A week ago, I reported on the news that Ste Michelle Wine Estates (SMWE) was being acquired by Sycamore Partners, a private equity company, for approximately 1.2 billion dollars. There had been a lot of commentary about this news. The best analysis I've read is that of Sean Sullivan, reviewer of Washington wines for the Wine Enthusiast magazine. Go to winemag.com and then to Industry News for the article in BevarageIndustryEnthusiast. Here's my take on this news and what it means.

Ste. Michelle has been owned by a tobacco company, Altria, the parent company of Philip Morris, maker of the world's largest selling cigarette brand, Marlboro, along with other brands including U.S. Smokeless Tobacco Company which owned Ste. Michelle until it was taken over by Altria in 2008. So Ste. Michelle has been a tobacco company subsidiary since 1974 when it was acquired by U.S. Tobacco.

Under U.S. Tobacco ownership, Ste, Michelle has undergone management changed over the years. Allen Shoup went on to found the Long Shadows winery in Walla Walla. Ted Basler retired in 2018 and was succeeded by Jim Mortensen, an Altria executive, and in 2020, David Dearie took over. Ste. Michelle had steady growth over the decades, but saw a sales decline from 2016 to 2020, due to increased competition and the COVID 19 pandemic. The current leadership realizes the need for creative management for future growth.

So, what's in the future for Ste. Michelle? David Dearie came to SMWE with wine experience at Treasury Wine Estates whose portfolio includes Penfolds and Lindemans in Australia and Beringer, Beaulieu Vineyards, Acacia and Chateau St. Jean in California. So being headed by a wine industry rather than tobacco industry person should benefit Ste. Michelle. With a portfolio that includes prestige wineries such as Northstar and Spring Valley Vineyard, and extensive vineyard holdings around the state, SMWE is positioned to continue to be a leader in much the same way as Beringer is a leader in California with its breadth of products from White Zinfandel to Private Reserve Cabernet Sauvignon.

Another asset for Ste. Michelle is its economies of scale and production capabilities (over three million cases a year) which makes it the giant of the Washington wine industry. Ste. Michelle turns out the best values in Washington wines. In the August issue of the Review of Washington, there will be four Ste. Michelle wines in the Best Buys section. The product line, however, should be focused on quality. I think SMWE should consider dropping the lower tier brands such as Snoqualmie and Two Vines.

Back in 1967, it was Vic Allison (see the Review Blog posting of 21 January) who had the vision to make Ste. Michelle a prestige producer of quality wines. if Sycamore Partners and the current SWME management continues this vision, the company should continue to be an industry leader.