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Tag Archives: wine business

Treasury Wine Estate’s plan to avoid a hostile takeover

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Treasury hostile takeoverThe Wine Curmudgeon mentions Treasury’s scheme for two reasons. First, and most importantly, it doesn’t seem very sustainable. The troubled Australian multi-national wine company, whose holdings include California’s Beringer, has been losing more millions than most of us have socks.

Yet, despite its problems, Treasury wants to boost business to fend off a hostile takeover from private equity firm Kohlberg Kravis Roberts, which tried to buy Treasury earlier this year and made another offer this week. The second offer was a little higher, but probably won’t scare anyone.

Treasury’s anti-takeover plan features selling heavily discounted wine refrigerators to customers in Australia. The Brisbane Times newspaper reports that the company’s new boss “labelled the wine cabinet promotion the biggest consumer-facing promotion ever undertaken by the company.” Which should tell us all we need to know about Treasury’s lack of marketing ability.

How does it work? Buy six bottles of a Penfolds Bin wine, which cost from AU$30 to AU$80 a bottle, and you can buy a AU$650 wine fridge for AU$200. In other words, buy six bottles of AU$30 Penfolds Bin 51 Eden Valley riesling and the refrigerator and pay AU$380 — just 58 percent of what the refrigerator would cost by itself. Given retail discounting, in fact, you could probably get the fridge for at least 50 percent off. Is it any wonder that Treasury wrote down AU$260 million earlier this year and fired its CEO?

The second reason I mention this? The Wine Curmudgeon, financial genius that he is, bought 100 shares of Treasury stock in hopes KKR (as we high-flying investment types call Kohlberg Kravis Roberts) would make another, much higher offer for Treasury. My retirement to Burgundy never seemed so close.

I paid about what KKR offered the first time, so news that Treasury seems to be throwing away money on the refrigerator promotion is not welcome. The company is reducing inventory and margins to increase cash flow, which will not boost its value or make me rich. KKR’s second, not much higher, offer confirmed this.

In the wine business, the old joke always seems to apply. Or, as one actual real-life financial type told me: “With a little luck, you might get a nice bottle of wine out of this.”

Why wineries change their label design

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wine label designMostly, because they can. That’s one of the conclusions of an article I wrote for the Beverage Media trade magazine, trying to figure out why so many producers seem to be changing the look and design of their labels. Because, given the changes in the wine business, with more and bigger companies controlling more brands, it’s going to happen more often.

Or, as one retailer told me: “Sometimes I wonder why they need to fix something that isn’t broken.”

And, though the article was written for retailers, it has lessons for consumers as well. Ever go into a store, look for your favorite wine in its regular place with its regular label, and not see it? Chances are it’s still there; it just has a different label. Don’t laugh. Retailers told me this happens all the time.

So what’s going on with all the re-labeling?

• It’s difficult to get a firm grasp on how often this happens. Brands that have changed labels over the past several years include Blackstone, Columbia Crest, La Vieille Ferme, Jacobs Creek, Columbia Winery, Cuvaison, Hahn, Parducci, and Langhe Twins.

• Producers, facing a need to make their product stand out among what may be 15,000 different wines in the U.S., are more willing to change the label than ever before. In addition, they know more about this kind of marketing, and will spend the money to do it where they may have been reluctant before.

• Consumers aren’t always the primary target for label changes. Producers sometimes do it to impress distributors and retailers, to reassure them that they care about the brand and will put marketing dollars behind it. This is completely different from every other consumer packaged good, and we have the three-tier system to thank for it.

• Most label changes aren’t complete makeovers, although that seems to be happening more often. Usually, the changes are tweaks to reinforce the brand’s image, and are only noticeable over time.

• Once-popular wines that aren’t anymore are the most likely to get a new label. Also, producers aren’t shy about changing labels on popular brands, if they see a chance to keep the current audience, which may be older, and attract a new, younger one.

Winebits 333: Prosecco and cava, buying a winery, and family wineries

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Winebits 333: Prosecco and cava, buying a winery, and family wineriesThe Spanish understand these things: Imagine a California wine producer, facing intense competition for a foreign rival, and their reaction: “We must crush them!” But the Spanish, faced with the phenomenal growth of Prosecco over the past several years, have figured out that’s a good thing. “The Prosecco boom is helping to open minds and show that you don’t need to wait for a special occasion to open a bottle of sparkling wine – Prosecco and cava can be Monday night wines,” says Gloria Collell, the winemaker at Spanish cava giants Freixenet and Segura Viudas (and, in the interest of full disclosure, someone I know a little and like). Which, of course, is the Wine Curmudgeon’s approach to wine — drink it on Monday night (as well as Tuesday night, and so on and so forth). The interview, in the drinks business trade magazine, is worth reading for its sensible look at the sparkling business.

The best due diligence: I’ve met a lot of new winery owners over the years, and too many of them admit they really didn’t understand what they were getting into. Now they have this to read, from Jonathan Yates at The Street: “There are always good buys in established wineries on the market as many of the sellers purchased without focusing on how the business model operates.” His three points — understand wine is made everywhere, understand the importance of the tasting room, and understand wineries as destinations — are as good as anything I have seen.

Everyone owns a family business: The idea of local and the backlash against big and multi-national that started during the recession has even moved into wine. Casella Wines, the Australian producer that makes YellowTail, and has always been owned by the Casella family, has a new name — Casella Family Brands. Because, of course, nothing will better burnish the image of a brand that makes tens of millions of cases than the idea of family. It’s something E&J Gallo, still owned by the Gallo family, has always played up, and it’s even something that publicly-owned behemoth Constellation Brands, started by the Sands family and still run by it, tries to take advantage of. In wine, family and big are not mutually exclusive the way they are in so many other businesses.

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