While the French-based giant Pernod Ricard is the world’s second-largest wine and spirits conglomerate, wine only represents €1 in every €25 of its revenue.
As a spokesman told Bloomberg, the company regularly evaluates it options, which may include “divestments or the streamlining of some or part of individual business units.”
The current ‘option exploration’ includes the disposal of its two leading southern hemisphere brands – Jacob’s Creek and Brancott Estate – as well as another pair of storied Australian labels, St Hugo and George Wyndham. Also under consideration are two wine brands from New Zealand: Stoneleigh and Church Road. But for the moment, its Spanish wines Campo Viejo and Ysios, along with Château Sainte Marguerite in Provence and Kenwood in California, are not being reviewed. But how likely will the long-term continued ownership of these brands be once the Southern Hemisphere brands are gone?
Hold the Champagne
On the other hand, Pernod Ricard is expected to retain its Champagnes, Mumm and Perrier Jouët businesses, as the marketing strategies and profit margins are more in line with the spirits brands that drive the company’s business.
A glance at the company’s website illustrates where its nine still wines and two sparkling brands fit in a ‘House of Brands’ portfolio that has no fewer than 245. Both Champagnes are “Strategic International Brands… true global heavyweights [that] account for the highest share of business and potential”. Perrier Jouët is also a ‘luxury’ and “Prestige’ brand… available in iconic outlets around the world.”
The wine brands, about which the company only says “Whether it’s shared over a meal or to celebrate a special occasion, wine is increasingly appreciated by a growing variety of consumers around the world” appear on the website at the end of the list of categories, almost as an afterthought.
Fifteen years of ownership
Wine industry observers with long experience will remember how Pernod Ricard acquired Brancott Estate — when it was still called Montana — in 2008, following its sale by Allied Domecq. At the time, the brand was expected to go to Diageo, but CEO Paul Walsh rejected it because it was unlikely to generate sufficient growth.
Ownership of a sector that is always at the mercy of the weather does not fit easily with a business that has to deal with shareholders and analysts who want reliable quarterly growth.
Walsh stated that the “acquisition would not meet [Diageo’s] investment criteria”. The company would, he said, “add selectively to our wine business, especially within the premium segment.”
Fifteen years later, Diageo’s only wine assets are Moët & Chandon and the London merchant, Justerini & Brooks.
One of the people who shared Diageo’s lack of enthusiasm for wine production as a corporate investment was Philip Bowman, CEO of Allied Domecq. Bowman privately acknowledged at the time, to Meininger’s Robert Joseph, that ownership of a sector that is always at the mercy of the weather does not fit easily with a business that has to deal with shareholders and analysts who want reliable quarterly growth.
The management of Pernod Ricard seemed to be thinking along the same lines when it tried, unsuccessfully, to sell its wine portfolio in 2019, but appeared to display renewed affection for the sector when it acquired Château Sainte Marguerite. Time will tell how long that relationship will last.
