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Friday, December 03, 2010

How Wine Markets are Different From Beer Markets, and How They Aren't

Oregonian columnist Steve Duin had a fascinating piece in yesterday's paper about the Oregon wine market. Locally, wine and beer are regarded as pretty similar products: rapidly expanding, artisan-made, small-market products with a strong international reputation. This conceals the differences between the markets for these products, which are legion. And, based on Duin's article, the wineries are in for a big fall.

(Backgrounder. Oregon's western climate is cool, and the growing season is short. Most grapes don't do well here. The exception is pinot noir, which can be coaxed along to produce world-class wines the equal of those from Burgundy. Almost all of Oregon's acreage is devoted to pinot noir and pinot gris (92%). Because of the conditions, though, an acre will produce two tons of grapes, not the five that emerge from fecund California vineyards. Duin quotes one winemaker who observed that "it's phenomenally expensive to farm" in Oregon. As a consequence, you often spend $30 for a bottle of wine grown 30 miles away.)

The craft beer market has continued to enjoy robust growth, and even three or four years ago people began to wonder if it was sustainable. But craft breweries grow by the single digits each year in Oregon. Compare that to wine:
Between 2004 and 2008, Hatcher says, the number of Oregon wineries doubled, to 400, as hobby farmers and other opportunists sought to take advantage of the growing celebrity of Oregon’s pinot noir grape.
So here we have a region famous for a style of grape and capable of producing world-class examples. So what has the industry been focusing on?
But that campaign has been undercut by the sub-appellation movement, in which a small number of Oregon wineries want consumers to believe that acreage producing its second vintage is the next Heitz Martha’s Vineyard cab, eucalyptus leaves and all.

“When half of America can’t find Afghanistanon a map, how can we expect them to parse the difference between Chehalem Mountain and the Eola Hills?” Hatcher asks. “We’re making it more and more confusing.”
According to Duin, who believes half the wineries will be gone in ten years, this is a monumental blunder. Wineries should be cashing in on the mystique of Oregon, not the subtle distinctions that distinguish the terroir in the Willakenzie loam from Ribbon Ridge.

So much is different in the way wine and beer are produced. Wine is dependent on nature--it is a born beverage, not a made one. Beer is a matter of chemistry and recipe, closer to a restaurant meal than agricultural product. In some other ways, though, beer has some shared qualities.

I was recently talking to John Holl, the New Jersey beer writer. On the East Coast, they get just a couple Oregon beers. When I described the diversity of beer styles brewed locally, he was shocked. A brewery devoted to farmhouse ales? A barrel house that serves mainly sours? States or regions have not done a lot to articulate a sense of place in the beer world. Because the local market is so good, breweries haven't had to venture out into the national market to sell their products. As a consequence, breweries mainly try to figure out how to distinguish themselves from each other in this variety-rich landscape. For breweries, there's no reason to think of ways to present Oregon or Northwest beer as a kind of "appellation."

Anyway, it got me thinking. In Oregon, beer and wine are superficially similar in so many ways. But they're actually hardly alike at all.


  1. I agree... Half of Oregon Wineries will tank over the next 10 years. Moderate Hype, but little substance in the big picture.

  2. Definitely agree about the coastal shocks. I go to NYC and DC regularly and am dismayed that Rogue seems to be the sole representative of Oregon beer, even in really good beer bars. On the flip side, I discover great East Coast beers that we never see on this side of the country. I'd really love to see distribution open up further for craft beers. Maybe I'm being naive, but I think it would reduce some of the rampant provincialism of the craft beer community if we actually got to taste the _good_ stuff that other areas produce.

    The one place where I'd take issue with your premise is in the context of barrel-aged and sour beers. They seem to have a lot more in common with wine, in technique, time, cost, and less predictable outcomes.

  3. @kevin

    In the 7 or 8 years I've been buying beer professionally I've seen many east coast breweries attempt to expand out here, and most of them fail miserably. Our shelves are overflowing with good, local, and for the most part reasonably-priced beer, so in order for a "foreigner" to make it here they need one of three things:

    1. Name recognition/geek cred - I have no doubt in my mind that Bell's, Founder's, or Brooklyn could be very successful here, but Summit, St. Arnold, and Troeg's (all of which make excellent beer) probably wouldn't fare as well. Name recognition is how Dogfish Head can sell pallets of 60 Minute IPA for $11 per 6pk, even though it's less fresh and (arguably) less hoppy than many of the local offerings.

    2. Unique products - Breweries that are staking out new territory like Cigar City (cedar aging), Short's (crazy experimental beer), and Surly (amazing beer in pint cans) can find a niche, but we're flooded with pales, IPAs, and ambers, so if that's you're bread and butter you'll probably be dead in the water within 6 months.

    3. Low price - We can find any number of incredible beers on the shelf for under $8 6pk, so unless you've got the nostalgia factor to appeal to the transplants (like Long Trail or Highland) or the name recognition I spoke of, people are going to pass over your $10 6pk of IPA (of unknown quality) for a TG, Sierra Nevada, or Green Flash.

    I think Boulevard nailed it perfectly when they expanded out here a couple years ago. Instead of starting out by shipping 6pks of their solid (yet unremarkable) Single Wide IPA or Unfiltered Wheat they introduced themselves to Oregon with their 750ml Smokestack series of Bourbon-aged whatchamacallits. That caught the attention of the geeks, established the brand, and alerted transplants from the midwest that they had a presence here.

    Eighteen months later after hundreds of requests for their Wheat they've finally shipped it out here, and it's flying off the shelf.

    Oh, a bonus fourth method of carving out some space on the shelves: plaster the words "Organic" and/or "Gluten-Free" on your labels. All the crunchy hippies will buy the organic stuff, and all the hypochondriacs who think they're allergic to wheat will flock to your GF option.