Oregon’s Willamette Valley Is A Wine Industry Trailblazer

Oregon’s Willamette Valley has earned a worldwide reputation for its superlative, finely crafted Pinot Noir wines. Indeed, notwithstanding that Oregon grape growers cultivate over 80 different varieties of grapes in their vineyards, it is Pinot Noir that has become the Oregon Wine Industry’s signature grape.

Oregon’s offerings aren’t limited to just Pinot Noir, however. Its bounty ranges from the world class Viognier and Tempranillo that are now putting Southern Oregon wine producers on the vinous map to the growing reputation of the Willamette Valley’s white varietals, in particular Chardonnay, Pinot Blanc and Riesling All three of those varietals are pushing Oregon’s wine making boundaries, and are emerging as the next big thing in Willamette Valley wines.

Oregon wine growers lead in more than just their wine making prowess. They are also industry leaders in direct to consumer (DTC) sales

One of the legacies of America’s ill-fated experiment with Prohibition was the subsequent emergence of the three-tier distribution system. Wineries sold to distributors who sold to retailers who in turn sold to consumers. The system was designed to prevent any major participants from leveraging their market power to exert undue influence on any of the other tiers in the distribution system. Combined with individual state control and regulation, the result was a highly fragmented, and often expensive, road to market for producers.

The three-tier system still largely exists, but over the last several decades exceptions have been made for direct sale to consumers by wineries. Originally limited to actual physical visits, the rules have since been loosened to allow for mail order sales to consumers. For many small wineries the ability to set up and operate “wine club” sales to a producer’s “friends and visitors” has been a godsend and a major factor driving the ongoing expansion of the US craft wine industry.

The typical winery nets around 35 cents of each retail dollar of sales. The rest is split between the distributor and the retailer. The numbers vary. They are generally lower for wines that retail for under $10 and higher for expensive, highly sought-after wines. Producer margins will also vary depending on the cost of producing/purchasing grapes as well as the underlying cost of building and maintaining a winery.

As a rule, producer margins will generally be around 50% of the wholesale cost. That means the average producer nets about 16 cents of every consumer dollar spent on wine. There are lots of exceptions of course, but this percentage is a reliable guide.

Direct to consumer sales are more profitable than sales to wholesalers, even though there are higher operating costs and are more labor intensive. Obviously, it is a lot easier to ship a truckload of wine to a single destination than it is to ship the same number of bottles one at a time to multiple addresses.

DTC allows producers to pick up the margin that would otherwise have been kept by the distributor and retailer. Even after adjusting for the higher operating costs, wine producers will generally retain about 75 cents out of every DTC sale. That makes DTC four to five times more profitable than sales to wholesalers.

According to Morgen McLaughlin, Executive Director of the Willamette Valley Wineries Association, a new report from Sovos Ship Compliant revealed that Oregon’s wine producers continue to lead the nation in direct to consumer sales. In 2019, DTC sales rose 13.1 percent over 2018. Not surprisingly, much of that growth was from DTC sales of the state’s flagship varietal, Pinot Noir. Oregon accounted for 6.6 percent, $211 million, of the $3.2 billion in US direct to consumer wine shipments last year despite only being about 1.5 percent of US wine production.

According to McLaughlin, DTC is “the lifeblood of many small, family owned wineries in the Willamette Valley.”  This is particularly true now that the consolidation of distributors is making it much harder for small wineries to access the retail marketplace.

Since 2013, shipments of Oregon Pinot Noir have grown at an average yearly rate four times higher than the overall industry’s average growth rate. According to Nielsen, this has translated into Oregon wine seeing double-digit annual growth in retail sales for the past three years in a row. Rapidly growing wine sales also means rapidly growing grape production. For the first time ever, the estimated value of Oregon wine grape crop reached $208 million in 2018.

Tourism to the Willamette Valley also continues its double-digit growth. According to Nielsen, tasting room sales were up 16% in 2018. Those sales have an important multiplier effect, driving additional sales for hotels, restaurants and transportation.

According to the Oregon Wine Board, wine related tourism contributed more than $431 million to the Willamette Valley economy. In 2018, its estimated that between half a million and a million visitors stopped at Oregon wineries, spending an average of $193.36 on wine per visit, and an average of $605.70 per travel party per day in the Willamette Valley. The typical wine tourist represents $264.35 in daily in-market spending to Willamette Valley businesses. 

Not surprisingly, the Willamette Valley’s burgeoning reputation is attracting a steady stream of new wine producers, including such prominent wine makers as Jackson Family Wines, Chateau Ste. Michelle, Vintage Wine Estates, as well as numerous world-renowned French producers like Louis Jadot, Domaine Drouhin Dominique Lafon, Louis-Michel Liger-Belair and Jean Nicolas Méo, amongst others.

The success of Oregon wines has been echoed in the steadily rising, worldwide interest in the annual Willamette: The Pinot Noir Auction. The auction is a trade event held by the Willamette Valley Wineries Association that attracts high-profile attendees from throughout the country. According to David Millman, this year’s Auction Chair and General Manager of Domaine Drouhin Oregon,

Since its inception in 2015, the Auction has seen an increase of 114% in total wine sales, the average bottle price has increased 82% and the number of active bidders has increased by 15%.” The 2019 auction had 450 attendees and 148 successful bidders representing 26 states and 3 countries.

Added Millman,

Last year, the Auction raised a record $1.02 million and we’re excited for another great year. While there are numerous factors behind the success of the auction, it is a barometer of demand for Willamette wine in that it reflects the confidence among the trade.

The 2020 auction will have 93 lots of wine donated by 88 members of the Willamette Valley Winery Association: 86 lots of Pinot Noir and seven Collaborative Chardonnay lots. There are 10 new wineries participating in this year’s auction.

You can follow the auction on social media at

• #WVWines #WVAuction
• Facebook: @WillametteWines @WillamettePinotNoirAuction
• Twitter: @WVWines @WVAuction
• Instagram: @WVWines @WVAuction
• Website: WillametteWines.com, WillametteWines.auction

Cheers