Monday, September 6, 2010

Washington's Fading Wineries

Bloggers are following the Washington wineries for sale, or those that have just closed their doors like Yellow Hawk, but there is a disturbing number of 'fading' wineries. I personally know of four - maybe five. What, you ask, is a fading winery? It is a winery that is neither for sale, nor closing, nor in bankruptcy.

Fading wineries won't crush this fall, or if they do, they will crush a minimum, maybe just whites in order to have a full line of wines while the reds sell down. They can use the cold weather to cancel grape contracts. (How convenient is that?) They will continue to be in business until the inventory is depleted. Then they will simply close their doors. "Hey, wasn't there a winery here last year?" "Yeah, we stopped, but we didn't buy any wine."

Why would a winery fade? Simple. The federal government requires a bond on all wine stored at the facility. Federal taxes have to be paid when the wine is withdrawn from bond. State taxes need to be paid when it is sold, also. Winery owners simply do not want a 4000 case personal wine cellar. Only 200 cases per year may be withdrawn for personal use tax free.

Another reason for fading is the fact than many wineries have little value other than used equipment and maybe a building. They have no distributor relations, are self-distributed to a few retail accounts (you know, the usual upper end restaurants and wine shops), and the owner is tired of playing winery.

Many of the first generation winemakers are getting ready (or would like to get ready) to retire. Wineries require a lot of work. The hours are long, the rewards few, and the money is scant. Sure it is a good living for an owner/winemaker/tasting room worker, but there are other things they would like to do other than clean up crushed grapes at 1:00 AM.

One big winery is just picking up its toys and moving back to Oregon. Their vineyard is up for sale. One mega corporation is trying to get out of the wine business altogether focusing their energy on their forte, spirits.

Winery wannabes don't have any money, so they plan to be garagistes until Paul Gregutt makes them rock stars - or maybe they will just fade away at some future time if Parker doesn't discover them. 500 cases of ultra-premium, hand-crafted, award-winning wine can be stored in your garage pretty easily if you park your car outside.

What with all the wineries for sale, the sanest exit strategy might just be to fade away. Here today, gone tomorrow.

5 comments:

  1. How wonderful someone else questions where have the wineries have gone. More specifically, where has all the affordable wine gone?

    I am not big on social networking but I need to vent somewhere. My wife, some friends and I spent Labor Day weekend in Wall Walla relaxing and becoming acquainted with some of the new wineries in the area. The majority of the wines we tasted were $25 a bottle and up. And the majority of the wines we sampled tasted like sucking diesel through a siphon hose. The reason the wineries are fading is quite obvious, the overall quality of the wine from one of the finest AVAs in the state isn't worth $5 a bottle.

    My take, all the well healed winemaker wannabes have priced themselves, and the mom & pop wineries out of business. I truly enjoy a glass or two of a respectable wine several times a week. But cannot afford for myself, and certainly not to entertain, $20 - $50 a bottle wine. I would also offer that a fairly small segment of the wine purchasing public can afford wine consistently priced as such.

    Here's how it works. Dewey, Cheatem & Howe decide they want to be winemakers, the prestige would be good for their practice. They know nothing of wine making but they have lots of money and money counts overcomes anything. They hire a good winemaker away from an established vintner and then outbid the competition for the grapes he wants, thereby driving up the cost for everyone else. Or, you buy an established winery and succeed on their reputation until the consumer figures out your wine really sucks. You'll make a ton of money because everyone wants to be part of the circus.

    Compound the scenario as many times as it has played out in the wine industry during the past 20 years and you arrive where we are today. A fifty fold increase in the number of wineries with only a modest increase in grape production. Voila! supply and demand. The fading of the wineries will be a "correction" in the industry I welcome.

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  2. As someone who works for the law firm of "Dewey, Cheatem & Howe" and who represents many wineries/vineyards, I can give you two of the biggest reasons why a winery would "fade." You may have given a "simple" reason of blaming the federal government, but in the cases I'm familiar with, the government wasn't the blame.

    I keep reading rants about why wineries go out of business. Everybody gets blamed, except the actual winery. Life happens. Winemakers, like all people, have unexpected changes in life. That's one of the reasons and often a reason that doesn't go public. The second reason and probably the most profound? The winemaker is often just one of the most difficult people to be around and when he fails, it may not have anything to do with the quality of his wine, but everything to do with mismanagement and just being an @sshole to work with - and then being an @sshole to his attorneys to get him out of the mess he made.

    Stop blaming the government. Stop blaming usual upper end restaurants and wine shops. Stop blaming your neighborhood "rock star" winemaker. Stop blaming other wineries. Do we blame other plumbers when a plumber goes out of business? Do plumbers blame the government for all of their problems? If you go out of business or sales are low take the responsibility and man up. You are either a lowsy business person or just have shitty wine.

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  3. "Dewey, Cheatem, & Howe" may be my favorite Tre Stooge short, ever. To hear it twice in a comments section, I feel like Curly when he would spin-run on the floor! Great article on the fading wineries and the two replies are just as thought provoking. With other 600 Washington wineries, in an economy that has pulled back, why wouldn't there be some reduction of competitors who produce wine. How many winemakers are there who 'think' they are winemakers? Just because you can sing doesn't make you a singer. Those who can weather the bad times will succeed. But as they have said, it's a new normal. People are not buying anything like they did. Cars, houses, food and lights are priorities. Restaurants, vacations, and wine are luxury items. I'm not upset with the tightening of the belt. Stuff happens. Things will get better. It's from where you sit that how much 'better is.

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  4. I think you misread, "blaming the government." I forgive you, you said you were an attorney. What I implied was that paying $8000 for a personal wine cellar - all the same wine and brand - requires some "inventory reduction" before you can close the doors. You can't simply say you are done and put it in your garage like a plumber does with extra pipe. When you are selling 2005 vintages, a may take several years for the reduction to occur. When you get down to 500 cases or fewer, pay the tax and close shop. Closing a winery is more difficult than attorneys think.

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    1. Let Tefft Cellars be the example of how to close. Take everything that is not bolted down, have a yard sale and store the rest in a barn. File bk so you don't have to pay all the people screwed out of money/product, such as yours truly

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