Wine Industry Report

Willamette Valley Vineyards, Inc. (Nasdaq: WVVI), net income for the three and six months ended June 30, 2006 was $259,206 and $616,500, or $0.05 and $0.13 per diluted share, respectively, compared to net income of $275,520 and $364,279, or $0.06 and $0.08 per diluted share, respectively, in the comparable prior year periods. Revenues decreased 2% and Net Income before taxes decreased 6% for the three months ended June 30, 2006, as compared to the prior year period. For the six months ended June 30, 2006 revenues increased 21% and Net Income before taxes increased 69%, as compared to the prior year period.

Awareness of the Company’s wine quality received national circulation
in the quarter ended June 30, 2006 from the publication of renowned author
and sommelier Kevin Zraly’s ‘06 edition of the American Wine Guide in which
he featured the Willamette Valley Vineyards ‘02 Vintage Pinot Noir label
and recommended the winery’s Pinot Noir in the chapter “Kevin Zraly’s Best
Picks.” This wine also earned 92 points from Cheers magazine, a hospitality
trade publication. The ‘04 Estate and ‘05 Whole Cluster Pinot Noirs earned
gold medals from the Taster’s Guild International Wine Competition. The
winery’s ‘05 Pinot Gris has earned 6 gold medals from national and
international wine competitions, received 91 points in the August ‘06 issue
of Wine & Spirits Magazine and was featured in Karen MacNeil’s ‘07 Wine
Lovers calendar as a “must try wine.”

The continued increase in demand for the Company’s products has
continued to constrain the Company’s inventory of its core products. All
winery Departments and distributors have been given case allocations
available to each for 2006. The Company received orders in the quarter
ended June 30, 2006 from particular distributors in excess of their
respective allocations and those orders were “shorted” and filled only to
the amount of their annual allocation, stopping the continued growth in
winery sales revenue.

Depletions of the Company’s products by its out-of-state distributors
to their retail customers increased 130% in the six months ended June 30,
2006 compared to the prior year period. Specifically, increases in
depletions of the following core products were: 265% Estate Pinot Noir,
201% Vintage Pinot Noir, 97% Whole Cluster Fermented Pinot Noir, 123% Pinot
Gris and 54% Riesling.

In spite of these historically high levels of customer demand,
management expects to receive less revenue from the sales of its core
products, Vintage Pinot Noir, Whole Cluster Pinot Noir, Pinot Gris and
Riesling in the second half of 2006 and in 2007 than it did in 2005, and
the six months ended June 30, 2006. The Company has placed these varieties
on allocation with its distributors, and has made careful, upward price
adjustments as new vintages were released in order to address these
inventory constraints. The upward adjustments have contributed to improved
gross margins for the Company as more revenue was associated with sales of
products produced by the Company.

The total owned and contracted vineyard totals 505 acres, including 290
acres not yet productive, which together will produce approximately 120,000
cases when fully productive. The current production estimate for the 2006
harvest is approximately 80,000 cases. The Company presently owns 48 acres
of producing vineyard at its Willamette Valley Vineyards Estate Vineyard
and owns or leases approximately 180 acres at its Tualatin Estate Vineyard.
The Company is in the process of planting an additional 5 acres at the
Tualatin site. In addition, it leases the 50 acre Belle Provenance Vineyard
in the Eola Hills, of which 2006 is the last year of the 10 year lease. The
Company has chosen not to renew that lease. This will result in a decrease
in production of approximately 10,000 cases, offset by increases of
approximately 12,000 cases from vineyards that are expected to come into
production in 2007. All of the Company’s vineyards are certified
sustainable by LIVE (Low Input Viticulture and Enology) and Salmon Safe by
the Pacific Rivers Council.

In order to meet the demand for the Company’s products until the new
plantings are productive, the Company will continue to purchase wine grapes
as the Company has done historically from quality growers throughout the
Willamette Valley Appellation on shorter term contracts. However, the
recent, significant increase in demand for Oregon wine has increased demand
for available fruit supplies. While plantings are increasing, fruit yields
are lagging behind demand and prices are high for contract grapes.

During this period of high demand and limited supply, management is
focused on positioning the Company’s Willamette Valley Vineyards brand and
flagship varietal Pinot Noir as the consumer’s brand of choice for the
varietal at price points that management believes significant growth and
margin opportunity exists. The Company is identifying and nurturing Pinot
Noir enthusiasts at all levels of distribution through its “Customers for
Life” program. Additionally, the Company is developing its professional
staff and sales mechanism and to support the expected increasing production
volumes. These efforts are increasing sales, general and administrative
expenses in the near term in an effort to build and maintain the ability to
handle the expected volume increases in the long term.

Revenues from the Company’s Oregon Wholesale Department, Bacchus Fine
Wines, decreased 4% in the three months ended June 30, 2006, compared to
the prior year period. In the year ended December 31, 2005, the Company
sold 27,217 cases of products other than its own through Bacchus Fine
Wines. In the six months ended June 30, 2006, the Company sold 12,662 cases
of products other than it is own through Bacchus Fine Wines. The Company
receives a gross margin of approximately 23% from the sales of products
other than it is own compared to a gross margin of approximately 55% for
the sale of products the Company produces. As the Company’s revenue
attributable to the sale of products other than it is own through Bacchus
Fine Wines increases, the Company’s gross margin will be negatively
impacted, particularly when the sale of Company produced products is
constrained by inventory shortages.

Forward-looking statements in this release are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are subject to risks and
uncertainties and actual results could differ materially from those
projected. Such risks and uncertainties include, but are not limited to:
availability of financing for growth, availability of adequate supply of
high quality grapes, successful performance of internal operations, impact
of competition, changes in wine broker or distributor relations or
performance, impact of possible adverse weather conditions, impact of
reduction in grape quality or supply due to disease, impact of governmental
regulatory decisions and other risks.

Willamette Valley Vineyards, Inc. is headquartered in Turner, Oregon.
The company is one of Oregon’s leading wineries and the state’s only
publicly held winery. Willamette Valley Vineyards is the owner of Tualatin
Estate Vineyards and Griffin Creek wines. Willamette Valley Vineyards
common stock is traded on NASDAQ (Symbol: WVVI).

                      WILLAMETTE VALLEY VINEYARDS, INC.
                           Statement of Operations
                                 (unaudited)

                       Three months ended June 30, Six months ended June 30,
                                  2006        2005        2006       2005
                              __________  __________  __________  __________
    Net revenues
     Case revenue             $3,426,838  $3,500,676  $7,121,014  $5,785,314
     Custom crush-facility
      lease-bulk revenue           8,793      11,823      17,586     102,263
                              __________  __________  __________  __________
    Total net revenues         3,435,631   3,512,499   7,138,600   5,887,577

    Cost of sales
     Case                      1,779,274   1,931,401   3,730,693   3,161,917
     Bulk                              -           -       4,631      55,926
                              __________  __________  __________  __________
    Total cost of sales        1,779,274   1,931,401   3,735,324   3,217,843

    Gross profit               1,656,357   1,581,098   3,403,276   2,669,734

    Selling, general and
     administrative expenses   1,200,629   1,069,561   2,329,745   1,961,984
                              __________  __________  __________  __________
    Net operating
     income                      455,728     511,537   1,073,531     707,750

    Other income (expense)
     Interest income              18,878         260      23,156         426
     Interest expense           (42,597)    (52,597)    (86,083)   (118,380)
     Other income
      (expense)                        -           -      16,895      17,336
                              __________  __________  __________  __________
    Net income before
     income taxes                432,009     459,200   1,027,499     607,132

    Income tax                   172,803     183,680     410,999     242,853
                              __________  __________  __________  __________
    Net income                   259,206     275,520     616,500     364,279

    Retained earnings
     beginning of period       2,470,166   1,044,692   2,112,872     955,933
                              __________  __________  __________  __________
    Retained earnings
     end of period            $2,729,372  $1,320,212  $2,729,372  $1,320,212
                              ==========  ==========  ==========  ==========
    Basic earnings per
     common share                   $.06        $.06        $.13        $.08

    Diluted earnings per
     common share                   $.05        $.06        $.13        $.08

    Weighted average number of
     basic common shares
     outstanding               4,711,620   4,492,602   4,692,942   4,489,573

    Weighted average number of
     diluted common shares
     outstanding               4,893,871   4,598,281   4,875,194   4,595,252