Opening a favorite bottle of wine in the company of friends isn't an experience many Northwest wine lovers are giving up as concerns about the struggling economy continue to mount.
But consumers are increasingly looking for the best values, and some in the industry are starting to feel the pinch of the recession in the United States and Canada.
Bad news for restaurants
"What we've seen is a shift in consuming habits from on-premise to retail," said Harry McWatters, industry veteran and president of Vintage Consulting Group in Penticton, British Columbia. "People are dining out less frequently or buying less wine when they dine out. People are still drinking wine, but they're doing it at home. That's been a pretty radical shift. It's having a huge negative impact on restaurants."
Bargain hunting
Many in the industry echoed McWatters' observations.
"People are trading down," said Pat Spangler, owner and winemaker for Spangler Vineyards in Roseburg, Ore. "Volumes are not off much, if any. People are just buying less expensive stuff."
It's a little early to tell just how much the recession will affect the growing Washington wine industry, said Keith Love, vice president for communications and corporate affairs for Ste. Michelle Wine Estates.
The company's Red Diamond brand is considered a barometer for sales, and the $10-range wine that's sold nationwide was doing well through January, Love said.
"We know there's going to be an impact ... but we think the state industry will ride it out," he said.
He agreed with McWatters and Spangler that wine sales at restaurants are a major concern.
"I think that's going to be where you see the big drop off," Love said.
Making do with less
At Monterosso's, an Italian restaurant in Richland, Wash., owner Aaron Burks has seen his wine sales slow about 10 percent from 2007 to 2008 because consumers are eating out less, especially at nicer restaurants.
"I would say that sales in general are more than a challenge in these economic times," he said.
Visitors to L'Ecole No. 41 near Walla Walla, Wash., often are downsizing their purchases, said Marty Clubb, owner and managing winemaker.
"We've definitely seen a slowdown in the last four months," Clubb said at the recent meeting of the Washington Association of Wine Grape Growers.
People are buying bottles instead of cases. Still, retail sales are holding on and Washington wines continue to be well-priced compared with those from other regions, Clubb said.
One problem Spangler foresees is that many wineries are discounting their product to get it off their shelves. But once they drop their prices, he's concerned about getting them up again.
"The lower end is doing better, and a lot of people are discounting wine," said Spangler, who's also president of the board of directors of the Southern Oregon Winery Association. "But I don't know how you're going to get your prices back up. Once the price goes down, it seems to me you're shooting yourself in the foot doing that."
Sales up for less expensive wines
Wine drinkers' attraction to less expensive wines could be a boon for Wine by Joe, said Joe Dobbes, owner/winemaker of the Oregon wine priced in the $12 to $20 range.
"Those sales are doing very well," he said.
Dobbes, also the winemaker for Dobbes Family Estate in Dundee, Ore., said even though distributor sales were up about 10 percent in 2008, the winery is watching the bottom line.
"We're spending as much time as we can out in the marketplace," he said. "I know for a fact that you're going to see more and more second labels coming on the market."
He's noticed a fair amount of surplus inventory on the market, particularly Pinot Gris and Pinot Noir.
"We're paying a lot of attention to inventories," Dobbes said.
B.C. keeps growing
Jay Drysdale, an industry consultant who works mainly in British Columbia, also has observed more inventory at wineries. But he equated it to normal industry growing pains as wineries work on increasing their production.
He's looking forward to major upcoming events in Vancouver, such as the Vancouver Playhouse International Wine Festival in March and the 2010 Winter Olympics to bolster the regional wine industry.
"Everybody's still in a ramping-up stage. We're still seeing new vines going into the ground and new wineries opening up," Drysdale said. The upcoming events "will put a unique spotlight on the region, and I think we would be feeling more of an economic crunch if we didn't have those focuses coming."
Idaho in a good position
The Idaho wine industry also continues to grow, said Brad Pintler, chair of the Idaho Grape Growers and Wine Producers Commission.
The state has 34 wineries with at least three more scheduled to open this year, he said.
"If people are looking at more affordable-type wines, that may even be a benefit for Idaho," said Pintler, noting the affordability of the state's wines.
Grape gluts don't seem to be a problem, either, he said. "I haven't heard of any of the vineyard growers expressing concerns."
He also sees tremendous potential for wine tourism to grow as more people learn about Idaho's wine offerings. The commission is working on a five-year strategic plan and is presenting a new festival, Savor Idaho, during Father's Day weekend.
"Flat is the new up"
But changing consumer trends are apparent to those outside wineries, too.
Eric Denton, a Tri-Cities-based sales representative for Spokane's Vehrs Inc., a wine distributing company, also noticed consumers' recent penchant for less expensive wines.
"It seems like people are gravitating toward more affordable wine," Denton said. "Instead of buying the $20 bottle, they're buying the $15 bottle. People are taking a step down, it seems."
Robin Pollard, executive director of the Washington Wine Commission, agreed, though she also said it's too early to see the full effect.
She recently attended a national wine industry meeting and the trend seemed to be that "flat is the new up" - sales that remain even with prior years will be viewed positively, Pollard said.
Credit crunch
And as wineries look to cut costs, many also are having a hard time getting financing for projects because of continuing tight credit conditions.
"We're finding that lenders are being a lot tougher on projects. I'm doing consulting for a number of wineries and I'm seeing banks … really sending a strong message that they're not interested in taking on new projects," McWatters said.
What doesn't kill you ...
But he's had more inquiries for consulting assistance than he expected, and he predicts the industry will emerge in a healthier state.
And that might just be a silver lining of the plunging economy.
"Anytime you get a stress like this, it really separates the good wine from the mediocre range wine," Spangler said. "If you could take the bottom 20 percent off, the weakest performers, that's going to make the industry stronger overall."
That's not to say only the weakest will be weeded out by economic difficulties, he added.
"I think in western Canada we thought we were a little insulated from the world economy. We're not going to suffer as badly, but we are feeling the pain," McWatters said.
Wineries have to be conscious of the competition and make sure they're meeting consumer demands.
"Growing grapes in British Columbia is not an inexpensive exercise. When a customer pays fair market value, it better be delivering everything they expect," McWatters said.
Ingrid Stegemoeller covers the wine industry for the Tri-City Herald and is a frequent contributor to Wine Press Northwest.
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