What Does Precept Growth Mean to Washington Wine Industry?

Anyone who has been paying attention to the ways of the world in the last few decades could tell you that the times, they are a changin'. There has been a steady move away from the locally owned mom and pop businesses in favor of larger corporations. In some industries this comes in the form of big box retailers moving into an area, displacing the locally owned stores, and in some cases it is in the form of the larger companies buying out the smaller ones. The wine industry has certainly not been an exception to this trend, and we have seen an acceleration of this trend in recent years, with brands like Constellation growing ever larger in their holdings. The state of the economy over the last several years has certainly contributed to this, as more and more people are becoming value conscious with their wine purchasing decisions.

Washington State has long been the home of smaller production wineries, with the exception of a couple of juggernauts. One of the larger companies in the state is Precept Wine Brands. This week Precept announced two purchases that are expected to push their production up to around 900,000 cases this year. With the acquisition of Canoe Ridge Vineyards and Sageland Vineyards, Precept builds on the large purchase of Corus Estates and Vineyards (which included Alder Ridge and Sawtooth wineries) last year. In addition to the wineries, the acquisition of Canoe Ridge Vineyards has brought the vineyard holdings of Precept up to approximately 3000 acres.

One representative from a winery contacted me this week and posed some questions about what affect the growth of Precept will have on the smaller wineries in the state. The concern that was implied in the questions was that the purchase of heritage brands and subsequent lowering of the price of the wines could be potentially damaging to producers who must charge a higher price for their boutique and small production wines.

A counter argument was presented almost a year ago by Paul Gregutt on his blog. Gregutt had interviewed Precept Brands Founder/CEO Andrew Browne, and his take on the issue was that the growth of Washington owned companies was a positive thing for the state's wine industry, potentially aiding in establishing Washington wines in other markets. His point, as I understand it, is that the growth in the sub-$15 wine market from Washington and increase in production are likely necessary to make Washington a true player in the global wine marketplace. He sums up his point in the comments when he says that, "...a rising tide floats all boats."

So what is the overall effect of the consolidation of wine brands under larger corporations? It's hard to say at this point. I have always had a soft spot in my heart for locally owned business. I generally avoid Starbucks in favor of local options, and I'll always shop at a locally owned option over a big box store when possible. I certainly think that, at least in the short term, the trend can make it harder for smaller brands to compete. Having heritage brands on the market for $15 a bottle is bound to move some sales away from brands that are in the $30+ price point. The question is how large this move is going to be, and how many brands will be able to weather the storm. The centralizing trend will likely only accelerate as some brands aren't able to remain profitable and join the other labels that have been purchased by larger companies. That being said, Paul Gregutt has a point. When I lived in Texas, the only Washington wines that were readily available to me were Ste. Michelle, Columbia Crest and Hogue. These wines were all of high quality for their price point, but didn't give me very much choice when it came to Washington wines, which hurt the state's ability to grab my attention overall. Having more options for Washington wine in markets around the country (and globe) does seem like it would help to more firmly establish the state's wines in the minds of consumers around the country.

Ultimately, the questions won't really be answered until we've had several years to observe the trends. I would definitely be interested to hear the thoughts of those in the Washington wine industry on the question (either on or off the record.) I would also be interested in hearing some thoughts from producers in California, who have already had to deal with these kinds of issues for some time.

Comments

[joe]

Good for the brand "Washington Wine", bad for the unique aspects of "Washington Wine". The perceived notion that most California wines are widely known as being "fruit-forward", "high alcohol", "oaky", etc. might be an unfair bypr...oduct of homogenization, as the hundreds of Cali wines that shipped to markets like Lubbock and Atlanta were subsidiaries (easily distributed with one parent company to deal with), and perhaps those brands had been limited by expense management in the style they could make.

Does that make sense? Will Washington wines become generalized under an unfair "style" if the only ones coming to market are all owned by the same company with the same vision/budget?

[PaulG]

Couple of points: First, Precept is locally-owned. Second, the price competition that boutiques face has nothing to do with cheap wines from Washington; it has to do with cheap wines from everywhere else. What more widely-available WA wines under $15 will do is to spread "Brand Washington" farther and farther afield. It will not take sales away from WA boutiques - those wines aren't generally avaialbe outside of a few key cities and restaurants anyway. As for the acquisition of Canoe Ridge and Sagelands; I believe that is the very best possible news, as I wrote on my blog a week ago.

[Vinotology]

Thanks a lot for the comment Paul. I have a great deal of respect for you, and I appreciate you taking the time to comment on the post.

You are, of course, correct that Precept is local, in that they are a Washington company. Still, by that same logic, Starbucks is also local, which is hardly a characterization that I would make. My point had more to do with concerns about the consolidation of smaller heritage brands within larger companies. You may very well be right that this is an overall good for the industry. I don't know that I would agree that the purchases will "not take sales away from WA boutiques" at all. You are definitely more connected to the Washington wine industry than I am, and I certainly hope that you are correct. It seems to me that this would be an exception to the way that the consolidating trend has effected every other industry that I can think of. Boutiques and smaller producers seem to always be the ones who suffer as larger companies capture an ever growing portion of the industry.