Forecast Calls for Continued Sales in Oregon
Wine industry facing generational shifts as baby boomers age, says speaker at Oregon Wine Symposium
Presenters at the Oregon Wine Symposium this week suggested that the state’s famed Pinot Noir vines stand to hold their own as the planet warms, meaning shifts in ownership of the state’s wineries promise to be what grabs headlines in the coming years.
Mark Freund, a managing director with Silicon Valley Bank’s Wine Division in St. Helena, Calif., told some of the 1,750 people registered for this year’s symposium that an industry survey indicated more than 38% of the state’s winery owners consider the sale of their businesses likely within the next five years.
That works out to approximately 260 properties in play, according to Wines Vines Analytics, a finding that comes as interest in Northwest properties holds steady among potential buyers from California and elsewhere.
Ease of business
“We expect more new entrants coming into Oregon,” Freund said, pointing to the “effective moratorium” by proposed regulations in Napa and Sonoma, Calif. “It’s much easier to do business up here.”
How many transactions actually happen is another question.
Freund’s finding was good fodder for conversation, but many agreed that price would be the sticking point for any sale. Getting deals done depends on what people are willing to pay, and on what terms.
Strong valuations are possible, given that Silicon Valley Bank forecasts good times for the wine industry in 2016 (notwithstanding the dour assessment by 28% of Oregon vintners that their businesses could be in better financial health).
Will the good times last?
Freund believes growth in U.S. wine sales is slowing, and unlike previous economy-led declines, this one is part of a generational shift as baby boomers pare back and millennials—the next major cohort to embrace wine—spread their money around a larger array of craft beverages.
Picking up on this theme, Christian Miller of Full Glass Research in Berkeley, Calif., told the Oregon industry that this isn’t necessarily a bad thing.
Millennials may not evolve into the high-frequency wine drinkers their parents were, but they’re not shying from buying premium products they believe in, either. The hipsters who embraced Pabst Blue Ribbon prior to craft beer are open to fine wine—if there’s a story.
“The cultural trends that are driving craft beer also favor wine,” Miller said. “It’s not an absolute trade-off.”
It’s a fact that Oregon vintners might want to note, Miller said, especially as retail sales of their table wines posted a respectable growth rate of 10.5% during the past year, according to Nielsen. (That compares to 2.2% growth in U.S. wine sales and 1.8% growth in sales of all wine in the country during the past year.)
A steep climb for Oregon
A key challenge Oregon faces, which Miller has mentioned before (see “Start Spreading the News” ), is letting consumers know the state produces more than Pinot Noir, and there are worthwhile growing regions outside the Willamette Valley.
Miller noted that the top phrase people associate with Oregon wine is “Pinot Noir,” yet only a third of wine drinkers consume Oregon wines regularly, according to Wine Opinions’ national survey of high-frequency, high-end ($20-plus per bottle) wine drinkers.
While people are aware that Oregon makes wine—47% of those surveyed report having tasted the state’s wines several times, and 14% have had at least one experience with them—awareness of regions outside the Willamette Valley continues to lag.
Survey findings indicated that a remarkable one-third of drinkers deemed Walla Walla too unfamiliar to rate, with unfamiliarity levels reaching as high as 50% for the Columbia Gorge AVA.
“You still have a significant familiarity and visibility issue,” Miller said.
Symposium sessions Feb. 25 will focus on brand development, work that may reap wineries large dividends a decade from now, when millennials reach their peak earning years and indulge in fine wine purchases.
Freund expects millennials to take over the wine market from baby boomers and gen-Xers in 2026, giving wineries time to shift not only to new owners, but a new awareness of how to tell their stories to the next generation.
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