Pernod Ricard cuting SKUs, no Hot Prospect for Aus

Pernod plotting more offloads

Last week Pernod Ricard (PR) released its 2015-16 sales and results with the covering words “solid” and “encouraging”. It said its 14 premium brands were responsible for 75 per cent of the company’s sales.

Beyond the 14 premium brands there is the group of wine brands, with the main ones being:

  • Jacob’s Creek (Australia)
  • Brancott Estate (New Zealand)
  • Campo Viejo (Spain)
  • Kenwood (US)
  • Graffigna (Argentina)
  • Helan Mountain (China)

Associated with these is a host of sub-brands, and goodness knows how many brands that have become redundant and rest in a dusty draw. Wines account for 6 per cent of turnover.

As well as wines, there are 18 key local brands. In total they account for 19 per cent of sales.

key-local-brands

The company also has a huge amount of other brands. As well as the year-end facts and figures there was a sentence announcing the company was considering a reduction of up to 30 per cent of SKUs in its portfolio.

The sale of Morris Wines to Casella was an example, as was the sale of Paddy Irish Whiskey to Sazerac.

In India PR owns Nine Hills, a winery based in Dindori, Nasik, Maharashtra. How important is this brand to the company? Perhaps from a financial point it could be disposed of, but is having an Indian investment politically beneficial? There appears no political benefit in having the New Zealand Church Road brand, and with Brancott and Stoneleigh, PR is well covered, so Church Road’s sale in our opinion is a possibility.

Where does the Australian George Wyndham fit? What is its future? There has also been media talk about Pernod Ricard looking to buy a Chinese drinks brand, possibly a baijiu one.

It makes sense for PR to sell brands to finance a new purchase, as it is carrying a lot of debt. It will be fascinating to see how this plays out. More so if, like Diageo, PR quits its wine brands and puts them on the market. This seems unlikely at the moment, as the main wine brands it has are performing well, especially Brancott Estate and Campo Viejo. Jacob’s Creek has returned to volume growth but is it returning the margin the others are?

Hot news

What is the hot news? If exporting wine to the USA the hot news is getting on the Hot Prospects, Imported Wine Brands chart, this is this year’s winners, announced this past week.

  • Chapoutier  (French) imported by Terlato
  • Gerard Bertrand (French) imported by Gerard Bertrand USA
  • Primo Amore (Italian) imported by Zonin
  • Barone Fini  (Italian) imported by Deutsch Family Wine
  • Chateau d’Esclans (French) imported by Shaw-Ross
  • Stellina di Notte (Italian) imported by Treasury Wine Estates
  • Rosatello (Italian) imported by Constellation
  • Perrin  (French) imported by Vineyard Brands
  • Luca Bosio (Italian) imported by Quintessential
  • Astoria (Italian sparkling) imported by Prestige Wine & Spirits
  • Honoro Vera (Spanish) imported by Blue Ventures
  • Giesen Estate (New Zealand) imported by Pacific Highway Wines & Spirits
  • Saget la Perriere (French) imported by Pasternak
  • Maschio Prosecco (Italian sparkling) imported by Banfi Vintners
  • Valdo Prosecco (Italian sparkling) imported by Pasternak Wine Imports
  • Tiamo (Italian) imported by Winesellers Ltd

Nine Italian, Five French, one Spanish and one New Zealand Brand. Note the absence of an Australian brand.

The Hot Prospect brands then hope (providing they have the quantity) to graduate to a Hot Brand which is 250,000 cases. Australia has two in this category Treasury Wine Estates (TWE), 19 Crimes and Casella owned Yellowtail Sangria. Why no others?

Apparently it takes around five years to grow from a Hot Prospect to a Hot Brand. It shows how Australia in the main has given up on the US market and the identifier for Australian wine in the US is Yellowtail. Nothing wrong with Yellowtail as it sells millions of cases and the cohort of Americans addicted to McDonalds, donuts, apple pie, burnt coffee, coke and elasticated pants love it.

TKR and other eyes are on the Peter Lehmann brand will it make the Hot Prospect list next September and hopefully become a Hot Brand in the future.  TWE have recently announced they are to up promotional spend on 19 Crimes so it should continue to grow perhaps to over 500,000 cases.

The Giesen family are joint owners with the Oatley family of Pacific Highway Wine & Spirits based in Sonoma California they are an import, sales and marketing agency for some 20 brands from, Australia, New Zealand, South Africa, USA and Chile full portfolio.

Angela Slade Vice President, Brand Strategy and Communications says of the Giesen brand being a Hot Prospect brand

What I personally love about this, for Giesen, is that they are family owned and relatively small here (54,000 cases). We are growing and building buzz based not just on the Estate Sauvignon Blanc, but I just did two seminars to showcase their Single Vineyard Range.

“I’m working hard to build this brand and showcase the volume player (Estate Sauvignon Blanc) but at the same time, whilst there’s buzz, I’m leveraging that energy to showcase the higher end narrative and pitch media on the single vineyard collection. Our team is aggressively selling their allocations of the single vineyard wines – and it’s great to have a brand that can cover both market needs. Marcel Giesen has been in the US twice since I started and we have had three other senior level Giesen staff working the market with our sales team and distributors. They are really putting in the hard yards – I’ve not seen a brand and group of people invest so much personnel time into this market. It’s so important.”

The above is a lesson for any Australian wine company that wants to tackle the US market.

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