Weathering Another Storm

For the Washington state wine industry, the continuing recession means consumers are buying fewer pricy top-of-the-line bottles. That change actually plays to Chateau Ste. Michelle’s core strategy of producing good but affordable wines.

“That’s called ‘price-to-quality ratio,’ and Ste. Michelle is known for it,” says competitor Norm McKibben at Walla Walla’s Pepper Bridge Winery. “Even in a recession, people don’t want to quit drinking wine, but they want a great buy.”

All the more reason for Ste. Michelle to hold steady during the slowdown. “Quality is really the driving force between success and failure, particularly in the wine business,” says Ted Baseler, who has been CEO since 2001. “We’re not going to overreact to the economic downturn. We’re going to maintain our integrity, and not fundamentally change the business model.”

Going into 2009, Ste. Michelle’s sales remained strong, and Baseler believes the business will continue to grow this year. “In more challenging economic times, consumers look to maintain their lifestyles more frugally,” Baseler explains. “Trusted brands like ours, which are known for quality and a good price, are more resilient than fancy new designer labels.”  Ste. Michelle makes wines that are every bit as good, but less pricy, than some famous Napa brands, and its tasting scores support that claim. “We will finish the year strong. And we will continue to be the fastest-growing premium winery in the top 10,” Baseler says.

He has a swift reply when asked how the Washington wine industry can maintain momentum in an economic slowdown. “There’s no doubt about what should be done—it’s a great time to grow market share. We have a perfect environment in Washington state to capture market share from California and from imports.”

In Baseler’s first year as CEO, the economy took a serious hit following the 9/11 terrorist attacks, which was aggravated in the wine industry by a domestic oversupply of wine grapes. “Unlike that downturn, this economic crisis does not come with a huge excess of grapes,” Baseler says. “This is time for the Washington Wine Commission to put the pedal to the metal and invest in promoting Washington wine around the country and around the world. The more Washington wineries can be out sampling, and the more people that taste Washington wines, the better.”

Baseler says he has no plans to reduce staff, although he notes Ste. Michelle may hold off on incremental hiring and also may downsize receptions and tastings. “We’ll maybe be less flamboyant in the types of events we hold for customers. But we’ve done nothing in terms of decreasing expenses for producing wine. If anything, we’re going the other way.”

He has already helped out several small wine producers in the state by taking excess supply off their hands. “We’ve been helping out by buying some barrels of wine,” he says. Ste. Michelle then evaluates for quality and looks for ways to blend these wines with its own grapes. That assistance, too, is in line with Ste. Michelle’s long commitment to supporting all Washington state wineries. “The economy is certainly a struggle for most businesses, and wine is not recession proof,” Baseler says. “We seem to be surviving better than some. I think we’re in a very good position to weather the storm.”

Back to main story: "The Man Who Saved Washington Wine"

Related: Ted Baseler Biography

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