The Slow Unraveling of Ste. Michelle Wine Estates

Plus: An interview with the late Allen Shoup, and new wines from Ken Wright Cellars

In recent interviews David Bowman, the new CCO (Chief Commercial Officer) overseeing Ste. Michelle Wine Estates (SMWE), has sounded predictably optimistic about the company’s future. He rightfully acknowledges the company’s history, historic importance and ongoing impact on the entire Washington wine industry. As you’d expect from any new leader he’s sure that his attempts at re-inventing, re-organizing, re-centering the company – call it what you will – have a good chance of success. Kind of like Dan Wilson’s take on the Mariners, although by some metrics the M’s are in better shape.

Chateau Ste. Michelle and its associated brands were owned for decades by U.S. Tobacco. The wine business part of the company – a relatively minor component – was run under the more than competent leadership of Allen Shoup and his successor Ted Baseler, who often referred to the company’s many acquisitions during his reign as a ‘string of pearls’.

In 2008 ownership passed into the hands of Altria (formerly Philip Morris) as part of its purchase of UST. Subsequently the wine business seemed less like an asset and more like an orphan. After Baseler retired in 2018 a revolving door might as well have been installed in the CEO’s office. As many negative trends began impacting the entire wine industry, including Covid, things at SMWE continued to slide.

In 2021 the company was sold again, this time to private equity firm Sycamore Partners. More predictable optimism from various employees, clients and Washington wine industry marketers immediately followed the sale, though at least one savvy observer was less sanguine. Quoted in a 2021 Wine Enthusiast article about the new ownership, L’Ecole No 41 co-owner Marty Clubb noted that “what they [Sycamore] typically do is try to skinny down and sell off pieces and sell off brands, and I don’t know if that’s good or bad. The ‘string of pearls’ might get broken.”

This week I reached out to Clubb to see if his thoughts on the sale had changed. “My comment still holds,” he told me. “They’ve sold a bunch of stuff and I don’t know that that’s going to stop. But the outcome of it all could be a good thing. There’s a little bit of coming back to home. The change going on at SMWE is a huge downshift, but there are other dynamics going on where there’s growth in parts of the industry and new players in parts of the industry. Ste. Michelle is less important than it used to be; maybe they don’t have that outsized influence any more, though they are still significant.”

In 2022 Sycamore moved all white wine production out of SMWE’s Woodinville headquarters, freeing up a big part of the property for other purposes. In June of that year the corporate headquarters (the old Stimson mansion) and the 118-acre estate was listed for sale and possible redevelopment. It seemed all but assured that the company would be, as Clubb had predicted, slowly but surely dismantled – parted out – by the new owners.

For reasons unclear the sale never happened, and the listing has apparently lapsed. But as recently as this past winter the owners unveiled a comprehensive proposal to re-zone much of the land to allow for a mix of single family and townhomes, along with a destination hotel and additional commercial development. And again as predicted, the sales of properties that were once part of Baseler’s “string of pearls” have accelerated.

These “Brand Stories” from a 2022 post include a number of brands that have since departed. Among them:

Stag’s Leap Wine Cellars – sold to Marchesi Antinori in July of 2023. This past June Antinori, once a partner in Col Solare (SMWE’s Red Mountain showplace), acquired full ownership.

Antica Napa Valley – also listed among the Brand Stories, is owned exclusively by Antinori.

Patz & Hall  – sold back to founder James Hall in March of 2024.

Conn Creek – sold to a California investment firm in April of 2024.

Closer to home are the comings and goings of old and new Washington brands. Such old timers as Snoqualmie seem to have vanished. Last year just ahead of harvest Ste. Michelle cancelled 40% of its existing grape contracts. The long time winemaker at Spring Valley, Serge Laville, was let go after two decades at the helm (he has just resurfaced at a new Walla Walla winery, Reali Family Vineyard).

To quote David Bowie… “Ch-ch-ch-ch-changes; Turn and face the strange…”

It’s troubling to see all these changes not knowing how their cumulative impact will continue to play out over the coming years. So far at least there is little to suggest that a near-term re-set will restore stability to the portfolio, the winery or the organization. Back when I was a regular visitor to then-CEO Allen Shoup’s office, there was always change in the air, but it was the change that comes with building something out rather than taking it apart.

As recounted in an entry on Historylink.org, Shoup had the full backing of his superiors at U.S. Tobacco, even back in 1980 when there wasn’t much of a Washington wine industry, and the bulk of sales at Ste. Michelle were Riesling. Nonetheless his board at UST green-lighted a roughly $100 million investment in the wine business. In 1981 Shoup was already predicting that during the next decade and a half the number of Washington wineries would dramatically increase, that the wine industry would generate significant tourist dollars, and that red wine rather than white would become the calling card for the Pacific Northwest. During his 20-year tenure as CEO he made all that and more a reality.

Shoup left Ste. Michelle in 2000, intent on creating a collaborative wine brand bringing in celebrity consultants from around the world. Long Shadows Vintners was formed in 2003 and its first wines marketed the following year. The brand was still finding its way when I did an extensive interview with him early in 2006. At that time Shoup, who passed away in November of 2022, offered a clear-eyed, no b.s. assessment of the strengths, weaknesses and opportunities facing this state’s wine industry.

AS:  “I think we could be logically viewed as a ‘California wanna be’, but after all, they paved all the roads we are now traveling, and we should not reinvent the wheel in this effort. Having said that, long-term we must lay down our own trail… our own unique reason for being.  We do that by promoting the uniqueness of our region while at the same time continuing to improve our viticulture and winemaking talents.

“Our unique strength is we are a very different growing region. The uncontrolled variables of the other great regions –  spring frost, cloud cover, rain and mold causing humidity, rain at harvest, disease, lack of  moisture when needed (in areas that don’t allow or won’t support irrigation) – are all virtually a non-factor in Washington.

“Our weakness is mostly a product of our youth. Our industry doesn’t have a focal point. We are geographically, viticulturally and structurally scattered with wineries in metro areas hundreds of miles from vineyards. Even most of the wineries near vineyards are in less than ideal locations or facilities. And finally, with the possible exception of Walla Walla, we do not have the type of natural beauty consumers normally associate with fine vineyard regions.

“But we must remember youth is both a strength and a weakness. We get strength from the fact that we know we are still learning how to optimize these natural advantages… we do not fight change and new ideas …in fact we embrace them. I believe we have only climbed to about 10% of our eventual knowledge and understanding of the Columbia Valley viticultural region. We have just started the clonal research, water management techniques, trellis experimentations, and site selections for specific varieties, and we have yet to attract a critical mass of well-trained enologists and experienced wine grape growers to take advantage of what mother nature has bestowed on us. But this is as much good news as bad news, for we are already making wines that compete with some of the finest wines in the world, not a lot yet, but still more than one would expect given our youth. To come this far so soon with only 10% of the knowledge available begs the question ‘How high is up?’ The future with proper commitment to excellence could be very bright indeed.”

PG:  This was the sort of vision and leadership that propelled the growth in numbers, quality and reputation that characterized both SMWE and the entire Washington wine industry over many decades. The lack of such a clear vision, along with the steady dismantling of the most influential wine company in the state’s history, suggests that the industry has reached a critical juncture. Nonetheless, as Marty Clubb also pointed out during our conversation, there are plenty of hopeful signs to be found outside of developments at SMWE.

MC:  “At L’Ecole we’ve actually been growing in national distribution sales, as have DeLille and others. So you’ve got a whole bunch of quality players moving up in the world. Also on the positive side is the Ackley company moving so quickly buying up brands such as Hogue, Charles Smith and others. And in a way [by taking full ownership of Col Solare] Antinori is betting on Washington too. I think Washington is down-shifting from lower tier wines into more of the luxury end of the market. Brands like Avennia – everything they do is golden. At the end of the day it’s going to stabilize in a way for Washington to be more visible as a high tier region. That’s going to push up Washington’s quality reputation into a luxury scale, which is the only part of the industry that’s growing.”

PG:  Erik McLaughlin, the CEO of Metis which handles wine industry mergers and acquisitions, sees many of the same ground shifting opportunities.

EM:  “Everyone is rooting for SMWE. There aren’t enough other grape buyers in the market to absorb the fruit they dropped. Development of the grounds that house Chateau Ste. Michelle could be a great thing for Woodinville and for wine tourism. The property is poised to house multiple successful wine brands, retail, restaurants and even residences. Woodinville needs more space to spread out the retail and hospitality demands it is facing, and it is hard to imagine a better spot than the excess land around the Chateau.”

“SMWE has consistently produced some of the very best wine under $15 in America for decades. Unfortunately, that part of the market is shrinking. As the company shrinks along with it, it has the opportunity to reposition and go further up-market. Most of the growth that Washington wine has seen in the last five to seven years has been from small producers at premium price points. The market for $20 – $35 bottles is the healthiest segment of the wine market. There is no place in America more capable of profitably producing high quality wines at those prices than Washington.”

PG:  As a close friend of mine has often observed… all hope permitted.

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Ken Wright Cellars

Nearing his 40^th Oregon vintage, Ken Wright continues to innovate. He and his son Carson Wright, the winery’s General Sales Manager since the end of 2019, have added both by-the-glass and AVA-based wine options to the portfolio. I asked Ken to comment on the plan and purpose behind them.

KW:  “Our lineup of wine has evolved to what I had hoped to achieve over the years. We have three levels of education and connection to our region now.

1) We introduce ourselves with the Willamette Valley offerings – Pinot noir and Chardonnay. Both are line priced to be able to be glass poured, and meant to serve as a regional introduction to the best areas of the Willamette Valley. Our goal is that they over-deliver for their price and bring people new to wine or our area into the Willamette Valley ‘tent’.

2) This next level is our effort to show the importance of geology (parent material, mother rock…call it what you will) and the massive influence it has on the profile of Pinot noir. While soil is important to health, and is the great decayer of all physical matter (which eventually provides nutrition), it is the original geology below soil that brings real complexity and nuance to wine. It is incumbent of course that sensitive farming supports aerobic microbiological populations that break down the raw ore of the geology and provide the trace elements (manganese, phosphorous, potassium, iron, etc.) in an ionic form to the plant. We provide examples of these differences in profile through two wines that are AVA based – our Yamhill Carlton AVA bottling, which is marine sediment based, and our Eola Amity AVA bottling, which is volcanic basalt.

3) Our top tier is our vineyard specific bottlings which feature the incredible ability of Pinot noir to connect us to a specific place and the characteristics that are unique to that place. In my experience there is no other food or beverage on this planet that can provide such a direct and complex explanation of the place from which it comes. It is a bit spiritual for me. I feel like we have arrived to where our offerings provide a thoughtful and increasingly focused reveal of our region and the stunning ability of Pinot noir to connect people to place.”

PG: In my experience there is no one in Oregon with a better knowledge of viticultural geology than Ken Wright, who has been the principal force behind the certification of many of the Willamette Valley’s sub-AVAs. Now on to my reviews of his current lineup. Note that wine club prices for all these wines are significantly lower than the full listed retail.

Ken Wright 2023 Willamette Valley Chardonnay – Just released, this exceptional, affordable Willamette Valley Chardonnay is all Dijon clones, aged 8 months in neutral barrels, and discounted even further for wine club members. Full-bodied, roundly fruity, backed with citrus and stones, this brings a forward, luscious palate with surprising density and length. Lots of lemon, lime and apple, graceful savory highlights, and a finishing lick of caramel. 13.5%; $28 (Willamette Valley) 92+/100

Ken Wright 2023 Willamette Valley Pinot Noir – The companion wine to the Willamette Valley Chardonnay and newly part of the Ken Wright portfolio. This is an energetic young wine, tightly focused with red currant fruits, firm tannins and savory highlights. There’s a juicy mouthfeel that is sure to amplify the wine’s impact when matched to the right dishes, such as salmon and lemon chicken. 13.2%; $28 (Willamette Valley) 91/100

Ken Wright 2022 Eola-Amity Hills Pinot Noir – Part of the winery’s brand new AVA Series, this Eola-Amity Hills cuvée gets 10 months in 10% new French oak prior to release. It’s a lighter, more high acid style than what Ken Wright acolytes may be accustomed to. That said, it’s balanced, sharp and accented with floral highlights along with mid-weight blueberry and blue plum fruits. 2968 cases; 13.2%; $38 (Eola-Amity Hills) 92/100

Ken Wright 2022 Yamhill-Carlton Pinot Noir – Part of the winery’s brand new AVA Series, this captures the essence of Ken Wright’s home town terroir, and he’s done it proud. This light-hearted wine sets juicy flavors of fresh-picked marionberries and savory herbs against a tannic spine that firms up the finish. Here you’ll find balance, precision, power and depth, at a cost that is just about half of the winery’s single vineyard bottles. 3021 cases; 13%; $38 (Yamhill-Carlton) 92/100

Ken Wright 2022 Savoya Vineyard Pinot Noir – Elegance across the board is the defining characteristic for the 2022 portfolio from Ken Wright. Pinot Noir is valued and celebrated for its grace and finesse, yet at times in the New World it’s been ripened and oaked past the point of displaying its true character. In recent vintages these KW wines have dialed back the alcohol and dialed up the aromatics and detail. Here is a tangy mix of rhubarb, cranberries and raspberries, a thin seam of butterscotch, firm and lightly savory tannins, and good detail and focus throughout a clean finish. 760 6-pak cases; 13%; $65 (Yamhill-Carlton) 92/100

Ken Wright 2022 Bonnie Jean Vineyard Pinot Noir – Pretty aromatics of strawberries and cherries unfold in an elegant palate that tickles rather than soaks the tongue in flavor. Despite the lightness there is no lack of depth or detail, and the flavors unfold in a chorus of zesty citrus, herbs and hints of new barrel toast. This is a true Pinot lovers Pinot Noir, with the subtlety and detail of a good village Burgundy. 545 6-pak cases; 12.5%; $65 (Yamhill-Carlton) 93/100

Ken Wright 2022 Freedom Hill Vineyard Pinot Noir – You’ll find Freedom Hill as a vineyard select from dozens of top tier Oregon wineries, and it’s interesting to see how different winemakers approach this sought-after fruit. This is one of the lightest examples I’ve recently tasted, putting an emphasis on tart and brambly red fruits underscored with citrus and finished with pretty sandalwood notes from barrel aging in 20% new oak. If you like high acid, juicy Pinots this is your bottle. 800 6-pak cases; 12.8%; $65 (Willamette Valley) 93/100

Ken Wright 2022 Carter Vineyard Pinot Noir – With more ripeness than the other single vineyard selections reviewed here, this rounds out the palate, pulling the fruit into a mix of ripe strawberries, raspberries and cherry compote. Just under a year in 20% new oak barrels firms up the tannins and adds a toasty frame with a final dash of chocolate. 965 6-pak cases; 13.3%; $65 (Eola-Amity Hills) 94/100

Ken Wright 2022 Shea Vineyard Pinot Noir – I love the aromatics, detailed and seductive, like the first sketch of a fine painting. This wine might strike some tasters as thin, because Shea vineyard fruit is often big, bold and dark. But here it shows a different side, like an actor in a new and challenging role. Elegant, subtle, layered with citrus, red berries, savory herbs and threads of sandalwood and breakfast tea. It’s a wine to dive into and let it seduce you. 1305 6-pak cases; 12.7%; $65 (Yamhill-Carlton) 94/100

Note To Winemakers and Wine Marketers:  Now that I am unchained from the demands of print, I have rebuilt my tasting practices from the ground up. I only taste wines for review at home under tightly controlled conditions. I do not scribble a few notes at big wine tasting events and use them for scored reviews, nor do I find wine judgings valuable. When visiting wineries I want to walk the vineyard, learn more about the winemaking and talk trade. After in-person visits I will re-taste wines at home for formal reviews. I open no more than a half dozen wines at a time and almost always retaste them repeatedly over 48 – 72 hours. I use specific stemware and eliminate all distractions – no cooking smells, no food, no music, just me and the wines. It gives young wines the chance to show their very best. Blind tasting? Not any more. I’m interested in context, history and the luxury of tasting each wine over many hours and days – no wham bam sip ‘n’ spit tastings.

A number of wineries have asked for permission to use my notes, scores and reviews for their marketing efforts. Permission granted! Please use this material. No need to ask. I truly value your support. Just quote me accurately and completely, and when you can include a link to Substack. Thank you!