Constellation Sheds Australian Assets
The common denominator in today’s issue is Australian wines.
Constellation announced yesterday evening that it plans to sell three out of ten production facilities – in Clare and Padthaway in South Australia and at Mount Barker in Western Australia – and twenty vineyards to reduce debt. It also plans to consolidate bottling operations, streamline its portfolio and rationalize more than 30% of the company's Australian stock keeping units (SKUs). All wine brands will be retained.
Roughly 350 employees, or 20% of Constellation’s Australian workforce, will be let go. The decision was made after a strategic review of its Constellation Wines Australia business, formerly known as Hardy Wine Co.
The president of Constellation Wines Australia, John Grant said most of the assets for sale were at the more attractive end of the market and were not as large as others in the business, but he said the company had paid too much for them, according to local reports.
SAID KAUMIL GAJRAWALA OF UBS: “We view this move as confirmation that STZ is an unlikely acquirer of FGL’s Wine business, should it be for sale.”
He also believes Constellation’s announcement highlights continuing tough conditions for Australian wine producers, which have been well documented. For years Aussies have dealt with oversupplies, but recent droughts have taken a chunk out of production. In addition, the Aussie dollar is strong, taxes are high in the UK and Australian winemakers are facing strong competition from other winemaking countries.
“While we support moves to re-base asset values & improve returns, the process could prove time-consuming with no guarantee of an adequate outcome. We look for signals of buyer appetite and price ($95m proceeds seem conservative versus other metrics),” Kaumil continued.
UBS rated Constellation “neutral.”
AUSTRALIAN WINES IN THE SPOTLIGHT. "Australia remains one of the most important and dynamic New World Wine producing markets, and our Hardys and Banrock Station brands are two of the most recognized and consumed wines in the world. Australia is the largest New World Wine exporter based on volume and value, as well as being the second largest producer, and it is the third largest consumer market for these types of wines,” said Rob Sands, Constellation ceo. “This assessment of our Australian business has led to the development and implementation of an action plan that we believe will allow us to better position this business for success around the world. We will continue to provide consumers with an excellent array of the highest quality, premium Australian wine brands, along with many other high-quality Australian products that are Constellation Wines Australia hallmarks."
Bob Ryder, Constellation Brands chief financial officer added, "We are eliminating less profitable SKUs, focusing on brand-building and increasing pricing to restore appropriate levels of profitability.”
In connection with the Australian initiative, the company expects to incur one-time cash costs of approximately $45 million and net one-time non-cash costs of approximately $95 million, for a total of approximately $140 million in net one-time costs.
FOSTER’S WINE. Speaking of Australian wines, Kaumil mentioned in the same research note that Foster’s will report is fiscal 2008 result in a few weeks, “however the strategic review of its Wine business may take longer in our view given the simultaneous search for a new CEO.”
“In Australia FGL’s portfolio appears superior to STZ but both companies need to improve returns,” he said.
Constellation’s asset sales do not bode well for Foster’s because it could squeeze prices and make it more difficult for Foster’s to offload wine brands in the future.
UBS rated Foster’s “neutral.”
DR. DRE COGNAC AND VODKA COMING SOON
Hip Hop mogul Dr. Dre’s cognac and vodka brand will hit shelves in the next two months. The brands are owned by a joint venture between Drinks America and Dr. Dre's Interscope Geffen A&M Records label, a unit of Universal Music.
Aftermath Cognac will come out first, followed by an unnamed 80-proof flavored and unflavored sparkling vodka, Drinks America said Monday in its fourth-quarter earnings statement. The vodka will ship to distributors in the next 60 days. Marketing for the brands will coincide with the release of Dr. Dre’s “Detox” album, which is expected to be out in November or December.
In fiscal 2008, the company achieved net sales of wine and spirits of $3.8 million on 39,635 cases. Growth was due predominately to the launch of Trump Super Premium Vodka in October 2006 and Trump Vodka Flavors in February 2008, said Drinks Americas.
Net sales of Trump Vodka for the fourth quarter fiscal ‘08 rose 244% versus the prior quarter fiscal 08, and 101% versus the fourth quarter of the prior year fiscal ‘07. Sales of Trump Vodka were $2.7 million for this year. The prior year volume was influenced by the sell in, launch and pipeline fill of distributor inventory of Trump Vodka.
In addition, the company said it is focused on expanding internationally and is currently negotiating with distributors in China, India and Europe.
"Our strategy of creating premium branded beverages in partnership with icons continues to prove its foresight and long term viability, with great brand value creation enhanced by reduced capital requirements and favorable production and supply contracts," said company CEO, Patrick Kenny. "We have demonstrated that we can place quality brands in the market quicker and more cost effectively, with instant brand recognition, on a domestic and international basis, leading to accelerated sales. This, in conjunction with great product and beautiful packaging, will assure our future."
PERNOD LAUNCHES GLENLIVET XXV
The Glenlivet XXV, the oldest permanent release in the range’s portfolio, is coming to the U.S. It is made from hand-selected vintage that has been finished in first-fill Sherry casks for at least two years before bottling, said the company. Glenlivet XXV was also signed off by four expert whisky-makers: Alan Winchester, who oversees the production process; Bill Lamb, who supervises the filling and warehousing of the casks; David Boyd, who regularly “noses” the whisky to inspect its progress and selects the casks for bottling; and Jim Cryle, The Glenlivet’s acclaimed Master Distiller.
Unlike other products in The Glenlivet’s permanent range, The Glenlivet XXV showcases a strong Sherry influence as a result of being finished in Oloroso Sherry casks, which adds a layer of nutty, spicy flavors to The Glenlivet’s light and fruity overtones.
“The Glenlivet XXV was created to live up to exceptionally high standards,” says Jim Cryle. “The craftsmen responsible – myself included – are immensely proud to put our signatures on the final product.”
With a suggested retail price of $350, The Glenlivet XXV will be available in the U.S. in limited quantity in the fall, 2008.
U.S. GIVES IT ANOTHER GO IN INDIA
The United States is not giving up its fight against hefty Indian import tariffs. As expected, the U.S. appealed a World Trade Organization decision that upheld India’s import taxes on alcohol, including California wine and American whiskeys.
India reduced the national tax it imposed on all imported alcoholic beverages last year to 150%, which falls within the WTO’s limits. However, some states continue to implement hefty tariffs going as high as 550%. The state of Tamil Nadu has even shut out foreign alcohol and only allows shops to sell domestic Indian spirits and wines.
Wine, beer and spirits companies are eager to export their products to India because it is one of the world’s largest markets. However, imports only account for a small portion of total consumption. Discus estimates all foreign liquor together make up less than 1% of the Indian market.
ROSEMOUNT FOUNDER LAUNCHES NEW WINE BRAND
The Oatley family, founders of Rosemount Estate, has returned to the U.S. by establishing Robert Oatley Vineyards in Petaluma, CA, which commenced distribution of their first wines this week. In a statement, the company said it “is poised to once again take Australian wine to the world” with the launch of “Robert Oatley.” It will be released in nine states this August.
The line includes 2007 Chardonnay (Mudgee), 2007 Shiraz (Mudgee), 2008 Sauvignon Blanc (Western Australia), 2008 Pinot Grigio (South Australia) and 2008 Rose of Sangiovese (Mudgee). The suggested retail price, nationally, is $18-20.
Robert Oatley, 80, founded Rosemount Estate in 1970 and sold it to Southcorp Wines in 2001. In 2006, he launched his new wine business, Oatley Wines, in Australia. The business is run by Oatley's eldest son, Sandy Oatley and Chris Hancock.
Robert Oatley Vineyards is focused on the family's seven individual vineyards totaling 1,200 acres which are nestled in the hills of the Mudgee wine region on the west side of the Great Dividing Range which divides it from the Hunter Valley.
ADMIRAL IMPORTS TO MARKET FABIANO WINES
Effective August 1, Italian wine producer Fabiano has appointed Admiral Imports as their new importer and marketing company for the U.S. Fabiano is one of Italy's renowned producers of Veronese wines since 1912.
"Our relationship both personal and business with Admiral Imports has existed for over 20 years and I am now very proud to be able to appoint Admiral my Fabiano wines," said Nicola Fabiano.
WSD BRIEFS:
WIRRA WIRRA WINERY is returning to the U.S. and they have selected W. Gillett Johnson of International Vines, Inc. to reintroduce the brand into the world’s largest wine market. The range launches this month with the label that made Wirra Wirra famous, “Church Block,” a classic blend of Cabernet Sauvignon, Shiraz and Merlot. It will join other McLaren Vale offerings, including Woodhenge Shiraz, Catapult Shiraz Viognier and the eponymous RSW Shiraz. The wines will be available at premium restaurants and select specialty wine stores from August 2008 for between $18 and $60 per bottle.
PERNOD HAS APPOINTED Stephen Corrigan to the role of senior vice president of sales for Pernod Ricard Americas Travel Retail with immediate effect. In his new role, he will be responsible for North America and Brazilian duty-free, as well as Caribbean markets.
COSTCO’S JULY same-store sales rose 10%, with U.S. growth of 10% and international growth of 11%. Excluding gasoline price inflation, U.S. comparable sales would have climbed 6%, and excluding exchange rates, international comparable sales would have climbed 9%. Total sales in the four weeks to Aug. 3 rose 14% to $5.02 billion.
TO READ AN INTERVIEW WITH ALAN RICKMAN of Bottle Shock, click here.
Until tomorrow, Megan
“Cockroaches and socialites are the only things that can stay up all night and eat anything.”
Herb Caen
--------- Sell Day Calendar ----------
Today’s Sell Day: 5
Sell days this month: 21
Sell days this month last year: 23
This month ends on a: Fri
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
Constellation announced yesterday evening that it plans to sell three out of ten production facilities – in Clare and Padthaway in South Australia and at Mount Barker in Western Australia – and twenty vineyards to reduce debt. It also plans to consolidate bottling operations, streamline its portfolio and rationalize more than 30% of the company's Australian stock keeping units (SKUs). All wine brands will be retained.
Roughly 350 employees, or 20% of Constellation’s Australian workforce, will be let go. The decision was made after a strategic review of its Constellation Wines Australia business, formerly known as Hardy Wine Co.
The president of Constellation Wines Australia, John Grant said most of the assets for sale were at the more attractive end of the market and were not as large as others in the business, but he said the company had paid too much for them, according to local reports.
SAID KAUMIL GAJRAWALA OF UBS: “We view this move as confirmation that STZ is an unlikely acquirer of FGL’s Wine business, should it be for sale.”
He also believes Constellation’s announcement highlights continuing tough conditions for Australian wine producers, which have been well documented. For years Aussies have dealt with oversupplies, but recent droughts have taken a chunk out of production. In addition, the Aussie dollar is strong, taxes are high in the UK and Australian winemakers are facing strong competition from other winemaking countries.
“While we support moves to re-base asset values & improve returns, the process could prove time-consuming with no guarantee of an adequate outcome. We look for signals of buyer appetite and price ($95m proceeds seem conservative versus other metrics),” Kaumil continued.
UBS rated Constellation “neutral.”
AUSTRALIAN WINES IN THE SPOTLIGHT. "Australia remains one of the most important and dynamic New World Wine producing markets, and our Hardys and Banrock Station brands are two of the most recognized and consumed wines in the world. Australia is the largest New World Wine exporter based on volume and value, as well as being the second largest producer, and it is the third largest consumer market for these types of wines,” said Rob Sands, Constellation ceo. “This assessment of our Australian business has led to the development and implementation of an action plan that we believe will allow us to better position this business for success around the world. We will continue to provide consumers with an excellent array of the highest quality, premium Australian wine brands, along with many other high-quality Australian products that are Constellation Wines Australia hallmarks."
Bob Ryder, Constellation Brands chief financial officer added, "We are eliminating less profitable SKUs, focusing on brand-building and increasing pricing to restore appropriate levels of profitability.”
In connection with the Australian initiative, the company expects to incur one-time cash costs of approximately $45 million and net one-time non-cash costs of approximately $95 million, for a total of approximately $140 million in net one-time costs.
FOSTER’S WINE. Speaking of Australian wines, Kaumil mentioned in the same research note that Foster’s will report is fiscal 2008 result in a few weeks, “however the strategic review of its Wine business may take longer in our view given the simultaneous search for a new CEO.”
“In Australia FGL’s portfolio appears superior to STZ but both companies need to improve returns,” he said.
Constellation’s asset sales do not bode well for Foster’s because it could squeeze prices and make it more difficult for Foster’s to offload wine brands in the future.
UBS rated Foster’s “neutral.”
DR. DRE COGNAC AND VODKA COMING SOON
Hip Hop mogul Dr. Dre’s cognac and vodka brand will hit shelves in the next two months. The brands are owned by a joint venture between Drinks America and Dr. Dre's Interscope Geffen A&M Records label, a unit of Universal Music.
Aftermath Cognac will come out first, followed by an unnamed 80-proof flavored and unflavored sparkling vodka, Drinks America said Monday in its fourth-quarter earnings statement. The vodka will ship to distributors in the next 60 days. Marketing for the brands will coincide with the release of Dr. Dre’s “Detox” album, which is expected to be out in November or December.
In fiscal 2008, the company achieved net sales of wine and spirits of $3.8 million on 39,635 cases. Growth was due predominately to the launch of Trump Super Premium Vodka in October 2006 and Trump Vodka Flavors in February 2008, said Drinks Americas.
Net sales of Trump Vodka for the fourth quarter fiscal ‘08 rose 244% versus the prior quarter fiscal 08, and 101% versus the fourth quarter of the prior year fiscal ‘07. Sales of Trump Vodka were $2.7 million for this year. The prior year volume was influenced by the sell in, launch and pipeline fill of distributor inventory of Trump Vodka.
In addition, the company said it is focused on expanding internationally and is currently negotiating with distributors in China, India and Europe.
"Our strategy of creating premium branded beverages in partnership with icons continues to prove its foresight and long term viability, with great brand value creation enhanced by reduced capital requirements and favorable production and supply contracts," said company CEO, Patrick Kenny. "We have demonstrated that we can place quality brands in the market quicker and more cost effectively, with instant brand recognition, on a domestic and international basis, leading to accelerated sales. This, in conjunction with great product and beautiful packaging, will assure our future."
PERNOD LAUNCHES GLENLIVET XXV
The Glenlivet XXV, the oldest permanent release in the range’s portfolio, is coming to the U.S. It is made from hand-selected vintage that has been finished in first-fill Sherry casks for at least two years before bottling, said the company. Glenlivet XXV was also signed off by four expert whisky-makers: Alan Winchester, who oversees the production process; Bill Lamb, who supervises the filling and warehousing of the casks; David Boyd, who regularly “noses” the whisky to inspect its progress and selects the casks for bottling; and Jim Cryle, The Glenlivet’s acclaimed Master Distiller.
Unlike other products in The Glenlivet’s permanent range, The Glenlivet XXV showcases a strong Sherry influence as a result of being finished in Oloroso Sherry casks, which adds a layer of nutty, spicy flavors to The Glenlivet’s light and fruity overtones.
“The Glenlivet XXV was created to live up to exceptionally high standards,” says Jim Cryle. “The craftsmen responsible – myself included – are immensely proud to put our signatures on the final product.”
With a suggested retail price of $350, The Glenlivet XXV will be available in the U.S. in limited quantity in the fall, 2008.
U.S. GIVES IT ANOTHER GO IN INDIA
The United States is not giving up its fight against hefty Indian import tariffs. As expected, the U.S. appealed a World Trade Organization decision that upheld India’s import taxes on alcohol, including California wine and American whiskeys.
India reduced the national tax it imposed on all imported alcoholic beverages last year to 150%, which falls within the WTO’s limits. However, some states continue to implement hefty tariffs going as high as 550%. The state of Tamil Nadu has even shut out foreign alcohol and only allows shops to sell domestic Indian spirits and wines.
Wine, beer and spirits companies are eager to export their products to India because it is one of the world’s largest markets. However, imports only account for a small portion of total consumption. Discus estimates all foreign liquor together make up less than 1% of the Indian market.
ROSEMOUNT FOUNDER LAUNCHES NEW WINE BRAND
The Oatley family, founders of Rosemount Estate, has returned to the U.S. by establishing Robert Oatley Vineyards in Petaluma, CA, which commenced distribution of their first wines this week. In a statement, the company said it “is poised to once again take Australian wine to the world” with the launch of “Robert Oatley.” It will be released in nine states this August.
The line includes 2007 Chardonnay (Mudgee), 2007 Shiraz (Mudgee), 2008 Sauvignon Blanc (Western Australia), 2008 Pinot Grigio (South Australia) and 2008 Rose of Sangiovese (Mudgee). The suggested retail price, nationally, is $18-20.
Robert Oatley, 80, founded Rosemount Estate in 1970 and sold it to Southcorp Wines in 2001. In 2006, he launched his new wine business, Oatley Wines, in Australia. The business is run by Oatley's eldest son, Sandy Oatley and Chris Hancock.
Robert Oatley Vineyards is focused on the family's seven individual vineyards totaling 1,200 acres which are nestled in the hills of the Mudgee wine region on the west side of the Great Dividing Range which divides it from the Hunter Valley.
ADMIRAL IMPORTS TO MARKET FABIANO WINES
Effective August 1, Italian wine producer Fabiano has appointed Admiral Imports as their new importer and marketing company for the U.S. Fabiano is one of Italy's renowned producers of Veronese wines since 1912.
"Our relationship both personal and business with Admiral Imports has existed for over 20 years and I am now very proud to be able to appoint Admiral my Fabiano wines," said Nicola Fabiano.
WSD BRIEFS:
WIRRA WIRRA WINERY is returning to the U.S. and they have selected W. Gillett Johnson of International Vines, Inc. to reintroduce the brand into the world’s largest wine market. The range launches this month with the label that made Wirra Wirra famous, “Church Block,” a classic blend of Cabernet Sauvignon, Shiraz and Merlot. It will join other McLaren Vale offerings, including Woodhenge Shiraz, Catapult Shiraz Viognier and the eponymous RSW Shiraz. The wines will be available at premium restaurants and select specialty wine stores from August 2008 for between $18 and $60 per bottle.
PERNOD HAS APPOINTED Stephen Corrigan to the role of senior vice president of sales for Pernod Ricard Americas Travel Retail with immediate effect. In his new role, he will be responsible for North America and Brazilian duty-free, as well as Caribbean markets.
COSTCO’S JULY same-store sales rose 10%, with U.S. growth of 10% and international growth of 11%. Excluding gasoline price inflation, U.S. comparable sales would have climbed 6%, and excluding exchange rates, international comparable sales would have climbed 9%. Total sales in the four weeks to Aug. 3 rose 14% to $5.02 billion.
TO READ AN INTERVIEW WITH ALAN RICKMAN of Bottle Shock, click here.
Until tomorrow, Megan
“Cockroaches and socialites are the only things that can stay up all night and eat anything.”
Herb Caen
--------- Sell Day Calendar ----------
Today’s Sell Day: 5
Sell days this month: 21
Sell days this month last year: 23
This month ends on a: Fri
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
posted at 1:29 PM
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