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The California incursion into the Washington wine industry continues with the announcement last week that Napa Valley’s Duckhorn Vineyards will be producing a Red Mountain designated Cabernet Sauvignon, a little kept secret over the past year.

This is only the latest example of the California influx into Washington, as earlier this year Napa Valley’s Cakebread Cellars announced a new Walla Walla Valley-based brand and wine giant  Trinchero Family Estates teamed up with Charles & Charles. Last year saw the purchase by E. & J. Gallo of Columbia Winery and Covey Run. With all of this money coming north, what does it mean for the Washington wine industry?

First, it’s important to note that Washington is not alone in seeing an increased interest from outside groups. 2013 has seen an unprecedented influx of investments into Oregon, the most significant being the purchase of 1,350 acres of land by Jackson Family Wines of Kendall Jackson fame and the purchase of Resonance Vineyard by famed Burgundy producer Louis Jadot, the company’s first foray outside of France (look for an article in the January/February issue of Vineyard and Winery Management on these investments).

So what does this newfound attention for the Pacific Northwest mean? In short, major wineries and companies are seeing significant growth opportunity here - and that’s a good thing for these industries. Let’s look at each of the Washington investments individually.

Duckhorn Vineyards - Duckhorn, one of Napa Valley’s most well known wineries, produced its first Red Mountain Cabernet Sauvignon in 2012, using fruit from several vineyard sources on Red Mountain. This wine will be released in late 2014. At present, production is being done at Artifex, a custom crush facility in Walla Walla, and the winery has not, as of yet not, purchased any vineyards or a physical space. However, there is no reason to think that significant investments don’t lie ahead here. Expect Duckhorn to promote this wine nationally, albeit with a fairly limited production.

Cakebread Cellars - Cakebread Cellars, which has more than four decades of experience in the Napa Valley, is creating a new brand in Washington, Mullan Road. The wine will be a Bordeaux-style blend made from Seven Hills Vineyard fruit in the Walla Walla Valley. Aryn Morrell (Matthews, Tenor, Alleromb) is serving as winemaker with the wines also being made at Artifex.

E.&J. Gallo - E.&J Gallo’s purchase of Columbia Winery and Covey Run was significant as they are not only one of the country’s largest wineries, they also purchased two of the state’s oldest brands. Gallo stated at the time that its intention was to increase production to over 1,000,000 cases annually, which would make Columbia one of the largest wineries in the state. Expect it to happen.

Trinchero Family Estates - On the face of it, the ‘strategic alliance’ between Trinchero Family Estates and Charles & Charles may appear somewhat minor, with Trinchero simply managing sales, distribution, and marketing for Charles & Charles. But appearances can be misleading. This is an extremely large company with a global reach, working with two of the world’s more talented wine-maker-marketers. Trinchero has the ability to blow this brand up should they so desire. Given the winery and these two winemakers, there’s no reason to think that won’t happen.

While each of these investments is different, there is a common thread: companies are seeing growth opportunity in Washington right now. Let’s break each of these investments down into a) the type of investment, which I will give a binary code for ‘all in’ or ‘toe in the water’ b) the particular area of focus c) the wines to be produced and c) what some of the implications might be.

























Of note, Gallo and Trinchero are investing in the Washington brand more generally whereas Duckhorn and Cakebread are more appellation focused at present, investing in Red Mountain and Walla Walla Valley respectively. The latter is not surprising as these are two of the state’s strongest brands.

While Gallo and Trinchero have a portfolio of wines, Cakebread and Duckhorn will be focused initially on creating a Bordeaux-style blend (Cakebread) and Cabernet Sauvignon (Duckhorn). These are two of Washington’s strongest categories and also two very strong categories nationally.

With the exception of the Gallo investment which qualifies as an ‘all in’ type of commitment, all of the others are ‘toe in the water’ types. These wineries can decide when and how they want to expand these brands in the future with minimal up front risk. This is how one would expect many to start until Washington picks up additional steam. We’ll know that’s happening when wineries start pouring concrete and buying/planting vineyards (In terms of Mullan Road, that Seven Hills is close to the SeVein project should not escape the attention).

What will the results of these investments be for Washington? Each should significantly broaden the state’s brand across the country and beyond. These wineries each have a wide distributor, retailer, and consumer base. Consumers that currently see only a few Washington brands can expect to see more on the shelves. And that’s a very good thing for the state’s industry as for many consumers this can be a challenge.

Why is this happening now? Truly, it most likely would have happened several years ago if Wall Street hadn’t tanked the economy, leading most to tighten their purse strings. With these wineries on the leading edge, expect more to come knocking. Where they go and what they do will say a lot about what’s next for the Washington wine industry.

Read the Californians Are Coming! Part I here

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1 Responses to The Californians are coming! The Californians are coming! Part II - What Duckhorn’s arrival means for Washington wine

  1. Holly Says:
  2. It's a good thing for Washington State (I work in Napa Valley, but I hail from WA, so care). Good for its wine reputation and economy. The Big Boys (my husband is employed by one of them) are as necessary an evil as Orowheat. Those who know better and can afford better will and do; those who seek fulfilled expectations (Wines to Drink, not Think) will be well-satisfied. The folks who are likely most concerned are the Ch. St. Michelle peeps, who will find competition in Trinchero, Gallo, etc... as for my alma mater Duckhorn; they are a big, growing company still believed by many to be luxury, but as their many brands continue to collect dust under the bright lights of Bev Mo and Safeways, consumers looking for lux will wise up. The market takes care of itself.

     

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