A very good year for Woodinville's Chateau Ste. Michelle
A wine from Woodinville's Chateau Ste. Michelle was hailed as the best wine of 2009 by Wine Spectator magazine, and CEO Ted Baseler was named Man of the Year by Wine Enthusiast magazine. It's heartening news in a recession.
Seattle Times business reporter
Ste. MichelleWine EstatesCEO: Ted Baseler
Number of employees: 1,024
Number of wineries: 10
Number of brands represented: 19
Biggest wineries: Columbia Crest Winery in Paterson, Benton County; Chateau Ste. Michelle Winery in Woodinville
Buildingto a big yearTHE WOODINVILLE COMPANY has long been Washington's largest winery. Highlights of its growth:
1934-35: National Wine Co. and Pommerelle fruit wines are founded.
1954: Companies merge to become American Wine Growers, later called Ste. Michelle Vintners.
1968: After a Ste. Michelle semillon beats all U.S. competitors in a blind tasting, a wine seller writes, "Washington can challenge the quality supremacy held by California."
1974: Groundbreaking for Chateau Ste. Michelle in Woodinville, billed as the first wine-tourist experience north of California and now the company's headquarters.
1986: Stimson Lane Vineyards and Estates is formed as an umbrella company to oversee the growing wine portfolio. It's now called Ste. Michelle Wine Estates. It's based in Woodinville, along with Chateau Ste. Michelle Winery.
1994: A chardonnay from Chateau Ste. Michelle makes Wine Spectator's annual top-100 list.
2000: Ted Baseler becomes CEO.
2006: Erath Winery, the No. 1 seller of pinot noir from Oregon, is acquired.
2007: Ste. Michelle and the Antinori family buy Stag's Leap Wine Cellars.
2009: A cabernet sauvignon from Columbia Crest tops Wine Spectator's annual top-100 list, and Baseler is named "Man of the Year" by Wine Enthusiast magazine.
Source: Ste. Michelle Wine Estates
A china cabinet in the executive offices of Ste. Michelle Wine Estates holds relics of its less-than-glamorous past: a bottle of fortified apple wine, a 1.5-liter bottle of muscatel and a bottle with a label featuring a cartoon hot dog on skis.
Chief Executive Ted Baseler remembers selling some of those wines in the 1980s, when he started working at Ste. Michelle.
Back then, it was not a given that critics, collectors and sommeliers would even try wines from Chateau Ste. Michelle in Woodinville, one of fewer than 100 wineries in Washington state.
"We'd go to the East Coast, and people would snicker when you said 'Washington wine,' " he recalled. "They'd ask, 'Which side of the Potomac do you grow the grapes on?' "
Ste. Michelle now sells 19 brands and is the largest of the state's 650 wineries, a juggernaut that last year survived a change in ownership and reached two pinnacles of international acclaim: A wine from its portfolio was hailed as the best wine of 2009 by Wine Spectator magazine, and Baseler was named "Man of the Year" by Wine Enthusiast magazine.
The Wine Spectator listing alone "is going to do more for this state than tens of millions of dollars in advertising," said Tom Hedges, owner of Hedges Family Estate in the Red Mountain appellation near the Tri-Cities.
"They got a lot of publicity in the wine-o-sphere," said Paul Gregutt, an expert on Washington wines who writes the "Wine Adviser" column for The Seattle Times and who wrote the Baseler profile for Wine Enthusiast. "That selection from Wine Spectator garnered a huge amount of comment, and Baseler as 'Man of the Year,' that's a very nice award also."
It's heartening news in a recession.
Having a portfolio that leans toward Champagne rather than boxed wine cost Ste. Michelle some sales last year. After years of growth, net sales dropped 5 percent to $271 million for the first nine months of 2009.
And an ownership change last year sparked speculation about the wine company's future.
After tobacco giant Altria Group acquired Ste. Michelle's owner of almost 35 years (UST, formerly U.S. Tobacco), the new owner's board of directors visited Woodinville and CEO Michael Szymanczyk told investors it's a keeper.
"He had expressed that to me sometime before, but it's always good when it's public, because all our stakeholders look at that and say, 'There's nothing to worry about,' or at least that's one less thing to worry about," Baseler said.
Ste. Michelle's wines are mostly midpriced ($8 to $15). The bottle touted as the year's best by Wine Spectator (a 2005 Reserve cabernet sauvignon from its Columbia Crest Winery) cost $27, a modest price tag even for a list focused on value.
But the company also sells pricier bottles, including French Champagne from Champagne Nicolas Feuillatte that runs as high as $175 a bottle. Ste. Michelle became that label's exclusive U.S. importer last year despite abysmal Champagne sales worldwide.
"These opportunities don't come up very often, and my thinking was ... we're going to take it for the long term, not just when the economy is soft," Baseler said.
The slowdown also stalled tourism-building plans in Washington wine country, including the development of a luxury inn at Col Solare, a winery jointly owned by Ste. Michelle and the Antinori family of Italy, who has been in the wine business since at least 1385.
Coming of age
Baseler jokes that it took "only" 30 years for a Washington wine to reach the pinnacle of a world-recognized list of wine rankings.
"In the world of wine, that's a short amount of time," he said. "It took Napa over 100 years. It took Bordeaux a couple hundred years to be recognized as a great wine region."
He sees the accolade as a victory for the state, not just his company, because "unlike most products, the identity of wine is linked directly to the earth and the region it comes from."
Ste. Michelle tries to promote all Washington wine, he said, not just its brands.
The company is known for selling grapes to some wineries in Walla Walla after a freeze in 2004, and last year it bought barrels of wine from a couple of wineries that needed the business.
It also helps a handful of Washington wineries by exporting their wine to other countries. Hedges Family Estate, for example, works with Ste. Michelle on shipments to more than a dozen countries including Germany, Switzerland, China and Bermuda.
"They're a competitor, too, but the thing I like about them is they're not trying to flood the market with cheap wine," owner Tom Hedges said.
Ste. Michelle is such a major supporter of the Washington Wine Commission, the Washington Wine Institute and Washington State University's viticulture and oenology program that it sometimes is hard to tell who Baseler means when he says "we" are doing something, as in "we're looking at building a research winery on the WSU campus in Richland."
In that case, he explained, the winery would be funded by private donations, not necessarily Ste. Michelle. (Baseler also sits on the WSU board of regents.)
Wine education for Washington vintners has become more important because of budget cuts at the University of California, Davis, long the U.S. wine-education leader.
The Northwest also has unique climate and soil conditions that require a different approach to winemaking and produce their own characteristics in the bottle, Baseler said.
"California has wonderful big, bold wines with lots of fruit and power; Bordeaux has lower alcohol and more finesse," he said.
"Washington is somewhere in between, with the intensity and brightness of fruit of California, but consistently more refined, delicate flavors like Bordeaux and a little higher acidity."
Baseler and other Ste. Michelle executives regularly go to tastings and help make decisions about new vintages at the company's facilities, which include the prestigious Stag's Leap Wine Cellars in California that it owns with the Antinoris, and which is known for winning the famous 1976 France vs. California blind tasting, called the Judgment of Paris.
But the wineries operate as independently as possible, allowing the wines to have individual personalities and the company to be nimble for future growth.
Ste. Michelle has grown through acquisitions, but not in the same voracious manner as Constellation Brands, the world's largest wine company with $5 billion in annual sales and properties that include Robert Mondavi Winery and Clos du Bois.
Baseler wants to round out Ste. Michelle's portfolio.
"Something from the Rhône in France would be nice, maybe something from New Zealand would be good, and probably a little more in California," he said.
After Ste. Michelle won U.S. distribution rights for the Antinori's wines in 2006, Baseler said, "the phone rang off the hook with other producers around the world."
Slow and deliberate
He does not jump at those chances, but approaches growth slowly and deliberately. "Our theory is that they have to have outstanding wines and be well-known and come from the very top regions that complement wines from Washington state," he said.
Ste. Michelle also wants to make sure it does not divert attention from its current import partners such as the Antinori family, which became better known in the United States when it was profiled on "60 Minutes" last year.
"It's a very unusual business circumstance where we have a partner who we spend so much time with, not just on our mutual businesses but philosophically," Baseler said.
He often spends days in conversation with people from Antinori, including 25th-generation winemaker Piero Antinori, about their partnerships, winemaking and marketing.
Baseler admires their interest in new technology, planting methods, winery design and other innovations.
"What happens with some multigenerational companies, they say, 'We've done it this way for 800 years, and we're not going to change,' " he said. "Piero in particular appreciates the past but has been wildly innovative. It's a dichotomy that requires a balance."
Ste. Michelle tries to follow a similar path, although one that began 75 years rather than centuries ago.
"History and legacy is important; it separates our properties in many cases away from the 'me too' wannabes," Baseler said. "At the same time, we have to be constantly looking at new approaches, new ways, new thinking."
Perhaps the biggest shift came in the late 1980s, when Ste. Michelle had an epiphany: The taste of its wines needed to improve.
The company invested in French oak barrels, changed its mix of wines and made a splash in television commercials with its Columbia Crest label.
"It went from zero to, at one point, triple the size of Chateau Ste. Michelle," Baseler said. Still its two biggest brands, they are sold in 70 countries.
The other brands, which include Northstar, Spring Valley and Col Solare, are boutique wineries with smaller production. Some are sold overseas, such as Northstar, which is popular in Switzerland.
Baseler considers water rights one of the main hurdles to future growth of Ste. Michelle and Washington wine in general.
The state easily could double current production, but the key is having good land for grape growing, Baseler said. Washington produces more than 100 million bottles of wine a year, according to the Washington Wine Commission.
"There's some really suitable land in Eastern Washington that has high-quality soils and the right slope and exposure, but you can't get water to it," Baseler said. "It's not as difficult as in California, but it's probably the biggest governor in terms of slowing down the vineyard plantings."
The industry's greatest boost comes from the changing palate of American consumers, who once drank wine after they turned 40, but now enjoy it — and collect it — in their 20s, Baseler said.
"We never really envisioned that as being the future of wine," he said. "That's also why, in the end, I'm extremely optimistic about fine wine in America, and two, I'm extremely optimistic about Washington wine and its growth within that growing wine world."
Melissa Allison: 206-464-3312 or email@example.com
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