Pernod Ricard said to be considering offloading less profitable wine portfolio to focus on spirits
Pernod Ricard is said to be weighing up whether to sell off its wine division, which includes the Australian brand Jacob’s Creek, Spanish Campo Viejo and New Zealand’s Brancott Estate in its portfolio.
The Paris- based wine and spirits giant is rumoured to have held early discussions on a potential sale of the division, which currently has sales in the region of $500m according to a report by Bloomberg. However, any negotiations are at a very early stage, and Pernod could well decide not to sell the business at all.
“As a matter of policy, the company doesn’t comment on rumour or speculation,” Pernod Ricard said, which has been analysing its options for the division since before being targeted by US-based hedge fund Elliot Management in December 2018. At the time the investor, which took a stake in the French wine and spirits giant called for 500 million euros ($565 million) worth of cost cuts.
“The group is under no external pressure and has already mentioned several times that it intends to continue the dynamic management of its portfolio,” added a company spokesperson.
The company’s wine outfit is not as profitable as its spirits brands, and though Pernod Ricard has acquired vineyards such as Kenwood in California and Helan Mountain in China’s Ningxia region in recent years, CEO Alexandre Ricard has favoured expansion in fast- growing craft liquor by snapping up brands such as Monkey 47 gin and Del Maguey mezcal.
“For me, this makes a lot of strategic sense as it’s a relatively small part of the group, with lower growth and lower profitability,’’ Sanford C Bernstein analyst Trevor Stirling said.
And according to Drinks Business, CEO and chairman Alexandre Ricard said last month that he would continue to dispose of brands “that no longer fit” within the company’s portfolio following the January sale of Argentine wine brand Graffigna to Chile’s VSPT.
The company has also offloaded other products it doesn’t consider central to its strategy, such as the Domecq line of brandies and Paddy Irish Whiskey. The wine industry is more fragmented than the beer and spirits sectors, where players have driven consolidation over the past several decades to gain advantages in distribution and supply costs.