted into SB 112, a legislative maneuver known as a “gut and stuff.”
Oregon approved a $25-per-ton grape tax in 1983, which is split evenly between the grower and buyer. The OLCC collects the tax and distributes the money to the Oregon Wine Board for research, marketing and promotion of Oregon wine.
But with 20% of Oregon grapes now leaving the state — 18,210 tons of grapes in 2017 — it was unclear whether the agency had any authority to collect taxes from out-of-state wineries.
Under the old structure, out-of-state wineries were not required to pay any portion of the tax. SB 112 fixes that, requiring wineries located out-of-state but licensed in Oregon to pay their share. Wineries can deduct $12.50 to cover the growers’ share.
SB 112 passed unanimously in the Senate and 54-5 in the House. It was widely accepted by the winemakers and will take effect in 2021.
Danowski, of the OWA, said the wine board received a little more than $2 million from the tonnage tax for the fiscal year ending on June 30. Looking ahead, he expects the board will be able to recover approximately $400,000 a year in uncollected taxes.
“Nobody loves a new tax, but almost everybody we talked to, both in and out of state, appreciates that if we all chip in, we’ll all have more to invest in research and promotion of Oregon wine,” Danowski said.
After a testy legislative session for the wine industry, the OLCC launched its listening tour on July 17 in Medford to explain changes and gather input from winemakers.
About 30 people attended the meeting. OLCC chairman Paul Rosenbaum said the agency wants to help Oregon wine continue to thrive, but the industry needs to pull together before proposing additional rules and legislation.
“These are really tough decisions that whatever you do, we need guidance on it,” Rosenbaum said. “I don’t think we’re going to sit back and act as referee.”
Additional OLCC meetings were scheduled in Roseburg, McMinnville and Pendleton.
Adelsheim, who did not attend the meeting in Medford but plans to attend the Aug. 6 session in Pendleton, said Willamette Valley winemakers are still seeking 100% exclusivity to protect their brand.
“The reason that the Willamette Valley is on the world map of wine is because we’re making a wine that tastes like the Willamette Valley, and only the Willamette Valley,” Adelsheim said.
Wallace, who continues to organize the industry coalition, said there has been a lot of strife this spring but they remain committed to uniting Oregon winemakers.
“This is a big deal. It affects a lot of people,” Wallace said. “We need to take a minute, take a breath, and do what we can to have a reasonable conversation.”