WA’s largest winemaker slashes grape buying. Tri-Cities biggest winery feels the fallout

Wendy Culverwell

Washington’s oldest and largest wine maker is curbing its grape purchases and shifting fall crushing activities away from one of its most prominent labels.

Ste. Michelle Wine Estates, based in Woodinville, confirmed it canceled contracts for 40% of its grape buys during a recent meeting with its growers at the Walter Clore Wine Center in Prosser west of the Tri-Cities.

It also confirmed production of 14 Hands wines is moving from its Prosser winery during the 2023 harvest.

“This harvest our 14 Hands winemaking teams will be producing 14 Hands wines at our heritage Columbia Crest winery ... as we look to make the best use of our winemaking facilities,” Lynda Eller, spokeswoman, told the Tri-City Herald.

“Our 14 Hands winery tasting room will remain open to welcome our customers and wine club members,” she said.

Bullish on 14 Hands

Ste. Michelle emphasized its commitment to 14 Hands, the horsey-themed label that has grown into a prominent consumer brand since it was established in 2005 to make wines for restaurants.

“We are very bullish about the future of 14 Hands Winery,” said the company. “As Washington’s second largest premium wine brand, we are building upon our recent success with the launch our 14 Hands Unicorn wines and the addition of new experiences for visitors to our tasting room in Prosser.”

The winery and tasting room are at 660 Frontier Road, near Interstate 82 in Prosser.

14 Hands Winery in Prosser will not use their own facilities during the 2023 grape harvest, according the Ste. Michelle Wine Estates company officials. Instead, the 14 Hands team will make wine at Columbia Crest, a sister winery that is in Paterson. The 14 Hands tasting room, one of the busiest in the crowded Prosser market, will remain open to visitors.

The move comes as Ste. Michelle, owned since 2021 by Sycamore Partners, a New York private equity firm, works to rebalance its business to meet less demand from young adults, price pressures and oversupply.

Sycamore bought Ste. Michelle assets from Altria Group Inc., the tobacco giant, after Ste. Michelle wrote off millions in inventory losses amid a five-year downward trend attributed to a glut of wine and grapes. At the time, it produced an estimated 7.3 million cases annually.

Younger drinkers

The industry is still challenged by rising costs, aging customers, and dimming enthusiasm for wine among adults under age 60.

Wine sales continued to slide in early 2023, according to Terrain, an agricultural economics research firm.

In its most recently quarterly report, Terrain said the slump is affecting every aspect of the wine industry.

14 Hands Winery in Prosser will not use their own facilities during the 2023 grape harvest, according the Ste. Michelle Wine Estates company officials. Instead, the 14 Hands team will make wine at Columbia Crest, a sister winery that is in Paterson. The 14 Hands tasting room, one of the busiest in the crowded Prosser market, will remain open to visitors.

Prosser Mayor Randy Taylor said it makes sense for Ste. Michelle to consolidate crush activities at Columbia Crest in Paterson, which is 30 miles south of Prosser. There won’t be as many grapes to process.

“The big story is they cut everybody’s contracts 40%,” he said, but added the economic impact on Prosser should be minimal.

14 Hands Winery in Prosser will not use their own facilities during the 2023 grape harvest, according the Ste. Michelle Wine Estates company officials. Instead, the 14 Hands team will make wine at Columbia Crest, a sister winery that is in Paterson. The 14 Hands tasting room, one of the busiest in the crowded Prosser market, will remain open to visitors.

“As far as jobs in Prosser, those guys still have to be at the (14 Hands) winery because it is full of wine right now.”

Jean-Paul Estey, executive director of the Prosser Chamber of Commerce, was less concerned about where 14 Hands makes wine than he was about where wine enthusiasts can go to taste it.

Estey said 14 Hands is one of the most asked-about tasting rooms in Prosser, among the 30 or so clustered in the city that markets itself as the “birthplace of Washington wine.”

14 Hands Winery in Prosser will not use their own facilities during the 2023 grape harvest, according the Ste. Michelle Wine Estates company officials. Instead, the 14 Hands team will make wine at Columbia Crest, a sister winery that is in Paterson. The 14 Hands tasting room, one of the busiest in the crowded Prosser market, will remain open to visitors.

2 million cases

14 Hands was established to make merlot, cabernet sauvignon and chardonnay for restaurants.

It grew into a consumer brand and opened its tasting room in Prosser in its 10th year. The following year it shipped more than 2 million cases.

Its parent, Ste. Michelle Wine Estates, is easily the largest wine producer in the region, producing millions of cases a year under a variety of labels: Chateau Ste. Michelle, Columbia Crest, 14 Hands, Col Solare, Antinori, Erath and many more.

Its scale eclipses all other wineries: 90% of Washington’s 1,000-plus wineries produce 5,000 cases or less, according to the Washington Wine Commission.

The commission declined to talk about the cuts, calling Ste. Michelle’s recent moves a business matter best addressed to the company itself.

Columbia Crest Winery near Paterson
Columbia Crest Winery near Paterson

Sycamore has made several moves to balance its wine business. In 2022, Ste. Michelle executed its first acquisition under Sycamore when it bought A to Z Wineworks, an Oregon brand that gave it access to the state’s best-known offering, pinot noir.

About the same time, Ste. Michelle confirmed it would consolidate operations in Eastern Washington where most of its grapes are grown and its red wines are produced.

At the time, Eller cited logistics and fuel costs associated with ferrying grapes to its Woodinville facilities near Seattle. It even put its flagship property up for sale.

Right moves

Rob McMillan, executive vice president and founder of the Silicon Valley Bank wine division, now part of First Citizens Bank, has traced the economics of the wine industry for years.

Columbia Crest fans are getting a say in the management of one acre of the Paterson winery’s estate vineyard and in the wine made from that acre.
Columbia Crest fans are getting a say in the management of one acre of the Paterson winery’s estate vineyard and in the wine made from that acre.

McMillan said Sycamore is making the right moves with Ste. Michelle.

“They relocated and consolidated wine production to improve efficiency and sold some company assets, including their wineries in Napa. They had to shrink given the demand realities, but focusing entirely on the Pacific Northwest is a good sign,” McMillan told the Herald.

McMillan acknowledged that the company’s move to cut grape contracts by 40% will be painful for vineyards. He predicts a happy ending.

“If Sycamore Partners can leverage their consumer branding and marketing expertise, the Washington wine and grape growing community could be pulled along in Chateau St Michelle’s wake, and that will signal another period of industry growth,” he said. “The grape quality is certainly there to pull it off, and it’s exciting to see what the future holds for this iconic winery.”

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