Portland Business Journal, “How Climate Change Could Hike the Price of Your Oregon Pinot”
Sep 2, 2015, 10:20am PDT
Suzanne Stevens – Editor, Portland Business Journal
Oregon’s wine industry is set to celebrate another banner year.
While it will be difficult to top 2014, when the grape harvest increased nearly 40 percent over 2013 to a record 78,000 tons and sales increased 14 percent to $430 million, many growers are predicting an exceptional crop again this year.
Sam Bronfman is co-founder of Bacchus Capital Management, which is invested in two Oregon wineries: Wine by Joe and Panther Creek Cellars.
BACCHUS CAPITAL MANAGEMENT
Sam Bronfman is co-founder of Bacchus Capital Management, which is invested in two Oregon wineries: Wine by Joe and Panther Creek Cellars.
The optimistic outlook comes despite the hot, dry summer that pushed up the 2015 harvest by as much as three weeks. While Oregon growers have been able to deliver stellar grapes in less-than-ideal conditions, an extended dry weather pattern will eventually take its toll.
“Longer term, we need rain,” said Sam Bronfman, co-founder and managing partner of Bacchus Capital Management, a wine-focused investment firm. “We need it for a lot of reasons, but we need it for the grapes. They cannot be overly stressed forever. They still might be high quality, but yields will go down and that will affect price.”
Before co-founding Bacchus — which is invested in two Oregon wineries, Wine by Joe and Panther Creek Cellars — Bronfman led the premium wine division of the Seagram Company, which was run by his family for three generations, and served as Chairman of Diageo Global Wines.
Here’s what Bronfman had to say about Oregon’s place in the global wine industry.
On Oregon’s opportunity :”Oregon is arguably the second-greatest place in the world to grow pinot noir grapes (behind France’s Burgundy region), and it’s grown a lot. The state’s wines are tremendous and people are out there distributing them. One thing that we’ve seen over the past 20 years is that vintages were very uneven. The weather was uneven and the knowledge in wineries was not nearly as good as it is today. Today, not every vintage is great but most are very good. You can count on Oregon a lot more than ever before.”
On investing in Oregon wine:”You have multinationals and big wineries investing in Oregon. French pinot people are coming in; Big wineries in California are investing in Oregon and this enlivens the mood around Oregon wine. But grapes are getting more expensive and we have relatively low yields here because pinot noir is a finicky grape. You can’t get four or five tons to an acre like you can in a really good California vineyard. You have to think two-and-a-half or three tons an acre. As prices go up, can Oregon maintain its price-value relationship? I think we can, but it’s going to take work.”
On Oregon’s distribution challenge:”We have a unique distribution system in the U.S., where you have thousands of wineries, consumers, retailers and restaurants all in an extremely narrow distribution chain. There is a lot of competition. In the wine and spirits business, distributors make their profit on six or seven suppliers. Four or five are spirits and two or three are big wineries. Distributors pay attention to those seven suppliers much more than smaller players. Is Oregon going to be able to survive in that milieu? Does it need to find smaller distributors? That can be difficult to manage when you have a small winery trying to sell in 30 of 50 states and you need to go to 30 different wholesaler groups.”
On a shakeout of small wineries: “I’ve been in the business since 1979 and I’ve been predicting a shakeout for the last 30 years and we haven’t had one. There are 600 some wineries in Oregon alone, and at this point, I’m thinking there won’t be a shakeout. I think it hasn’t happened because many of those (small operators) aren’t necessarily in it for the money. They want the lifestyle. They don’t care about the return on investment. They don’t want to lose money. They want to run their business and pay their people and they want great wine — they are prouder than proud of what they do — but they’re not looking at a return like a private equity firm.”
