UK imports, Champ float, Pernod Ricard in USA

UK imports:

A short but informative article appeared in the UK trade publication Harpers this week saying UK wine imports from the European Union (EU) had declined 14 per cent since 2012. In contrast, Majestic Wines (200 stores-plus) said the sale of New World wine was on the increase, citing New Zealand sales up 25 per cent in the past five years.

There are two styles that have bucked the EU decline: one being Provence rosé, the other prosecco. Champagne is in a league of its own, and no matter how good Australian sparkling wine is it’s doubtful that it ever will pose a serious challenge. On the other hand, English sparkling wine appears to be making headway against the overpriced French bubbles.

Champ flotation:

Staying in the UK, it’s looking as if the favoured region for the flotation of Accolade Wines by current owners Champ Private Equity and Constellation Brands could well be the London Stock Exchange, not Australia. The alternative is a straight sale. Pondering who might buy it outright makes for interesting speculation. Media reports put Accolade sales at about the $1 billion mark.

Accolade is also pushing the domestic and US markets, announcing it is to increase its advertising spend, but not giving much detail.

There was plenty of surprise within the UK trade as Conviviality Retail acquired Bibendum PLB for £60 million ($118.4 million). Last September Conviviality took control of Matthew Clark from its joint owners, Accolade Wine and Punch Taverns, for £200 million.

Conviviality operates more than 600 stores, predominantly trading under the franchised Bargain Booze, Bargain Booze Select Convenience and Wine Rack brands.

Conviviality says it plans to operate the two wholesale companies separately, but the speculation is that, in time, savings will be made by merging parts of Bibendum and Matthew Clark.

Bibendum lists about 80 Australian wines, including Penfolds, Best’s, Mount Langi Ghiran and Josef Chromy. Matthew Clark handles the Accolade portfolio, Oakridge, Shingleback, Cape Mentelle and several others.

How these brands will fare remains to be seen. The Conviviality Retail company that turned over £364 million in the year to April 2015 is now a company expected to turn over around £1.4 billion.

In other news this past week, which could affect the Wingara Wine Group (Deakin Estate and Katnook), an offer has reportedly been made for Wingara’s parent company, Freixenet.

The Freixenet company is jointly owned by three sections of the Ferrer family. It’s said one section is not in favour of selling and is looking to take full control. Freixenet is going through tough times, with the latest accounts showing a 5.6 per cent fall in sales to €501 million ($778.11 million) and a 71 per cent decline in profits to €2.2 million. Debt is high, running at €150 million. With family infighting, falling sales and profits, and increasing debt, it could be time to off-load Australian assets to raise some cash. This raises the question: how much is Wingara worth? Hard to say, but if the rumours are true, Grant Burge went for $50 million-plus and Peter Lehmann $57 million. These could provide a guide.

Down is up:

A snippet of news caught our attention. The Sonoma Valley-based Kunde Family Winery has taken the decision to cut its production by about a third. The reason put forward is distributor and retail consolidation in the US.

Family patriarch Jeff Kunde is cutting production from 100,000 cases to about 70,000 cases. His view is that 100,000 cases isn’t enough to be considered large, so he’s concentrating on smaller batches of individual wines that sell at higher prices.

It’s eminently sensible and there are several Australian wines that could consider doing the same.

Up is now down:

Five to 10 years ago Pernod Ricard (PR) was very positive about chasing down Diageo to become the global leader in the drinks business. Not all has worked out as PR’s optimistic projections suggested.

Vodka has tumbled from grace, and is no longer the darling of the Americas. It’s the Americas that have hurt PR a great deal, as the table below, taken from Impact Databank, shows:

Pernod Ricard USA – Leading Brands
(thousands of nine-litre case depletions)
  Percent Change*
Brand Type/Origin 2013 2014 2015 2013-2014 2014-2015
SPIRITS:
Absolut Vodka 4,439 4,105 4,041 -7.5% -1.6%
Jameson Irish Whiskey 1,869 2,009 2,429 7.5% 20.9%
Seagram’s Gin 2,321 2,145 2,004 -7.6% -6.6%
Malibu Rum 1,876 1,833 1,909 -2.3% 4.2%
Kahlua Liqueur 893 846 814 -5.3% -3.8%
Hiram Walker Liqueur 827 786 757 -5.0% -3.6%
Beefeater Gin 513 492 481 -4.1% -2.4%
The Glenlivet Single-Malt Scotch 388 386 419 -0.5% 8.6%
Chivas Regal Blended Scotch 391 357 357 -8.6% -0.1%
WINE:
Jacob’s Creek Australia 758 652 586 -14.0% -10.1%
Kenwood California 489 452 456 -7.4% 0.9%
Mumm Napa California 225 255 303 13.2% 19.0%
Total Pernod Ricard USA 17,004 16,403 16,680 -3.5% 1.7%
*based on unrounded data, Source: IMPACT DATABANK @ 2016

PR has been shuffling its US top management faster than a card sharp, but has a lot of hard work ahead of it to turn those minuses into pluses.

The drop in Jacob’s Creek sales is shocking. Can the company do anything to lift the brand in the US or does it need to introduce a new brand without the JC name? It really needs to take a lesson out of the Gallo brand book, but we doubt it will. Because of Gallic stubbornness and the Australian insistence that JC is a global brand, PR will just watch the downward spiral continue. We wonder when the company will come to its senses.

Posh people in for treat:

Waitrose, the UK’s posh people’s supermarket, is planning a treat for its customers. The supermarket is overhauling its Australian range. The thus far Francophile supermarket has finally realised other countries, especially Australia, also have strong consumer followings, and this could be profitable.

It helps that the person in charge of the revamp is Alexandra Mawson, who spent four years in Sydney at Cellarmasters and Virgin Wines before moving back to the UK. Full information has not yet been released, but it shouldn’t be a difficult job, as Waitrose currently lists 82 Australian wines. It’s not a bad list, but it’s easy to see how it could be enhanced. New wines include:

  • Fox Gordon Adelaide Hills Sauvignon Blanc 2015
  • Baily & Baily ‘Folio’ Clare Valley Riesling 2014
  • Heirloom Adelaide Hills Chardonnay 2015
  • Storm Tree South Eastern Australia Shiraz 2015
  • Climbing Orange Region Shiraz 2013
  • Eddystone Point Tasmanian Pinot Noir
  • Parker “Favourite Son’ Coonawarra Cabernet Sauvignon 2014
  • Simon Hackett ‘Champion Reserve’ Coonawarra Cabernet Sauvignon 2010 from Coonawarra

It’s good news. Let’s hope it spreads to other supermarket buyers.

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