Ste. Michelle Wine Estates, the cornerstone of Washington’s wine industry, has been sold for about $1.2 billion to a private equity firm by its parent, the tobacco company Altria.
Woodinville-based Ste. Michelle describes itself as the nation’s third largest wine company, farming nearly 30,000 acres across Washington, Oregon, and California and selling wines under labels including Chateau Ste. Michelle, 14 Hands, Columbia Crest, Erath, Intrinsic and Patz & Hall.
Its growth has stalled, however, in the highly competitive wine industry. Ste. Michelle’s sales slipped from $691 million in 2018 to $689 million in 2019, with operating income turning from a $50 million profit to a $3 million loss. Then, during the pandemic shutdowns of 2020, Ste. Michelle’s sales fell to $614 million and it reported a steep operating loss of $360 million.
Altria, which owns major cigarette brands such as Marlboro, said it will use the sale’s proceeds to buy back stock. CEO Billy Gifford said shedding the wine company is part of its plan to focus on “moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices” like noncombustible nicotine products.
The sale is expected to close in the second half of 2021, subject to Sycamore Partners obtaining the necessary financing and antitrust clearance.
Sycamore, based in New York, invests in a variety of consumer and retail brands, ranging from Hot Topic and Staples to Ann Taylor and Coldwater Creek.
In a statement, Ste. Michelle president and CEO David Dearie said the wine company’s management team “believe we are well-positioned to help drive the next phase of growth.”
“Ste. Michelle is committed to leading the growth of the Washington wine category through investment in brand-building and by continuing to craft award-winning, wonderfully drinking wines. We are fortunate to have renowned estates and brands in Oregon, Napa and Sonoma to complement our diverse portfolio in Washington,” he said.
In recent Securities and Exchange Commission filings, Altria noted the “adverse impacts” to its wine business early in the COVID-19 pandemic. With sharply reduced wine sales in restaurants, bars and hotels and on cruise lines, Ste. Michelle took a $392 million write-off related to inventory and “estimated losses on future noncancelable grape purchase commitment” in the first quarter of 2020.
For 2020, Ste. Michelle’s total wine shipment volume was approximately 7.3 million cases, a 12% drop from 2019.
