When big companies invade boutique wine country with much bigger marketing budgets and resources, the little guy can feel squeezed out. Or, creative marketing and a changed paradigm could lead to more success.
Oregon’s Willamette Valley has seen explosive growth in recent years in small and large wineries. But big investment from major players has an impact on the smaller wineries distribution and maybe even production.
In recent years Kendall-Jackson has purchased Willamette Valley vineyards: Penner-Ash, Willakenzie, Gran Moraine and Zena Crown. French icon Louis Jardot has bought in along with Chateau St. Michelle from Washington and Foley Wines from California. There are quite a few others.
As the quality of Oregon Pinot Noir continues to gain critical and consumer accolades, more small wineries are disappearing, and others are strategizing to find and hold market share. The bigger brands eat up the shelf space and dominate distributor’s selling efforts.
“We primarily sell out of our tasting room though we do distribute a small amount of wine in Colorado, Maryland and Illinois,” said Steve Lutz, owner of Lenne Estate near Yamhill, OR. Lenne produces about 1,600 cases of wine annually. “It is becoming increasingly difficult to find any distribution for small producers and not a very effective way to sell anymore.”
Some winery owners have simply given up or cut back on efforts to lure a distributor.
“I’m resigned to finding and working with a couple of distributors in niche markets to sell about half of my wine,” said Don Hagge, Vidon Vineyards. Vidon also produces around 2,000 cases annually. “We’re rolling out a new online system (called VinAlliance) this year that might help us and a few other small wineries.”
Hagge hopes the new alliance will allow consumers to buy wines almost like a wine club but from several different wineries on a regular basis.zpat
These small wineries depend on direct to consumer (DTC) sales for their success. “We had distributors in more than 20 states but last year scaled back to six,” Alloro Winemaker and General Manager Tom Fitzpatrick said. “It’s not difficult finding a distributor but it is difficult finding a distributor who can generate adequate sales. But they have their own businesses to profitably run just like us. Building brand awareness and recognition for a small unrecognized producer, in a crowded space, is expensive. Most distributors don’t seem to be able to do this.”
Alloro is the biggest of this group of winemakers at a modest 2,550 cases.
Experience, Fitzpatrick said, has told him that direct to consumer sales will probably always be 80 percent of his business.
Everyone has a website, and some are exploring the partnering options like Vidon. The challenge is to get a brand in front of the consumer. “Most of our wine is sold through our tasting room, wine club, and events,” said Youngberg Hill winemaker Wayne Bailey. “Online sales are a big opportunity, but the current challenge is figuring out how to best reach potential customers or let them know you even exist. Even though you can ship to consumers in most states now, it is a very expensive and time-consuming process to gain and maintain the ability to ship into each individual state; making it almost impossible for small wineries to justify.”
The smallest of this winery group is Ghost Hill Cellars which produces less than 400 cases. Marketing is complex for such a small operation. “We have distributors who work with small producers but still even that is difficult,” said Ghost Hill owner Mike Bayliss. “We do online sales and a seasonal tasting room (April to November). Although we sell a good amount of our annual production we’re moving toward selling more grapes and making less wine.”
The upside of the investment by the wine world’s bigger players is additional attention. We’ll look closer at that benefit and at these winery’s wines in future columns.
Note: The next Grape Sense column keeps the focus on wine marketing and these small wineries.