The Man Who Saved Washington Wine

Ted Baseler has been CEO of Ste. Michelle for eight years and in the companys leadership for a quarter of a century. In that time he has brought the wine worlds attention to Washington state.

Five years ago, on a stunningly clear night in rural eastern
Washington, the burgeoning wine industry that dots the rolling hills of the
Walla Walla valley faced ruin. We have the near-perfect climate for wine,
other than this periodic arctic blast we can get in the winter, a very rare
circumstance, says Marty Clubb, owner and winemaker at renowned LEcole No. 41
winery. That January, we had one of those plunges. In a very few hours, the
temperature hit minus 15 degrees and wiped out the 2004 grape harvest. We had
basically no crop. We were facing a catastrophe. As the truth sank in, though,
the telephone unexpectedly began to ring at wineries throughout the valley. On
the line was Ted Baseler, president and CEO of Ste. Michelle Wine Estates, the
8,000-pound gorilla of the states wine business. He said, I want to help,
Clubb says.

And Baseler did, supplying grapes to save the season for at
least a dozen wineries. Trey Busch, then winemaker at Basel Cellars Estate
Winery, made half his wine that year from Ste. Michelle grapes. Ted was
reaching a hand out to all the wineries. I cant imagine anybody in Napa Valley
doing that, Busch says.

Baseler remembers: Many growers and wineries didnt have
any grapes at all. So I started calling around, saying if youre out of
grapes, well get you some if you need it to survive. Ste. Michelle intended
those grapes for itself, but for decades, the winery has made it a priority to
broadly boost all Washington wines. We could have used the grapes, but this
was more important, Baseler notes.

I am, in fact, one of the people that Ted personally
called, says Clubb, at LEcole. This is a story that supports an even bigger
story, which is that Ted and Ste. Michelle have always looked at the big
picture, over and above their own interests.

Deep Roots

Chateau Ste. Michelles lineage dates to 1934, when the
Pommerelle Wine Co. and the National Wine Co. were formed after the repeal of
Prohibition. Baseler has been the CEO for only the past eight years, but his
rootsand influencein the company stretch back a quarter of a century. He was
recruited in 1984 from the advertising world, where he serviced the account of
what was then a smallish Woodinville winery known mostly for its Riesling. Ste.
Michelle Wine Estates is now the seventh-largest wine company in the country,
and the fastest-growing among the top 10.

Year in and year out, they have enjoyed very high scores
from the Wine Spectator, says Marvin R.
Shanken, editor and publisher of the influential magazine. The interesting
thing is they produce a lot of wine, thats very good wine, at very affordable
prices. Ted has been very successful at building the company into an industry
leader.

In 2008, Ste. Michelle Wine Estates had profits of $72.4 million, up 18.7
percent over 2007. Net sales in 2008 were $421.4 million, up 19 percent over
2007. The company sold just over six million cases of wine last year, a new
record. It currently owns 11 wineries, including the relatively recent purchase
of Napa Valleys prestigious Stags Leap Wine Cellars and Oregons Erath
Winery.

Ste. Michelle may be best known, though, for its Columbia
Crest label. The first Washington wine that anybody tries, all around the
world, is Columbia Crest, says Steve Burns, who spent eight years as executive
director of the Washington Wine Commission. I cant imagine the states
industry without it. Baseler spearheaded forming Columbia Crest as a value
label to underpin the more formal Ste. Michelle brand.

When I came on board, it was just an idea, Baseler says.
It wasnt even a brand yet. It got hot just at the right time to hit the
Merlot craze. Then we had a one-two punch with Chardonnay, and Columbia Crest
became an overnight sensation in the market. It really helps to have a hot
varietal at the right time.

It helps to have good numbers, too. When Baseler started in
2001, the company knew how many wine bottles it sent to a distributor in, say,
Chicago, but little more. In the old days, we were driving blind down
Interstate 5, in essence. We couldnt really make good decisions. Today, using
customized programs built on Microsofts Performance Point and SQL Server, I
can go to that computer and learn exactly what weve shipped to any one
restaurant in Chicago or to wine shops or to grocery stores, Baseler explains.

And it helps to get out of the office. Ted gets out and
kicks the dust in the vineyards and pours the wine at a tasting. Hes the guy
who always shows up, says Tom Hedges, owner of Hedges Family Estate. He can
talk to anybody. From top to bottom, people say, Hey, I saw Ted last week,
not I saw the CEO of Ste. Michelle. Hes a very confident guy without a big
ego.

Baseler, who in person is affable, soft spoken and often
casually dressed, believes its critical to show up at tastings, dinners,
festivals. And I dont want to be speaking. I want to be behind the tasting
table. Its much more effective for getting peoples direct reactions, Baseler
says. If you delegate that stuff to other people, you get a CEO who is
isolated and ineffective.

Keep Running

Toward the end of 1999, Ste. Michelle hit a rough patch. It
was selling more wine than ever, but earnings were declining. In December of
2000, when Baseler was about to become company president, he opened his
executive committee meeting at the Bellevue Club by suddenly
throwingliterallya Nike running shoe onto the table. Everybody looked at me
like I was a lunatic. But I had a point. I said we need to run fast to turn the
company around. And I said we can do it, but we need to do it together. We need
to work as a team. That year, we increased earnings by 22 percent. The next
year, 44 percent, Baseler says. I doubt the shoe was the reason, though.

The reason wasnt wholesale turnover at the top, either. The
companys senior management in 2009 looks not very different from 1999. Of the
11 top managers Baseler counts as his team, seven have been there for a decade
or more. We bring in new executive members for a little different philosophy
than what we had, he says. But when you have a management team that has a
long tenure together, you know each others strengths and weaknesses. Its less
political than one with constant turnover, with constant jockeying for
position. To have people whove been here for 20 or 25 yearsthe company is
their ethos. Its more important than they are themselves.

A key piece of that ethos is Baselers string of pearls
theory. Ste. Michelle Estates 11 wineries make their own distinct wines. A
lot of CEOs are really interested in centralized power. We do just the
opposite, he says. Our mission is to keep the wineries individual and
special. Theres nothing profound about it. Weve observed other big wine
companies that have grown and consolidated their operationsand basically
destroyed what theyve acquired. The wineries lose their flair, their
personality, their legacy.

We believe the better recipe, at some slight cost to
efficiency, is to keep each of our estates independent, a local company taking
pride in making local decisions, Baseler addswith the linking string being
central administration and sales for all the corporations wineries. Two of
every three bottles of Washington state wine are sold by Ste. Michelle.

Steve Burns, who now runs a worldwide wine consultancy,
points to Ste. Michelles recent alliance with Italys famous Antinori family
as an example of the strength of its business model. Ste. Michelle is not only
the exclusive American dealer for Antinori, which has been making wine for 26
generations, but also partnered with it in building the stunning new high-tech,
eco-friendly Col Solare Winery on Red Mountain in eastern Washington. Antinori
could have invited anybody to be their marketing agent and partner in the
United States, Burns says. They could have had Mondavi, Gallo, anybody. And
they chose a Washington company and Ted Baseler.

The Ste. Michelle recipe could soon be tested with the sale
of its parent company, UST Inc. For 35 years, Ste. Michelle was a subsidiary of
the smokeless tobacco giant, which has mostly kept a hands-off approach to the
wine companys winning formula. Cigarette giant Altria Group, which previously
had no wine holdings of its own, acquired UST in January this year; Altria
indicated it has no plans to sell the wine company. Theyre very intrigued
with this business, and quite impressed with the success and growth of it,
Baseler notes.

Theyd be foolish to do anything but let Ted Baseler run
the company, says Vic Motto, current owner of Global Wine Partners and a
player in the industry for nearly three decades. There arent many people in
the wine industry whove had his kind of impact on the region. As Robert
Mondavi did in California, Ted has promoted not only his company, but the
entire industry, Motto adds. Its the foundation that he and Allen [former
CEO Allen Shoup, who recruited Baseler] built together, and Ted has refined it
quite a bit. Theyve probably been helpful to half of the Washington wine
business.

To that end, during the past quarter of a century, Ste.
Michelle has spent hundreds of thousands of dollars on proprietary research and
then made much of the results freely available to the rest of the states
wineries. Soon after he became CEO, Baseler worked with Washington State
University, where he has served on the board of regents. to establish a
permanent academic department of viticulture and enology to support the states
wine businesses. In six years, he raised more than $600,000 to help pay for
that program. He is a self-made man who has made an incredible impact on the
state of Washington, WSU President Elson Floyd says of Baseler. Everything,
and I mean everything, Ted does, he does exceedingly well.

One For All

Baseler believes that, as the Washington wine industry goes,
so too goes Ste. Michelle. They have been quick to realize that when
California makes 92 percent of the wine in the country and Washington makes 3
percent, that you need all the wineries you can get, says Norm McKibben, owner
of Pepper Bridge Winery in Walla Walla.

Baseler adds: We want Washington known. All of it. Were
not about to fight over whose bottle of wine gets sold. Were competing with
Napa, with France. Were not competing with Washington wineries. Thats why,
in 2004, Ste. Michelle stepped in after the freeze in the Walla Walla valley.
The company didnt simply donate surplus grapes to needy wineries but let them
work in choice vineyards.

We actually went to their [Ste. Michelles] vineyards and
worked with their vineyard specialists to train the vines, says LEcoles
Clubb. It was offering up their best sites and letting us make the best wine
we could.

This time wasnt the first, either. Its the second time
theyve helped since Ive been in the business. The same thing happened in the
freeze of 96, McKibben says. Then Ste. Michelles executive vice president,
Baseler was instrumental in that effort, too. Ted sits in a position where he
can take the broad view, McKibben adds. If Ste. Michelle had been like one of
the big guys in California, I dont think wed have a statewide wine industry
like we do today.

Related: “Weathering Another Storm”

Biography: Theodor P. Baseler