Has CHAMP missed the boat with Accolade Wines?

Missed the boat?

Has CHAMP Private Equity missed the boat in floating Accolade wines or selling it outright?

It’s beginning to look as if it may have. The senior staff turnover continues, with the latest departure being Accolade CEO Michael East, who it’s said is taking early retirement. Media reports say East made his decision after CHAMP delayed its plans for an initial public offering this year. East took over from Paul Schaafsma, who was in the job less than a year (as was East). Schaafsma succeeded John Ratcliffe, who was in the job for three years.

Accolade chairman Jim Anderson has been retitled executive chairman. Anderson is an old CHAMP hand and has had a long career at the top end of management, but not in wine. Reports say he will bed down the wine portfolio acquired from Lion.

It’s looking uneasy at Accolade. Did CHAMP hold on too long, looking for the right price? Is it too high for potential buyers or large investors? In hindsight, was the addition of Grant Burge Wines and the Lion portfolio right?

It’s hard to know. But from the outside the business is not looking good. Accolade is planning a $40 million construction project in the Riverland to house a bottling plant and warehousing. It also says China is a priority, but it may be late on that one.

The UK accounts show revenue was down £104 million ($175.45 million) in the year to the end of June 2016. Total revenue in 2016 was reported as £513.1 million, down from £617.7 million, with profits down from £32 million to £21.8 million.

The mainstay of the UK business is the Hardy’s brand, which has fallen five places in The World’s Most Admired Wine Brands survey, as reported in the International Wine News section.

Can the CHAMP management put Accolade in a position where it returns the capital it is looking to achieve on selling or listing? Or will it be better to keep it and enjoy the earnings? It’s not CHAMP’s policy to keep what it buys for long periods. Perhaps wine is proving its unique characteristics, which are all awkward and difficult.  

Nothing new

What has been will be again, what has been done will be done again; there is nothing new under the sun.” Ecclesiastes 1:9

The nothing new quote came to mind when I was rereading The Wine Trade by AD Frances, published in 1972. I tied it into the recent and ongoing TKR debate on terroir.

“Colbert also frowned on the mixing of Bordeaux wines.”  

Colbert was Charles Colbert, marquis de Croissy, and ambassador to the Court of St James in London during the reign of Charles II (1660-1685). He was complaining about the mixing of high country wines (those north of Bordeaux) during the 1670s,

“until 1683 when he was persuaded that some blending was beneficial and agreed to condone the practice in the case of wines being prepared for export, provided that it suited the taste of English and Dutch purchasers”.

This led to my consulting  A History of Wine by H Warner Allen, published in 1961, which quotes from the letter books of Bordeaux broker Nathaniel Johnston & Fils, established 1734 and still in family hands today. The period from which Allen quotes is 1799 to 1809.

On the 1801 vintage, in a letter from London to his partner in Bordeaux, Johnston wrote:

“If the wines have the body and colour which others represent more favourably than you do, I think they ought to be made up very lightly this year – the first and even the second growths* with not more than three to four gallons of Spanish wine and about three gallons of Hermitage, and the other wines not to have more than five gallons of Spanish wine.”

*Note some Bordeaux wines were already being referred to as first and second growths long before the official classification in 1855.

The Spanish wine that Johnston preferred was Benicarlo, which came from what we now know as the Valencia region in north-west Spain.

This from A History and Description of Modern Wines, by Cyrus Redding, published in 1860:

“Where a vine grower has land producing different qualities of fruit, he mingles his produce according to the wine he desires to make. Light, or stony soils, yield a bright wine, of a fine bouquet. The fruit from a different soil, by blending the grapes together, may produce a wine more desirable for other qualities, observing that growths of the first quality must alone be intermingled. No improvement can ever take place by mingling good wine with that of inferior quality.

Perfect wine can only be made by superior combinations.”

There are a lot of references in many books to blending regional wines, which points to the end product being better than its parts. Like religion, TKR has no objection to what creed a person choses to follow, so long as they don’t try to do a conversion job, or bore with a “we are right the rest of you are wrong” sermon. Or push Wine Australia to dump $4.3 million on understanding Shiraz terroir in Australia.

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