Industry analysts scotch rumours of Pernod Ricard will sell wine division
Industry experts have dismissed rumours that Pernod Ricard is considering offloading its wine division, claiming that while there may be sales of some of the company’s non-core brands, an entire disposal of the wine business is “unlikely”.
This is according to analysts Jefferies International which published a note last week in response to a Bloomberg article which said that the French drinks companies was in early negotiations on a possible sale of its wine unit, valued at around $500m.
“While we do not altogheter rule out a wine disposal, we do not necessarily see [Pernod Ricard] reacting in a knee jerk fashion to external pressure,” said analyst Edward Mundy in the note published last week.
He said that the Paris-based drinks giant’s premium wine brands, which includes household names such as Jacob’s Creek, Brancott Estate and Campo Viejo accounted for 5% of the group’s overall sales, with sales up by 2% in the 2018 financial year, compared to an increase of 4% in the previous year.
“We think the margins on wine are in double digits, with double digit return on capital employed, albeit lower than for spirits as wine is an agricultural capital intensive business,” he continued.
Mundy also pointed out that there would be a limited financial impact if Pernod Ricard did sell the wine division, calculating that the potential disposals proceeds would come in at around 1.2 – 1.5bn.
Last month CEO and chairman Alexandre Ricard said he would continue to "dispose" of brands that "no longer fit" within the drinks giant's portfolio, following the sale of Argentine wine brand Graffigna to Chile's VSPT in January, saying the company was "committed" to growing value sales over volume sales.
"Our wine volume sales are down by 8% due to our value focused strategy, which we're not afraid of pursuing," he said at the time.