By Eric Degerman

There’s been a retrenching of the Washington wine industry in recent vintages as a result of overproduction, a slippage in sales and the pandemic. However, reasons for optimism continue to grow even though the state crushed only 175,000 tons in 2020 – its lightest harvest since 2011.

For analysts craving statistics, there is economist Chris Bitter’s latest Washington Winery Report, issued just as bloom began in vineyards throughout the state.

“The Washington wine industry appears to have turned the corner following a challenging year that included a severe 7% contraction in shipment volume,” wrote the former University of Washington assistant professor.

Shipments of Washington wine packaged for consumers grew by 8% in the first quarter of 2021 compared to the same period in 2020.

A more telling sign of confidence in the future of the state’s wine industry can be found in the recent acquisitions and investments by Josh Lawrence and Tom Merkle.

Neither is a hedge fund manager nor foreign investor. Rather, they are two of the Columbia Valley’s most respected grape growers. Each family owns and operates their own winery.

“The Washington wine industry definitely has a wide range of confidence levels from extremely bullish to pretty bearish,” Lawrence said. “We have a tendency to be glass half full, but I believe the indicators are backing that view up at the moment.”

This spring, they announced the purchase of Desert Wind Winery in Prosser, an acquisition from the Fries family in Oregon that included more than 400 acres of vineyards on the Wahluke Slope near Mattawa. The deal included the $2.4 million purchase of the hotel, restaurant and other commercial buildings.

In 2019, Lawrence and Merkle teamed to buy 150-acre Conner Lee Vineyard, one of the state’s most historic plantings with roots stretching to 1980.

These are the types of transactions that typically generate headlines for corporations such as Precept Wine in Seattle, the Northwest’s largest privately owned wine company that also positioned itself to grow during the pandemic.

“I cannot discount the fact we are inherently opportunistic in our approach to business and specifically acquisitions,” Lawrence said. “The downturn over the past few years has provided us with some great opportunities to purchase very high-value assets at beneficial pricing. We know we won’t always catch it as the upswing starts, but we’d rather struggle for a season or two than buy at the top of the market.”

Their combined expertise spans much of Washington wine country.

Lawrence and his wife, Lisa, own Gård Vintners, an 8,000-case brand with three tasting rooms that are fed by their 450 acres of vines on Royal Slope.

Merkle – the Honorary Grower for the 2017 Auction of Washington Wines – and his wife, Tami, are partners with famed winemaker Jessica Munnell in Wautoma Springs Winery in Prosser. Their brand’s namesake estate vineyard is near historic Cold Creek Vineyard and a short drive west of the Wahluke Slope, where Merkle manages several sites for Zirkle Fruit Co.

“Tom has been a great partner with his ability to manage a ton of moving parts along with producing extremely high-quality grapes at high yields for Ste. Michelle,” Lawrence said. “He is also very in tune with the industry and has a similar perspective on the trajectory of this industry as well.”

Surviving a pandemic

The early returns for 2021 indicate an increase fueled by out-of-state shipments, according to Bitter. Last year, it was direct-to-consumer (DTC) sales and in-state shipments to wine club members that sustained smaller producers such as Gård Vintners.

“Our DTC approach with Gård really paid off last year during the pandemic as we had a record year for sales,” said Lawrence, who operates retail outlets in Walla Walla, Woodinville and Ellensburg. “The tasting rooms pivoted amazingly this last year, and I give our tasting room staff and marketing team all the credit. We were incredibly flexible with curbside, take-home tasting experiences, discounted shipping, etc., and it definitely paid off. The loyalty of our wine club members was the difference, especially with distribution struggling.”

The reception for their estate wines produced by Walla Walla winemaker Aryn Morell has the Lawrences looking to increase production to 10,000 cases with the 2021 harvest, launch the Gård Public House tasting room and restaurant this spring in Royal City, and open at least one more satellite tasting room for Gård – perhaps in Vancouver, Washington, but not at their latest acquisition in Prosser.

“We do not plan on having Gård available at Desert Wind, except possibly at the restaurant,” Lawrence said. “We’ve been in shared tasting room situations in the past and haven’t been real happy with them. Desert Wind’s brand is strong enough that it deserves having the tasting room to itself.”

Sinking more roots

Between negotiating the Desert Wind purchase and farming for themselves and their winemaking customers, the Lawrences raised a toast on Sept. 2, 2020, to the federal government’s establishment of the Royal Slope American Viticultural Area.

“The Royal Slope AVA, although a long process, has been great,” Lawrence said. “We believe it has had quite a bit to do with our increased demand this offseason for grapes. In fact, we are essentially sold out and wished we had been more aggressive on planting the past couple years.”

It’s an emerging region that’s been a longtime breadbasket for acclaimed winemaker Mike Januik at Novelty Hill in Woodinville. Morell uses Royal Slope fruit in wines he crafts for famed Napa Valley vintner Dennis Cakebread’s Mullan Road Cellars label. Mellisoni Vineyards in Chelan – Wine Press Northwest magazine’s 2021 Washington Winery of the Year – pulls heavily from the area as well.

“One of the reasons we are starting our Royal City tasting room and restaurant is we are bullish long term on Royal City above and beyond just crop production,” Lawrence said. “We have many customers who want to visit the vineyards, and this gives us an avenue to do so and then sit down and have great wine and food.”

Hospitality plans

It’s often in a farmer’s nature to diversify their holdings, and the Lawrences and Merkles now are in the hospitality industry by taking over Desert Wind, an 11,000-case winemaking facility in Prosser that came with a full commercial kitchen and a boutique hotel featuring rooms that overlook the Yakima River.

“Desert Wind is an unparalleled destination in the Yakima Valley, and we are excited to expand the offerings there with an even greater emphasis on food and wine pairings, private events and lodging experiences,” Lawrence said.

Desert Wind lost a valued neighbor last fall when the Walter Clore Wine and Culinary Center in Prosser closed. It had spent 10 years as a tourist attraction and tasting room for wines produced throughout Washington state.

Tinte Cellars adds Red Mountain vineyard

The Lawrence and Merkle families weren’t the only vintners to invest in Benton County this spring.

Seattle natives Tim Gamble and wife Teresa Spellman Gamble of Tinte Cellars in Woodinville bought Corvus Vineyard on Red Mountain. The former owners of Nutraceutix in Redmond purchased William Church Winery and Cuillin Hills in 2018, then opened a satellite tasting room for Tinte last fall in Seattle’s Georgetown neighborhood. They’ve rebranded their 5-acre site as Tinte Estates Vineyard and the adjacent four-bedroom vacation rental as Tinte Red Mountain Retreat.

Spellman Gamble’s late father, John, was the 18th governor of Washington state, and she spent three decades on the clinical faculty at the University of Washington.

Changing industry leaders

Last fall, Ste. Michelle Wine Estates, one of the largest producers in the country, brought in global wine executive David Dearie as CEO, its third change in leadership since 2018. Earlier in 2020, its parent company, Altria, wrote off $292 million in wine inventory and $100 million in non-cancelable grape purchases.

This spring, Ste. Michelle reshuffled its winemaking team, marked by the departure of Bob Bertheau as the longtime head winemaker at Chateau Ste. Michelle. He was replaced by Katie Nelson, while Will Wiles took over for Nelson at Columbia Crest. Leah Adint – a product of Washington State University’s viticulture and enology program – moved from Chateau Ste. Michelle to Erath Winery, a sister property in Oregon.

According to research by Bitter, Columbia Crest now stands as the state’s leading producer at 1.8 million cases in 2020. Chateau Ste. Michelle is next at 1.4 million cases. Goose Ridge Winery in Richland produced 914,162 cases, making it No. 5 on the top 10 list.

Bitter’s company, Vintage Economics, determined that overall production among Washington wineries fell from 17 million cases in 2019 to 12.75 million in 2020. His data, available via a paywall at Vineconomics.com, indicates that 70% of the state’s wine comes from the cellars of the leading 10 producers, a list that is rounded out by West Richland’s Vinmotion Wines, owned by Pacific Rim Winemakers, with 236,127 cases.

And in an effort to raise consumer awareness, the Washington State Wine Commission and Washington Winegrowers Association have created the Washington Sustainable certification program. A pilot project is scheduled to roll out by harvest 2021 with the full program implemented in 2022. The goal is to have wineries label their bottles as “sustainably farmed” with a Washington-specific brand. Growers are seeding the program at a cost of $6 to $10 per acre.

Eric Degerman owns and operates GreatNorthwestWine.com, an award-winning website that covers the Pacific Northwest wine industry.