Last July, Ste. Michelle Wine Estates (SMWE) in Washington State announced it would purchase 40 percent less fruit from growers over the next five years. As an industry with a strong foundation of grower-producer relationships, the entire Washington wine industry had a moment of reckoning.
Some believed this change presented new opportunities, such as a foothold for new brands and better quality fruit, while others noted the challenges ahead, from oversupply issues to financial difficulties.
Now, a year after the announcement, SevenFifty Daily spoke with growers, producers, and other key figures in the Washington wine industry to assess the future of winemaking in the country’s second-largest wine-producing state.
Don’t miss the latest drinks industry news and insights. Sign up for our award-winning newsletters and get insider intel, resources, and trends delivered to your inbox every week.
Ste. Michelle’s Market Challenges
Ste. Michelle Vintners, which later became Chateau Ste. Michelle, was founded in 1967. For decades, Ste. Michelle, and the umbrella company SMWE, served as the bedrock of the Washington wine industry. Until July 2023, SMWE worked with 30,000 acres of vineyards in Washington, Oregon, and California—27,000 acres in Washington State alone. Their estate-grown fruit comprised a small percentage of fruit sources: out of that total acreage, SMWE owned just 2,400 acres in Washington and 190 acres in Oregon. To put this into context, there is a total of 61,200 acres planted in Washington in total, according to the Washington Winegrowers Association, meaning over one-third of all vines were beholden to Ste. Michelle.
But Ste. Michelle was more than just one of the state’s largest wine producers. “They used to be a benevolent big brother,” says Andrew Latta, who was a winemaker at Charles Smith for a decade before launching Latta Wines in 2011 and Kind Stranger in 2016. “There was a freeze event in 2004 where people didn’t have grapes. Small wineries were going to struggle, and [SMWE] doled out grapes and made sure people had things to produce.”
But a confluence of factors, from oversupply to new ownership, led to the company’s decision to significantly reduce fruit purchases. According to SMWE at the time of the announcement, they needed to adjust grape supply to better align with demand to ensure the future health of both their business and the Washington wine industry in general. (Requests for an updated comment went unanswered.)
“The wine landscape is changing, and Washington is no exception to this,” says Kristina Kelley, the executive director of the Washington State Wine Commission. “We are looking at consolidation, market pressures, and evolving consumer behavior as both challenges and opportunities. We’ve got a lot of work ahead, but our wine community will continue to work together to make data-driven decisions, find solutions, and maximize opportunities to ensure a healthy future for Washington wine.”
Headwinds for Washington Grape Growers
Ray McKee, the former head red winemaker for Ste. Michelle and the current winemaker at Trothe and Sagebreaker, the estate wines for Andrews Family Vineyards, says they were one of the growers that took a 40 percent drop in contracted acreage with SMWE. “There was a small opportunity to try to find great clients at the end of last year,” says McKee. “I don’t think anyone was super successful at it. It was a little late to find places.”
But he says Andrews Family Vineyards—which sells 98.5 percent of its fruit—did well in finding homes from some of their in-demand varieties, as well as more offbeat grapes such as Primitivo and Pinot Grigio. He also says the strength of the Trothe label, a highly allocated estate wine, aided them in finding buyers. “We’ve been working very hard with selling our grapes and finding new clientele,” says McKee.
SMWE’s dominance and long-term contracts created stability for growers, but now some wonder how current market situations will affect profitability. “[As a state] we make such good wine at such a reasonable price point,” says Latta. “What we don’t want to happen is for this thing to really impact our growers. Bulk prices in general, which is a baseline indication of value, are trending down right now. But over the last 10 years, our costs have gone up tremendously on the growing side. Labor’s changed dramatically, equipment’s more expensive, and all the inputs have gone up tremendously.” Despite these obstacles, Latta says there is a huge amount of pressure on growers to keep costs down.
An Opportunity to Right the Ship
Despite the loss of business, everyone interviewed said these changes presented an unprecedented opportunity to elevate Washington wines.
“I think in moments of tremendous change, you have an opportunity to really grab hold of it and ride it out,” says McKee. “We had older blocks that needed revitalization and blocks that weren’t quite in the right terroir; we had Chardonnay on Cabernet ground, for example.” As a result of the drop in contracted acreage with SMWE, McKee pulled those vines out, and “when we plant in the future, when we come out of this low spot and demand comes back around, we’ll put the right varieties back in,” he says. “It sped up our own plan for quality diversification.”
“In my opinion, in this state, there’s a lot of fruit that needs to come out anyway,” says Tom Merkle, a second-generation grape grower whose family sold fruit to Ste. Michelle as far back as 1984. “Everybody was just keeping the diseased blocks because they were getting paid for it.” In his vineyards where contracts with SMWE were canceled, he’s removing plots with leaf roll virus and other poorly performing vines, with the intention to replant for quality.
And not just quality; Merkle says he and his colleagues are paying attention to what the younger generation is interested in, and are planting small experimental blocks to start, such as an acre of Saperavi and an acre of Chenin Blanc.
What Does This Mean For New Winemakers?
Tirriddis launched at the end of 2021 and solely produces sparkling wines. Its three founders, Andrew Gerow, Gabriel Crowell, and Matthew Doutney, are all in their early 20s and say the timing of SMWE’s decision opened up opportunities that would otherwise be unavailable to bootstrapping young winemakers.
“[The industry] is an artifact of irrigation districts and water rights,” says Gerow. “The way the Washington wine industry has grown is a little bit different than most places because you’re so restricted based on areas with water availability in such a dry, warm climate.” While the model makes obtaining land difficult, it creates a flourishing partnership ecosystem.
Because of the replanting efforts going on, Tirriddis can work with growers to plant varieties specific to their needs, and make farming requests that will optimize for vigor and yield.
On the flip side, because many contracts were established in the 1980s and 1990s, “The average age of these vines is about 30 years right now,” says Gerow. “So it’s really interesting that all these growers have older vines available.” New winemakers are excited for the opportunity to gain access to this fruit, because as any winemaker knows, mature vines usually mean more complex fruit.
But Latta says SMWE’s decision may end up making it harder for new brands to get started. Along with buying fruit, SMWE contracted large facilities to produce high-volume, bulk wines. Not only did they service SMWE, but these facilities provided a way for newer labels to break into the industry.
“People could start a value brand and do a smaller version of what [SMWE] was doing, to have someone else produce the wine for you and bottle it,” he says. However, without SMWE driving business, and the value of bulk wine decreasing, Latta thinks these facilities will feel the pinch and close.
Benevolent Once Again?
Ironically, SMWE’s decision may indirectly help another region. In early 2024, British Columbia, Canada, was hit by severe frosts that decimated the wine industry. In response, the Washington Winegrowers Association (WWA) is actively putting together a plan to send grapes to the devastated region. Although they were not available to comment on the program, WWA shared a document that is being circulated to wineries explaining procedures and protocol for shipping grapes across country borders.
Despite whatever lies ahead, everyone seems fairly optimistic for the future. “I still think we’re going to see some pretty big realignment, but for people like me, and other smart operators, I think our best wines are in the future,” says Latta.
Dispatch
Sign up for our award-winning newsletter
Don’t miss the latest drinks industry news and insights—delivered to your inbox every week.
Shana Clarke is a wine, sake, and travel writer, and the author of 150 Vineyards You Need To Visit Before You Die. Her work has appeared in Saveur, Fortune, NPR, Wine Enthusiast, and Hemispheres. She was shortlisted for the Louis Roederer 2020 International Wine Writers’ Awards and ranked one of the “Top 20 U.S. Wine Writers That Wineries Can Work With” by Beverage Trade Network in 2021. She holds a Level 3 Advanced Certificate from Wine & Spirit Education Trust and is a Certified Sake Sommelier. She will always say yes to a glass of Champagne. Learn more at www.shanaspeakswine.com and follow her @shanaspeakswine.
