Wineries Expand the Reach of Tasting Rooms

New law opens door for Washington state wineries to have up to five tasting rooms

by Peter Mitham
Tertulia Cellars operates a tasting room in Dundee, Ore., and two in the state of Washington including the one seen here in Walla Walla.

Olympia, Wash.—A three-round fight for the right of Washington wineries to operate up to four satellite tasting rooms in addition to one at their production facilities resulted in new legislation last year, but few wineries have exercised the privilege.

Originally proposed in 2015, the legislation died in the 2015 and 2016 sessions of the state house. It was reintroduced last year and passed in April 2017. It was signed into law the following month and took effect last July.

The change freed wineries from having to obtain a production license for a third and fourth satellite tasting room. Previously, these could operate under a production license with a barrel of wine on the premises to fulfil the technical requirements of the license.

Permit data the Washington State Liquor and Cannabis Board provided to Wines & Vines indicates that most wineries still operate this way. While several wineries hold production permits, the maximum number of additional location permits state wineries hold is three, led by Goose Ridge Estate Vineyard and Winery and Basel Cellars Estate Winery.

Goose Ridge was hailed last year as the first winery to operate five tasting rooms in the state, but two of those operate under production licenses. Just three operate as additional, or satellite, locations. Basel operates tasting rooms in Woodinville, Vancouver and Leavenworth in addition to premises in Walla Walla.

Josh McDonald, executive director of the Washington Wine Institute, worked with state lawmakers to effect the change and said the primary goal was to give wineries the option of adding more tasting rooms. “We are not surprised that only a few wineries have utilized the expanded number of tasting rooms allowed up to this point,” McDonald said. “We do anticipate more wineries trying to add more off-site tasting rooms in the future as our direct-to-consumer channel continues to be the dominant area of sales growth.”

Indeed, the number of wineries seeking additional permits continues to grow, and even accelerate.

Washington first allowed off-site tasting rooms — licensed premises separate from a winery’s production facility — in 2000. Of the state’s 779 wineries, permit data indicates that 184 of them hold renewed or newly won permits for additional tasting rooms.

Changing the game
Of these permits, 15 were issued to premises launched between 2002 and 2007. Applications picked up after 2008, with 11 permits issued in 2009. Growth in new applications paused in 2011 but resumed in 2015 with 24 permits issued that year. The state approved 35 permits in 2017, underscoring the growth of tasting rooms.

“It’s something that has changed the game. Where we used to think we had to have distributors to get our wine out there to draw traffic to the tasting room to build membership, now that whole thing has flipped,” explained Kristine Bono, who is a former tasting room manager at Goose Ridge and now oversees the direct-to-consumer activities of Tertulia Cellars in Walla Walla. “We’re going out to them.”

On the one hand, a tasting room is a convenient pick-up point that eliminates shipping charges for wine club members. And on the other, people who might normally drive to wine country have an alternative when weather conditions complicate travel. More tasting rooms bring the wine country experience to consumers and allows wineries to develop specific programs for those locations.

“Being able to go direct to the market, taking our DtC programs to the markets — that’s a huge portion,” Bono said.

Permit data indicates that the key cities for satellite tasting rooms are Woodinville and Walla Walla, with 49 and 41, respectively. Seattle, Leavenworth and Spokane follow, with 24, 20 and 17 each.

Bring in customers, provide an experience
Tertulia has tasting rooms in Walla Walla and Woodinville as well as Dundee, Ore. Its owner Jim O’Connell also operates Hampton Inn-flagged hotels in Walla Walla, Woodinville and Spokane where wine club members enjoy reciprocal benefits.

“We’re only 3,500 cases — but we have three retail centers. We have three different tasting rooms in different markets, but we also have the hotel partnership,” Bono said. “It’s about the experiences – people will pay now as the economy has definitely been recovering since 2008. We’re seeing that premium-priced bottles are way easier to sell. … But that’s not what’s keeping them in our club. What’s keeping them in our club is the engagement, it’s the entertainment factor, the experience factor.”

Chris Kontos, a partner in Kontos Cellars of Walla Walla, agrees in the value of providing an experience.

He said a tasting room in downtown Walla Walla gives the winery a street presence but its big event for wine club members each year is a pheasant hunt along the Touchet River. A dinner that often incorporates the day’s catch follows, usually prepared by an acclaimed chef. Jeremy Hanson from Spokane’s Inland Pacific Kitchen was last year’s guest chef, and this year Kontos plans to have Tim Prefontaine, executive chef from the Fort Worth Club join from Texas.

“It seems that there is an exploratory spirit in the wine buyer that we see in Walla Walla,” Kontos said. “[Millennials especially] get really excited to find wineries like ours that are second-generation winemakers and sixth-generation residents of Walla Walla. … Any time we can expose people to a part of the Walla Walla Valley that we see on a daily basis, it is a win for us.”

Kontos said retail activity this year to date is up 45%, driven largely by non-wine club members. When wine club members are pared off the stats, retail activity is actually up 52% over last year.

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