Small, high-end wineries get creative to save money, survive recession

Isenhower Cellars recently sent an unusual newsletter to customers, saying it has cut ties with most of its distributors and will sell wine almost exclusively through its Walla Walla winery, a tasting room in Woodinville and its Web site.

The 11-year-old winery used to make half its sales through restaurants, wine shops and high-end grocery stores. Now it is cutting production by half — to about 24,000 bottles a year — and selling them directly, which means it keeps the whole profit rather than sharing it with distributors and retailers. Wineries typically sell expensive wines — around $25 and up — to distributors for half the retail price.

It is an extreme example of the measures high-end wineries are taking to survive during the recession, particularly now that lenders are stingier about lending money. In some cases, that means getting smaller and trying to sell more wine directly to consumers.

Although wine consumption is up, sales of pricey bottles have been battered.

Scaling back production means lower costs and less stress, said Brett Isenhower, who owns the winery with his wife, Denise.

Besides buying fewer grapes, barrels, corks and bottles, he said, "We can store it on-site, not in wine warehouses, and I haul it over [to Woodinville] myself, so there are no more trucking fees."

With lower production, there is often less debt and less sweating about moving a lot of inventory. The research firm Nielsen figures sales of wines costing $25 and more dropped 30 percent last year, The New York Times reported.

Wine expert and Seattle Times columnist Paul Gregutt said this is the first Washington winery he has seen publicly broadcast its severed distributor ties. (Isenhower will continue to sell a small amount of wine through distributors in Portland and Florida.)

Because of the poor economy, he said, "Wineries are trying to find ways to sell more wines direct, whether through a wine club or a tasting room."

Sometimes they want to avoid distributor fees; other times they cannot find one. The state's winery count — now above 650 — has more than doubled since 2004, according to the Washington Wine Commission.

"My phone's been ringing off the hook, because things are slow and there are only so many wines a distributor can focus on," said Guy Harris, owner of a 2-year-old distributing business in Woodinville called Cru Selections.

He recently became the Puget Sound-area distributor for Covington Cellars in Woodinville, which produces about 38,400 bottles a year.

"The larger your production, the more important it is to reach out a little further than your own back yard," said Cindy Lawson, who owns the winery with her husband, David.

She figures that a full-time commission-only salesperson would cost at least as much as a distributor, and there is no guarantee a salesperson would sell as well as a distributor with long-term relationships with restaurants and retailers.

The Lawsons also own Two Vintners, which relies for sales through a wine club rather than distributors, because it is so small. Its prices are lower than the $20-to-$55-a bottle of Covington Cellars wine, because it does not have the expense of a tasting room and distributor.

Hollywood Hill Vineyards in Woodinville began selling wine in 2007, and just as owners Steve and Becky Snyder started gearing up to meet with distributors, the economy fell apart.

"Nobody wanted another $30 bottle of wine," he said. So, Hollywood Hill, which includes a small vineyard in Woodinville, leaned on its tasting room. About 90 percent of its sales are made there.

Its wine is also sold by the restaurant Sutra, the wine shop Pike & Western, Cellar 46 on Mercer Island and a couple grocery stores in Woodinville, but not through a distributor.

Steve Snyder expects to find a distributor eventually, despite the trend toward selling directly to consumers.

"It's a matter of being more available to people in the Seattle metro area," he said, although he is optimistic about the Woodinville wine scene.

"It seems like new tasting rooms are moving in every week," Snyder said. Still, when he brings up Woodinville at tastings in Seattle, "people say, isn't that way out in the sticks?"

— Melissa Allison

After nearly 20 years, Soundsations Records in Issaquah will close for good at the end of June. Owner Barry Reisman said he's ready to retire. "I'll be 65 in July," he said. "Also, music retail isn't happening anymore. Everybody is downloading music, and people don't really buy CDs." Reisman noted that sales at his store are down about 50 percent from three years ago. — AM

Youth-oriented retailer Zumiez said in a regulatory filing Thursday that Chief Executive Richard Brooks received a 2009 compensation package worth $372,308, including an annual salary of $262,500, plus a bonus of $105,000. That was up from total compensation of $268,226 in 2008, when he did not receive a bonus. Also, Zumiez set May 26 as the date for its annual shareholder meeting, which will be at its Everett headquarters. — AM

Joel Salatin, a Virginia farmer and author who was in Michael Pollan's book, The Omnivore's Dilemma, will give two lectures at the University of Washington on Tuesday, April 20. At 6 p.m., Salatin will compare the industrial global food model with the heritage local food system. At 8 p.m., he will discuss the realities of feeding the world with a nonindustrial food system. The lectures in room 120 of Kane Hall cost $25 each and include a free voucher to see the movie "Fresh," in which Salatin is featured, at Central Cinema. Tickets are available at the door or online at www.BrownPaperTickets.com (search for "Joel Salatin"). — MA

The University District Farmers Market was named one of the country's best by Travel and Leisure magazine. It noted that chefs shop there for Alaskan spot prawns, tiny Pacific oysters and foraged edible plants like fiddlehead ferns and stinging nettles.

Part of the Neighborhood Farmers Market Alliance, it runs year-round on Saturdays from 9 a.m. to 2 p.m. at the corner of Northeast 50th Street and University Way Northeast. — MA

Retail Report appears Fridays. Amy Martinez covers goods, services and online retail. She can be reached at 206-464-2923 or amartinez@seattletimes.com. Melissa Allison covers the food and beverage industry. She can be reached at 206-464-3312 or mallison@seattletimes.com.