Chateau Ste. Michelle, Woodinville by Richard Duval

Late last week, the Wyckoff family purchased Ste. Michelle Wine Estates (SMWE) from Sycamore Partners, a New York-based private equity firm. This included all of the company’s Washington wineries and assets. Sycamore kept the Oregon-based A to Z Wineworks, Rex Hill, and Erath brands that had been under SMWE’s umbrella. SMWE retains a sales relationship with these wineries.

In Part I, I looked at who benefits from the transaction. Here, in Part II, I look at questions that remain after the sale.

Please note that these represent my own thoughts and speculations, though they are informed by numerous conversations that I have had with people in the industry over the last several weeks.

Will the Wyckoff family be successful selling wine at retail?

Since 1950, the Wyckoff family has succeeded in reasonably diverse agricultural businesses. The company has also been involved in grape growing and in wine production.

Retail wine sales is, of course, a very different animal. This is also the most challenging time that the wine industry has experienced in generations. Will the Wyckoffs be able to succeed at selling wine in this environment?

As noted in a previous article, Court Wyckoff said that the family believes in the leadership team at SMWE. They will be relying on SMWE’s decision-making going forward.

The Wyckoffs will also surely bring leadership of their own to the table. Ultimately, whether the Wyckoffs can successfully sell wine at retail will be the most critical question to answer to ensure Ste. Michelle’s short and long-term success.

Will the Wyckoffs be able to successfully run a large wine company?

Make no mistake, while Sycamore sold off various assets from SMWE and retained others during its ownership, SMWE remains a very large wine company. With the Wyckoffs now owning the business, they will need to be not just successful selling wine but also managing a very large wine business. SMWE is also a business that occupies a space that is in the midst of a major reset and course correction.

The good news here is that the long-term success of SMWE seems to be very important to the Wyckoffs. Still, it will present challenges even just from an operational perspective, especially given the current environment.

Will the Wyckoffs be able to get SMWE back onto steady footing?

SMWE has been going through a process of refocusing and ‘right-sizing’ its business. This has involved shedding assets, decreasing costs, and pulling back on production to numbers that it feels are sustainable in today’s wine market. The company has also launched several new brands that it hopes to grow going forward. SMWE’s “transformation” has come a long way.

Still, the global wine market is in a period of extreme flux. As I have written previously, I believe it’s a good thing to have SMWE locally owned and family owned. Of course, this doesn’t wave a magic wand and solve the problems that SMWE and the larger wine industry have been experiencing.

There will be tough sledding ahead for SMWE and the broader wine industry in the near term. You can bet on that. But, will the Wyckoffs be able to complete the transformation and get the company back onto solid footing in the longer-term?

The Wyckoff family should be committed to the long-term success of the company in a way that Sycamore never was nor would be. Does that guarantee success? Of course not.

But it means that there’s an opportunity for the winery to find its way through the current situation and arrive in a better place. In my opinion, that opportunity did not exist under Sycamore’s continued ownership.

What will the leadership structure be at SMWE in the longer-term?