2009 Legislation Helps Improve and Streamline Washington State's Wine Regulation

New legislation signed mid-May by Gov. Christine Gregoire will go a long way to help improve, modernize and streamline Washington state's complicated laws and regulations impacting the state's burgeoning wine industry, the Washington Wine Institute said.

Jean Leonard, executive director of the Washington Wine Institute, said the new laws, which go into effect July 26, will significantly revise the state's current liquor control system by addressing many "wine pricing" issues raised by the Costco litigation. The newly enacted legislation will help eliminate barriers to market, such as archaic "post & hold" requirements, mandatory minimum mark-up and some issues regarding extension of credit. New laws also repeal some provisions that were adopted after prohibition to inhibit marketing of alcohol, Leonard said.

Institute president Marty Clubb of L'Ecole No. 41 Winery said the new legislation will provide increased opportunities for wine promotion and marketing as well as investments between wineries and retailers. These changes ultimately will have a positive impact on consumers, Clubb said.

On the contrary, in a newsletter published by Washington attorney R. Corbin Houchins, Houchins said, "Although the bill has been touted as liberalizing tied-house law, its actual effect on tied house is to tighten the trade practice restrictions while offering a mostly illusory relaxation of the inter-tier interest provisions. With respect to pricing, the bill deletes the 10 percent minimum wholesaler markup and minimally conforms statutes to the Costco decision's elimination of the 30-day post-and-hold system, which the Washington State Liquor Control Board had already abandoned. The bill's limitation of competition in price, promotional activities and services represents an historical objective of the wholesaler lobby, whose members appear to be the primary beneficiaries," Houchins wrote.

Lorraine Lee, chairman of the state's Liquor Control Board, said the new legislation demonstrates a "watershed change" that is "progressive and forward thinking" for the industry. She said the new approach strives for "simplification, modernization and flexibility in our liquor laws," but reinforced that the Liquor Control Board believes it can reach these goals without sacrificing the agency's top priority, public safety.

The Institute also supported legislation requiring wines labeled "Washington" to contain 95 percent of Washington-grown grapes.

Washington Wine Institute is the advocacy voice for the wine industry in Washington state. The Institute represents Washington wineries that annually produce more than 90 percent of the state's wine.

Big Clusters and Lots of Them: Will 2009 Bring a Bumper Crop?

While it is too early to predict how large the 2009 crop will be, many are saying it's looking big. That's the general consensus, whether one talks to growers, winemakers or industry suppliers.

Expectations that the crop could be relatively large come as activity on the bulk wine market has slowed with buyers backing off and as bankers in certain instances are cutting back on lines of credit that are tied to winery inventory.

California will need a 3.5-million-ton crop to keep its trend line of increased shipments filled, however.

"I think we'll have a sufficient crop for the needs of the industry," Nat DiBuduo of Allied Grape Growers said.

"We're going to have a good crop; above average," Chris Storm of Vino Farms said. "We're just taking our bunch counts now, but based on appearances they look heavy."

"This year compared to last year is hugely different because we got frosted last year," Storm said. "Just comparing them, it's a world of difference."

"It's a good average crop, not a bumper crop; but based on what we're seeing today, we will probably hit all of our 10-year averages," DiBuduo said. "We are going into bloom and will need to see what sets to make a further determination. We're pretty close to a normal bloom period, but will have to see what the shatter is and then we'll know what the fruit set is. That will give us a better determination of how these bunches will look."

Regarding the grape market, DiBuduo said there's a lot of interest right now in grapes from Lodi south, where wineries are looking at lower priced category wines to source grapes for specific programs and blending. There is more demand for Central Valley grapes due to pricing and the economy.

"In some of the North Coast and Central Coast, we're still seeing a little hesitance on the part of buyers," DiBuduo said. "They're waiting to see how inventory and sales are going.

"I'm anticipating that all the grapes will be harvested," DiBuduo added. "There will probably be a push back on prices.

"It is good sized, but I don't see it as being a '2005' at this stage. If we get a huge berry set and the berries keep growing, the potential would be there."

Glenn Proctor, a broker with the Ciatti Company, said crop size right now depends on who you ask. "If you're a grower, you're supposed to say it's getting shorter," he said. "What I'm hearing is that Chardonnay looks pretty good; average to above average. There's a question of set that still has to come, but we had water late in the year that will help generate berry size."

"It's looking pretty fair," said Michael Robichaud with Turrentine Brokerage. "We could be looking at 3.4 (million tons) but we're still not through bloom and set."

Online Winejob Postings by Wineries Rise in April

Winejobs.com released a report detailing wine job posting trends as of April 2009. The figures indicate that job postings by wineries in April 2009 increased, exhibiting a 33 percent rise since March. This increase is consistent with the growing trend from February to April that occurred in both 2007 and 2008.

Winemaking experienced the most dramatic growth with a 75 percent increase in job posting in April. Despite the spike, this number is down 30 percent from this same time last year, though relatively on-target with 2007's number. Sales and marketing experienced 9 percent growth in April, a 15 percent decrease from this same time last year. However, like winemaking, sales and marketing job postings are on-target with the numbers from 2007.

Unlike the previous two categories, hospitality job postings declined by 12 percent in April and decreased 56 percent since this same time last year.

"So many tasting rooms and direct to consumer programs are based on driving traffic," one wine club manager said. "There are lots of freebies, but customers aren't necessarily buying. We've found it challenging. People are coming but sales are down."

"It's like a restaurant where you have fewer people, and if things fall through the cracks, it happens," said another.

The Winejobs.com Index provides a way to measure and compare trends in the wine job market. January 2007 is set with a base index of 100. The following months' indexes reflect percentage changes since that base index, providing a quick way to gauge rises and drops in job postings. Derived from the leading online wine job board, these changes can be interpreted as industry-wide trends.

Index of Winery Job Postings from 2007 to 2009

   Jan   Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec

2007   100   88   106   120   125   141   110   123   83   86   80   72

2008   120   99   118   138   117   134   119   101   60   66   62   51

2009    60    56    74    93

Latest Findings about the Origin of French Grape Varieties

The National Institute of Agronomical Research (INRA SupArgro) in Montpellier recently announced that Magdeleine Noire des Charentes from Brittany is the mother of Merlot. This discovery counts among the many over the past 10 years identifying the origins of the chief grape varieties cultivated in France.

Over a decade ago, geneticists found that Gouais, a mediocre variety, was in fact the father of Chardonnay, Aligoté and Gamay. Up until then nobody had imagined that these grapes were hybrids. "When crossed with other grapes, the hidden genetic qualities of Gouais came to the fore," explained INRA research scientist Jean-Michel Boursiquot. His research team has more recently managed to pinpoint the origins of Merlot. This variety descends from Cabernet Franc (father) and Magdeleine Noire des Charentes (mother). The latter was previously unheard of, but about five years ago some vines were uncovered in the west of France and officially identified. Malbec is also derived from Magdeleine Noire des Charentes combined with Prunelard.

The same studies have allowed researchers to establish the family tree of other varieties. It would appear that Jurançon Noir originates from a mixture of Folle Blanche and Malbec. However the origins of Gouais remain a mystery as well as the origins of Pinot Noir, Cabernet Franc and Sauvignon. According to Boursiquot, these varieties date back to the Roman era, so it will be much more difficult to determine their roots. There is also some gray area when it comes to the background of other grapes. We know, for example, that Folle Blanc descends from Gouais but the grapes in between the two have not as yet been determined. Also, Dureza is thought to be derived from Pinot Noir or perhaps vice versa. But ongoing research should help shed some light on the question marks in the family tree.

Wine Social Media Whitepaper Released

VinTank, in partnership with wine industry consultant Derek Bromley, released a whitepaper profiling social media companies impacting the wine industry. Researched and written with the intent of helping wineries make sense of a vast and confusing medium, the paper looks at the largest social media sites (Facebook, Twitter, LinkedIn) as well as the almost 30 wine social networks battling for the attention of online wine consumers, ending with an overview of the wine blogosphere. The free whitepaper is available for download at www.vintank.com/VinTank_SocialMediaReport.pdf.

It is estimated that social media is generating twice the online content of traditional media, and wineries have been struggling with how to engage their current and potential customers in this medium. Cruvee.com estimates that each day in April 2009 there were 153 blog posts, 1,420 forum posts and 7,896 microblog (Twitter) posts on the topic of wine. The whitepaper offers best practices on how wineries can begin to engage in those conversations.

Some key findings of the whitepaper:

•   According to Compete.com, the top 20 wine bloggers in aggregate represent a larger audience than the Wine Spectator Online and are growing at a faster rate. However, the wine blogosphere is highly fragmented and difficult for wineries to navigate.

•   Wine social network memberships number in the hundreds of thousands, although it is near impossible to determine how much overlap exists across networks.

•   The two top-rated wine social networks, CellarTracker and VinCellar, started as wine cellar management tools that over time have added social networking functionality. This deeper level of value has paid huge dividends in terms of customer loyalty.

•   A key challenge for all wine social networks that have achieved any kind of scale is data quality. Duplicate and incorrect data affects all of these sites to varying degrees.

•   Online advertising models for the wine industry have more challenges than other verticals due to outdated alcohol regulations.

VinTank is a "digital think tank" for the wine industry, providing expertise and analysis where technology and the wine industry intersect. Derek Bromley is a former sommelier, co-founder of BevAccess and winery sales/marketing consultant.

New "Master Cooperage" Firm Launched

John Schilter and a group of investors have started a new cooperage firm serving wineries in North America. The company, Master Cooperage LLC, represents Cognac-based Girard and Vallaurine, the only cooperage based in the Rhône Valley.

In addition to those French cooperages, the firm makes its own Master Cooperage American oak barrels with staves seasoned for three years, and it is making a barrel in California from wood sourced from throughout Europe, dubbed "The Continental."

Schilter, a managing partner, is no stranger to the barrel business. He was with Sequin Moreau Napa Cooperage for 10 years where he worked his way up to vice president of production and ultimately served as president/CEO. He is also a winemaker and headed Vinquiry as president prior to establishing Master Cooperage.

Joining Schilter in the venture is managing partner Eric Mercier, who served as managing director of Oeneo Closures before starting Premier Wine Cask, another cooperage firm.

Master Cooperate "represents a select group of tradesmen whose dedication to quality and meticulous crafting of barrels is unique in this day of mass production," according to the company. Contact information can be found via the Web at www.mastercooperage.com.

California

TTB Withdraws Proposal to Establish Paso Robles Westside AVA

The U.S. Alcohol and Tobacco Tax and Trade Bureau (TTB), which this week approved the Lake Chelan viticultural area in Washington, has withdrawn a proposal to establish the Paso Robles Westside viticultural area. TTB said the withdrawal occurred because it "could not conclude that a delimited grape-growing region exists that is recognized by the name 'Paso Robles Westside,' or that the area described ... is distinguishable by geographical features."

The proposal would have established a new, 179,622-acre Paso Robles Westside sub-appellation on California's Central Coast. It was controversial, however, in part because it conflicted with the "master plan" submitted to AVA in 2007, which called for carving up the larger Paso Robles appellation into a dozen "sub-appellations."

TTB approved an expansion of the Paso Robles AVA last year, a "fix it" proposal that expanded the southern portion of the greater Paso Robles AVA.

There is no word yet on the "master plan" submitted in 2007, but TTB is said to have started reviewing the proposal late last year.