July 2008 Newsletter

July, 2008 Membership E-Newsletter

Grape Glut Coming, Says Hatcher

-Dana Tims, The Oregonian
Oregon's $1 billion wine industry has enjoyed unprecedented success in recent years, riding a wave of international acclaim for its flagship grape, pinot noir.

But one prominent Oregon winemaker is now sounding an alarm. If he's right, the state's wine industry, just like the rapid rise and dizzying crashes of the dot.com and housing sectors before it, may already have sown the seeds of its own upheaval.

"What we have coming," said Bill Hatcher, managing partner with A to Z Wineworks in Dundee, "is a grape glut of biblical proportions." Hatcher estimates that by 2012 the amount of acreage planted in pinot noir grapes will be almost double what it was as recently as 2005. That result, if realized, could drop the bottom out of the state's wine industry. Profits could fall precipitously and a number of Oregon's 400 wineries, particularly those locked into pricey, long-term grape contracts, could find themselves facing disaster.

Some highly-regarded Oregon vintners, however, strongly disagree with him.

Dick Shea, in his 20 years growing grapes and making wine in Oregon, said he has yet to see any significant growth in the supply side that's not been met by the unfulfilled demand for quality pinot noir. "Like any marketplace, there are always going to be some people who are bullish and some who are bearish," Shea said. "I'm certainly on the bullish side of Oregon pinot noir."

Hatcher should know what he's talking about since his own business, which thrives by buying excess grapes on the wholesale market and blending them for sale under his own label, took off in 2001 on the back of the last industry-wide grape glut. "Most of what went into the first A to Z bottlings was going into $40 bottles of wine that other people couldn't sell," he said. "You'd know the name of every winery that went into our wine."

A number of factors figure into Hatcher's forecast of another looming glut. Chief among them are dramatic consolidation of wine distributors, which down the road could make it difficult for fledgling labels to sell their wines; steady but hardly earth-shaking sales levels; a slowing national economy; and, most significantly, a "frenzy" of new plantings.

"If we planted nothing at all after this year, we'll still be looking at an enormous excess of fruit," he said. "The growing divide between supply and demand is just going to keep on intensifying." Hatcher's thesis is by no means met with unanimous agreement from industry analysts and producers. And if any of his assumptions are wrong, they say, his conclusion could turn out very differently.

"Bill's model is fine," said Jack Irvine, whose Portland accounting firm represents more than 100 Oregon wineries. "It just doesn't take into consideration some critical information."
Hatcher, for instance, is predicting that this year's harvest, which just this week is entering the critical "bloom" phase, will match if not exceed last year's bumper crop. The resulting supply increase, Hatcher said, could pave the way for a glut down the road.

In Irvine's view, either of two factors could dampen that possibility. The first is that seemingly insatiable national demand for Oregon pinot noir, some of it still attributable to the 2005 movie "Sideways," will soak up whatever the state can produce for years to come. The second is that growers, if faced by the prospect of too big a harvest, will merely do what they've done in the past by pruning excess grapes prior to picking. That ensures that all of their remaining grapes ripen sufficiently and that the total supply doesn't swamp demand.

David Adelsheim, founder of Adelsheim Vineyard in Newberg and one of Oregon's wine pioneers, doesn't share Hatcher's view of an imminent wine-grape glut, in part because of an emerging trend he said is likely to keep the supply of grapes line with demand.

"The vast majority of grapes being planted in Oregon right now are being planted by the wineries that will use them," he said, adding that the huge independent vineyards common in California are rare in Oregon. "Only total idiots are betting they can produce 100 percent more grapes than they can use or sell."

For his part, Hatcher is optimistic that established brands will do fine in the years ahead. But most of those wineries are already at capacity and have little room to expand, he said. New operations that could help the industry generate the new sales it needs to absorb soaring grape production may not gain traction in the marketplace for some time.

And then there's the matter of overall sales. With the exception of 2005, when case sales of Oregon pinot noir soared by 45 percent, the level has averaged only 2.5 percent to 5 percent since 2004. Hatcher's own forecast, which assumes annual sales increases of 7 percent, still predicts huge oversupply within four to five years.

"Everything adds up to a situation where there simply aren't enough sales to absorb all the new grapes coming on line," Hatcher said. "If that plays out into the future, the Oregon wine industry will be facing a very different landscape than it is today."

2008 Pinot Noir Crop Report
A cool, wet spring delayed bloom and fruit set in Oregon by several weeks, leading to fears of grapevines that could never produce ripe fruit by a normal harvest time. But consistent warm weather during July has turbocharged the vines' development, and most growers report that their vines have nearly "caught up."

Poor weather throughout June delayed the bloom, and contributed to an uneven fruit set. Many growers I talked to are planning to prune back the crop early, and often, in an attempt to limit the amount of fruit that the vine will have to ripen in the fall. Less fruit means a higher chance of getting it ripe, goes the theory.

Those fears have been eased, although not erased, by consistently good weather through mid-July, with more good weather in the forecast. Various grape farmers I've talked to estimate that they are now only 2-3 weeks behind an optimum growing cycle. "The fact is, nothing matters until September 15," one vineyard owner told me. "You can't worry about this stuff too much in the middle of summer, or it will drive you crazy."

Stay tuned as the season develops!

JULY WORLD CLASS WINES

2006 Iota Pinot Noir

Price: $42
Production: Less than 500 cases
Drinkability: Good, getting better
Availability: Good for now

New producer alert! What with all the griping I do about the flood of mediocre and downright lousy new producers that have washed ashore in Oregon lately, you'd think that there are no GOOD new producers. Luckily, nothing could be further from the truth. Among the gems shining forth from the vinous detritus is this new bottling from Iota.

The winery is located in Eola Hills, where the estate vineyard has eleven acres planted primarily to Pommard and Wadeswil clones of pinot, with a smaller percentage of Dijon clones. This is a bit unusual -- most new producers here are leaning on the Dijon clones to a much greater degree. (Estimates are that considerably more than half of all new plantings here are the Dijon clones, rather than the tried-and-true clones that make up the vast majority of older vineyards). This one step immediately puts Iota out in front of many newcomers, who rely too much on the Dijon clone fruit to make wines that are . . . gooey.

Over the past few years, the winery partners - the Sandberg and Pelos family - have sold their grapes to Beaux Freres and Bergstrom, among others. That's another good thing plenty of newcomers don't bother to integrate themselves with established wineries (a trend that is not good for the overall industry, in my opinion). After a few years of experimenting with winemaking they decided to go commercial. Here's another key factor. Rather than hire a consultant to essentially assembly-line produce their wine, the partners chose one of their own, Johanna Sandberg, to do the deed. While consultants and custom crush facilities certainly have their place, they have also made oceans of dreadful plonk.

As a result of all those good decisions, Iota has produced a terrific wine. It's a classically styled Oregon pinot noir brimming with rich flavors of dark fruits, deftly accented with quality wood and possessing a multi-layered texture and great complexity of flavor. Although it's from the ripe '06 vintage, known so far for a plethora of fruit bombs and early-drinking pinots, the Iota has a touch of structure that defines the wine and adds some welcome focus. Those who pay attention will discern minerals and soil flavors along with the black cherry, dark plum and other fruit flavors. Decant this one a bit for current consumption, or hold for 3 months to 3 years for further integration.

>> Click here to buy the Iota

2006 Lange Dundee Hills Estate

Price: $60
Production: 400 cases
Drinkability: Good, will evolve medium-term
Availability: Good for now

Here's the thing about Lange. Everything they make is, really, quite good. There's an explanation for this fortuitous circumstance: Experience.

The crew at Lange has been making wine around these parts for over twenty years now. When it comes to making great wine, experience is underrated and irreplaceable. (In fact, almost all of the Oregon wineries that started back in the Second Wave of the 1980s now make great wine every vintage, with only a few obvious exceptions). That experience allows Lange to avoid "new winemaker-itis" issues like too much new oak and overextracted fruit. It also means that a "tough" vintage really means "I've seen this before," and the Lange's know what to do in order to produce good wine, anyhow.

Lange has been around long enough now that the winemaking and winery operation has largely passed on to the next generation. Jesse Lange, scion of founders Don and Wendy Lange, now directs winemaking. He is one of a group of second generation winemakers in Oregon that includes Jason Lett (Eyrie), Adam Campbell (Elk Cove), Alex Sokol Blosser (Sokol Blosser) and a number of others. As with those, the transition has occurred with no diminishment of quality (there are exceptions to this rule). The generational transfer of knowledge and ability has been very successful.

Of all the Lange wines, their Estate bottling is usually my favorite. Certifiably "old vines" at this stage, the vineyard occupies a prime spot on top of the hill where the winery is located. It is what they consider their finest wine each year. Production is limited to a few hundred cases.

One of the factors that make this a great wine is the lack of fruit-bomb-ness. It's plenty ripe, has loads of fruit, is terrifically concentrated and lengthy - but it is NOT over-ripe, extra-toasty with barrel notes, or sporting exceptionally high alcohol. In short, the wine is balanced. The flavors tend to darker fruits, with black plums and blackberries hogging the spotlight. There's some subtle wood influence, and of course a very lengthy finish. Once again, this bottling is a classy, sophisticated and complex offering. You can drink this now, or wait awhile as desired.

>> Click here to buy the Lange

JULY PREMIUM CLUB WINES

2006 Lemelson Six Vineyards

Price: $26
Drinkability: Excellent now
Availability: Good for now

Whither Lemelson Winery? One wonders simply because of the winemaker turnover there. There have been several in just about as many years. That can create worry about the consistency of the product. As it turns out, though, the product has been very consistently good. Now, with the advent of winemaker Anthony King, who has has been at the helm for Lemelson since mid-way through the '05 vintage, the wines are perhaps at their highest level of quality to date.

King came to Lemelson via Acacia winery in California, a significant (although not vaunted) producer of cool climate pinot noir there. He has produced a stellar lineup of wines from the '06 vintage, which should bring him deserved accolades (and higher critical scores than he achieved at Acacia, I'd wager).

Here are some blurbs about owner Eric Lemelson and King, conveniently lifted from their website:

"Eric Lemelson found his "calling" as a Pinot noir producer after a series of serendipitous events that began with his decision to move to Oregon from the East in 1979 to attend Portland's Reed College. Oldest son of noted independent inventor Jerome Lemelson (1923-1997), Eric has always followed in the creative and entrepreneurial spirit of his family.

"Even before graduating from Reed in 1981, Eric realized that Oregon was his true home. His career path following graduation began with politics: an internship for an Oregon Congressman led to positions on several state and national political campaigns and in the State Legislature. Later he played guitar in a rock and roll band, then attended law school at Lewis and Clark, where he studied environmental law. He received his J.D. in 1992 and ran a research center on water law for several years after graduation.

"While in law school, Eric bought a farm in the hills on the eastern edge of Oregon wine country, following a longtime dream of living in the country. A longtime fan of Oregon wine, Eric began to notice the exceptional quality of Oregon Pinot noir produced in the 1990s. Intrigued, he contacted several producers to learn about viticulture. He discovered that his farm's southeast slopes and volcanic soils were well-suited for winegrapes. In 1995, he planted two acres of Pinot noir and Pinot gris at the farm, later named Chestnut Hill.

"Winemaker Anthony King comes to us from Acacia Winery, a major Pinot noir and Chardonnay producer from Carneros, in the cool-climate region of the Napa Valley. In addition to working as winemaker, Anthony also managed all of Acacia's organic vineyards.

"Anthony received his Masters Degree in Viticulture and Enology from the nation's premier school in the field, the University of California at Davis. Prior to working as Winemaker at Acacia, Anthony was Assistant Winemaker and Vineyard Manager. A Texas native, Anthony and his wife Kara have two children and live in McMinnville."

This '06 Six Vineyards Pinot Noir is Lemelson's entry level wine -- it's a blend of lots from all of their purchased and estate grapes. Here in Oregon, it is allocated to "restaurants only" and is not readily seen at retail. In other vintages, the entire production has been shipped off to Germany, and not even released domestically! The wine is fully fruited with juicy, rich dark fruit flavors that show the ripeness of the vintage, and the wine has appropriate acidity to keep things lively on the palate. It's already quite open knit, and early consumption is warranted. Overall, this is an excellent value, and OPNC clients are fortunate to have access to a generous allocation.

>> Click here to buy the Lemelson

2006 McKinlay OPNC Cuvee