EUGENE — The Oregon wine industry is facing a dilemma. The state's grape production is continuing to expand even as wine sales have dropped off, prompting concerns about oversupply.

EUGENE — The Oregon wine industry is facing a dilemma. The state's grape production is continuing to expand even as wine sales have dropped off, prompting concerns about oversupply.

"Not only are we producing more grapes, but more acres are coming online," said Ted Farthing, executive director of the Oregon Wine Board. "We need to do a lot more work on the demand side."

Farthing and other wine experts gathered in Eugene this month, to discuss the industry's outlook at an annual symposium. With national unemployment still hovering at about 10 percent, the "jobless recovery" from the recession continues to rattle consumer confidence, he said.

Wines produced in Oregon tend to be more pricey, making them less attractive to distributors who want to move large volumes of product, said Eugenia Keegan, a wine industry consultant.

Oregon winemakers sold about 1.66 million cases of wine in 2009, down 5 percent in volume from the prior year, according to the USDA's National Agricultural Statistics Service.

In terms of value, however, wine sales dropped about 16 percent, to $202 million, according to NASS.

As high-end wineries have been forced to knock down their prices, they've begun competing more with mid-level wineries, said Rob McMillan, head of the wine division of Silicon Valley Bank in Saint Helena, Calif.

As a result, the wine industry has felt pressure to reduce prices across the board, he said. Wineries can lower their prices only to a certain point without risking their overall business.

For that reason, producers should now focus on consumer research and provide more value for the dollar, rather than engaging in a race to the bottom, he said.