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Washington's Ste. Michelle Buys Oregon Winery Erath

New owner has plans for expansion and improvement of its first property in Oregon

Harvey Steiman

Posted: Wednesday, May 31, 2006

The biggest wine company in the Pacific Northwest, Washington's Ste. Michelle Wine Estates, has made its first purchase in neighboring Oregon: the state's biggest Pinot Noir producer, Erath. Oregon wine pioneer Dick Erath has agreed to sell the brand, the winery, five of the company's seven vineyards and long-term contracts with other growers. The winery produces more than 70,000 cases a year and is growing. The sale price was not disclosed.

Erath founded the company in 1967 with partner Cal Knudsen (under the name Knudsen Erath), who split with Erath years ago and became a partner at nearby Argyle. Erath built the winery into a powerhouse, focusing on the production of Pinot Noir. The winery also makes Pinot Gris and Pinot Blanc.

"We're bottling the '05 this week," Erath said by telephone from his home near the winery in Dundee, Ore. "That's 51,000 cases of regular vintage Pinot Noir. We knew this would be a good place for Pinot when we came here from California, but we had no idea it would ramp up this fast." That's what prompted Erath, 70, to sell. "We have outgrown this facility," he said. "We had to build a new winery. With Ste. Michelle's distribution and resources, I can see them doubling production."

After Ste. Michelle takes over the winery in July or August, pending regulatory approvals, Erath plans to remain to run the estate vineyards, including the two he planted himself. He is also excited about a separate project, a 14-acre vineyard he planted in Arizona.

Ste. Michelle, owned by Connecticut-based UST, a publicly traded company, has been busy lately. Last year, Ste. Michelle, based in Woodinville, Wash., acquired the highly regarded Washington winery Spring Valley Vineyard, and earlier this year it scored a huge coup by striking an import deal with Marchesi Antinori of Italy.

Ted Baseler, president and CEO of Ste. Michelle Wine Estates, has been looking for an Oregon winery to buy for more than a year, he told Wine Spectator in a telephone interview. "We can do everything in Washington except good Pinot Noir," he explained. "It makes so much sense to complete the picture with an Oregon winery."

In a statement, Erath credited Ste. Michelle's commitment to the wine community of the Pacific Northwest as one reason he accepted the offer. As part of the agreement, Ste. Michelle will underwrite a foundation to advance viticultural and enological science in Oregon.

"I was particular about who I would have purchase the winery," said Erath. "Of course, it had to be someone committed to making quality wine, but also someone who would be a good steward of the land and a good citizen of this community."

Despite Erath's commercial success, the wines have not been standouts in recent years: The 2004 Pinot Noir scored only 80 points on the Wine Spectator 100-point scale. A new winemaking team could make a difference.

"We don't want to come in like an 800-pound gorilla," Baseler added. "But we can expand the facility, acquire more vineyards, buy more new oak barrels and provide the resources to make the kind of wines we know Oregon can do."

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