The Saint’s Deal With The Devil

David Dearie. Photo courtesy SMWE.

They say you shouldn’t gulp your wine, but, gulp, this is a bit of a surprise.

Ste. Michelle won’t say what’s going to happen with its iconic Chateau (visitor center and amphitheater), let alone its extensive Woodinville wine-making facilities or even the wooded acreage behind the winery, all of it zoned for residential development. None of that stuff is no longer central to its brand.

And just what is that brand, anyway? In addition to Ste. Michelle, SMWE includes 14 Hands, Columbia Crest, Erath, H3, Intrinsic, Liquid Light, Patz & Hall, Northstar, and Spring Valley Vineyard, in addition to partnerships with Marchesi Antinori (Stag’s Leap Wine Cellars and Col Solare), Ernst Loosen (Eroica), and Michel Gassier (Tenet). SMWE is also the exclusive importer for Antinori wines and Nicolas Feuillatte Champagnes.

Ah, but what about sales, you ask. Aren’t sales essential to a brand? It was, after all, by opening a dedicated sales office in every state 50 years ago that Ste. Michelle became such a powerhouse.

Well, standby, here comes the “gulp.” Ste. Michelle’s parent company, SMWE (now owned by a private equity firm in Manhattan) has decided to outsource its sales operations to its longtime distributor, Southern Glazer. (The official announcement is here.)

SMWE’s CEO, an affable Australian gent named David Dearie, told me yesterday, in a conversation on the Chateau grounds, that Ste. Michelle’s sales force will remain intact (for now). But it’s pretty clear that the “national strategic alignment” is eyewash.

The new parent, Sycamore Partners, is obviously hard at work dismantling its new toy.

Just a couple of weeks ago, the company put the Woodinville headquarters acreage on the market and announced they were moving the wine-making operations “back” to eastern Washington. (Not a bad idea, actually.) But what about the visitor center? What about the amphitheater and summer concert series? And what about the Woodinville headquarters itself? More efficient wine making at Canoe Ridge pales in comparison to the value of nearly 100 acres of prime real estate. What developer wouldn’t smack their lips at the wooded hillside on the west side of the former Stimson estate?

You just know the bean-counters in Manhattan, who have no expertise in agriculture, wine production, or wine marketing (Sycamore’s investments to date have all been in retail merchandising), are sending each other memos like, “Why is the wine business so complicated?” The answer is too long for a blog post, but yes, it’s incredibly complicated. No sooner do they have a good idea than they run it up the flagpole and wait for our mate David Dearie to salute.

So, indeed, why should an outsider (who earns a commission on every case sold) not be in charge of selling your product? Because the distributor doesn’t care about the wine itself; the distributor’s metric is “How many bottles did you move?” It’s the winery job to be concerned with what’s in those bottles, and that’s what’s getting lost. Gulp.

3 thoughts on “The Saint’s Deal With The Devil

  1. Sales may be important to a brand. But you have to have a product to sell. It doesn’t sound as if there’s any interest in continuing to make the old product–wine.

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  2. The argument was that SMWE was “a string of pearls.” A brand for every customer, a customer for every brand, from high-end by-the-glass (14 Hands) to artisan pinot noir from Oregon (Erath) to lower-tier bottles like Columbia Crest and higher-tier wines like Ste. Michelle, alongside super-prestigious wines like Col Solare. As the Emperor said to Mozart, “Too many notes.”

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  3. Also, SMWE owns or controls half the production of Washington State vineyards (more than all of Napa Valley). Gotta do something with all that juice, and if there’s one thing they do understand is that you can’t push wine through the pipeline, you’ve got to suck it out, glass by glass. Hence all those channels, hence the temptation to turn everything over to the outside distribution guys.

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