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Blockbuster wine deal: Washington’s Ste. Michelle Wine Estates acquires Oregon’s A to Z Wineworks

Portland Business Journal

September 7, 2022

Overview

In a blockbuster deal A to Z, one of Oregon’s biggest wineries, sold to Ste. Michelle Wine Estates, the Woodinville, Washington-based industry giant.

A to Z, along with its Rex Hill brand, joins Erath Winery in Ste. Michelle’s Oregon stable, which will be led by A to Z chief executive Amy Prosenjak as president of Oregon Brands.

A to Z was founded 20 years ago by Tannahill, Cheryl Francis, Deb Hatcher and Bill Hatcher, all Oregon wine veterans. It grew to over 350,000 annual cases calling itself the “Essence of Oregon” and typically selling at under $20 a bottle. In an interview, Prosenjak said the deal will allow A to Z to take another big step.

As big as the sale is for Oregon wine, it’s a bold play by Ste. Michelle less than a year after the private equity firm Sycamore Partners bought it from Altria for $1.2 billion.

“Erath and A to Z share the same passion for producing high-quality wines at fair prices, making A to Z a natural fit for Ste. Michelle,” Ste. Michelle CEO David Dearie said in a statement. “The future of Pacific Northwest wines — both Oregon and Washington — is bright and we’re excited to introduce new consumers across the country and around the world to the full complement of our region’s outstanding wines.”

With the deal, Bill Hatcher is retiring while the other three A to Z cofounders join Ste. Michelle as consultants.

“We could not have found a better partner than Ste. Michelle to carry on the legacy of both A to Z and Rex Hill,” Deb Hatcher said in a statement. “They understand the Pacific Northwest better than anyone, and they know what it takes to promote an entire region on the global stage.”

A to Z and Erath are similarly sized and feature Oregon pinot noir as their leading SKU (as opposed to Willamette Valley-designated pinot), with A to Z typically a couple of dollars up the price ladder from Erath. How will the brands be distinguished?

“If you taste the wines, the styles are different, and the brands have different personalities,” Prosenjak said. “That will be maintained, but it’s going to be fun now that this is public to really get to work on a coherent strategic plan.”

A to Z and Rex Hill wines are made in Newberg, where A to Z expanded at the Rex Hill winery site as it grew. Erath wines are made in Dundee at the 12th and Maple custom-crush winery.

Prosenjak said it remains to be determined if investments in winemaking facilities or vineyards might be forthcoming from Ste. Michelle in Oregon. But she added that “with Sycamore Partners behind the ownership, I think there's a lot of appetite for growth and investment. And that makes it exciting.”

While this acquisition might fairly be called the biggest deal in Oregon wine since Ste. Michelle bought Erath in 2006, there has been a steady stream of smaller acquisitions, increasingly featuring international players.

It’s no wonder why: Oregon has been on a roll for years, with no signs of slowing down: The value of Oregon wine sales rose 23.1% in the 52-week period ended this January compared to the same period two years ago, easily besting California (up 7.9%) and Washington (down 4.9%). The overall U.S. market was up 7.7%.

“I think there’s more of this to come,” Prosenjak said. “I mean, why wouldn’t you want Oregon in your portfolio? If you don’t have Oregon today, I would think you would want Oregon tomorrow.”

Schwabe Mergers and Acquisitions attorneys were instrumental in this transition.


Read the full article in the Portland Business Journal

This article was republished with permission from the Portland Business Journal.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.

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