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.”
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Related: Ted Baseler Biography