Pernod Ricard, Chapel Hill, Constellation Brands

On the up, just:

An environment that remains contrasted” were the cautious words from Pernod Ricard chairman and chief executive officer Alexandre Ricard.

Sales to the nine months to the end of March totalled €6.81 billion ($10.13 billion), a 4 per cent increase on the corresponding period in 2014-15. Asia was up 5 per cent and the Americas up 9 per cent but Europe remained flat.

The top 14 brands grew 1 per cent, with key local brands up 7 per cent. Wine managed a 4 per cent increase.

Sales are one aspect, profit another, and that we won’t know until the year end. The company has confirmed its FY16 guidance of organic growth in profit from recurring operations at between plus 1 and plus 3 per cent.

Sales up, profit down:

Across the English Channel the much smaller Chapel Down vineyard has posted a 34 per cent increase in revenue to reach £8.18 million ($15.34 million). Sales were impressive but the company still recorded a £279,000 loss for the year, up from £83,000 the previous year.

Belief in the future of English sparkling wine is strong, with Chapel Down investing £1.32 million in planting 90 acres of new vineyard. It has also raised £1.5 million to build a brewery for its Curious Drinks beer and cider business.

The owners of Chapel Down are in favour of the UK remaining in the European Union as it’s a source of cheap labour at vintage and pruning times.

New birth:

It was 10 years ago this month that Constellation Brands acquired the leading Canadian drinks company, Vincor, for C$1.23 billion (C$36.50 a share) plus debt of C$220 million. It was a drawn-out affair, as Vincor’s director had passed on a previous offer of C$31 a share.

At the time, among other assets, Vincor owned Inniskillin and Jackson-Triggs (Canada), Hogue Cellars (Washington), Goundrey and Amberley (Western Australia), Kim Crawford (New Zealand) and Western Wines in the UK, which owned the South African brand Kumala.

Now Constellation Brands is considering floating its Canadian assets on the Toronto and possibly New York exchanges. Apart from Inniskillin and Jackson-Triggs there is not much substance of the original Vincor left. Hogue is still with Constellation but it’s in the US so may not be included. Goundrey, Amberley and what remains of Western Wines now reside in the Accolade Wines portfolio.

Constellation is now more interested in acquiring brands, but not the clutter of vineyards or buildings and equipment. Floating part of the company will free up cash to buy more brands, such as the recently acquired The Prisoner Wine Company and Meiomi last year.

Constellation has announced the Canadian wine company would have sales of about C$600 million. The question being: do the Canadian brands have growth potential? The Canadian wine portfolio consists of:

  • Inniskillin
  • Jackson-Triggs
  • Black Sage Vineyard
  • Le Clos Jordanne
  • Naked Grape
  • Open
  • Sawmill Creek
  • Nk’Mip Cellars
  • See Ya Later Ranch
  • Sola-Nero
  • Strut

The potential perhaps lies in the possibility that Constellation has not pushed or marketed these brands as hard as it could have, due to being focused on beer (Corona) and wine brands in the US.

Yellow dominates:

Impact Databank has released the five top selling wine brands in the US. They are listed below. Yellow Tail has decreased slightly from 8.3 million cases to 8 million cases.

Top 5 USA brands

The latest export reports to the end of March show total wine shipped to the US in the year was 161 million litres valued at $442 million. The average bottle plus bulk wine price was $2.75 a litre. The bottle price being $3.75 a litre or $33.75 a case

If Yellow Tail is selling 8 million cases (72 million litres) it accounts for about 45 per cent of total shipments to the US. As Yellow Tail ships in bottle it’s not unreasonable to assume it accounts for about 72 million litres of the 92 million litres in the bottled $2.50 to $4.99 a litre sector.

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