Small and Mid-sized Wineries Drive Growth in Washington State

Total shipments of packaged wines by Washington wineries increased by 1% in 2021 to 11.9 million cases, based on Vintage Economics’ analysis of Washington State Liquor and Cannabis Board data. The final tally will likely be revised upward to just above 12 million cases when late reports are incorporated. 

In-state wholesale sales and out-of-state shipments were up marginally in 2021, while DTC sales/shipments grew at a more robust pace. The modest increase in total shipments represents a substantial improvement relative to a 7% volume decline in 2020.

Performance continues to be bifurcated 

The overall figures mask an ongoing divide between the state’s largest winery, Ste. Michelle Wine Estates, and the rest of the industry. 

Ste. Michelle, which still accounts for more than half of all Washington wine shipments, continues to struggle in a challenging market environment for wines priced below $12. Its Washington shipments fell again in 2021, though the loss was much smaller than the 600,000-case decline reported in 2020. Nonetheless, Ste. Michelle’s fourth quarter shipments were down sharply – an indication that the winery hasn’t found a bottom yet. 

Excluding Ste. Michelle, the Washington wine industry looks much healthier. The combined shipments by all other wineries grew at a high single-digit pace. Approximately 70% of small and mid-sized wineries (500 to 100,000 cases) shipped more wine in 2021 than in 2020. Aquilini Brands led the way with an increase of 32,000 cases. 

The grape market shows improvement 

The 2020 grape crush is expected to come in at near 180,000 tons, though the final total won’t be available until March. The crush has averaged about 185,000 tons over the last three years, which compares to more than 250,000 for the prior three-year period. 

Consequently, much of the excess bulk inventory in Washington has been wiped away and grape demand has picked up. But the market also continues to be highly bifurcated. Demand is expanding for higher-quality grapes destined for higher-priced bottlings, and prices are rising. Conversely, demand and pricing continue to be subdued at the commodity end of the market. 

The three consecutive below-average harvests have masked a structural imbalance between supply and demand for lower-tier grapes. Some acreage has been removed in recent years, but the region is still capable of producing 250,000 tons under normal conditions. Thus, the market could potentially return to a state of excess supply unless wine shipment growth picks up. 

Contact Chris Bitter for more detailed intelligence and analysis on the Washington wine industry or visit our website at www.vineconomics.com to learn more about Vintage Economics and the services we provide. 

Chris Bitter 

Bitter@VinEconomics.com 

206-981-6885