In five years, Pernod Ricard is gradually "quitting" wine. On July 23, the editor of the business department learned from Pernod Ricard that Pernod Ricard signed an agreement with Australia Wine Holdco LTD (hereinafter referred to as "AWL") to sell its international strategic wine brand to AWL. It is reported that a total of 10 wine brands were sold in this package, involving Australia, New Zealand and Spain, including Jacob's Creek, which is well known to Chinese consumers.
Back five years ago, Pernod Ricard also tried to divest some of its wine brands. Hidden behind Pernod Ricard's sale of a number of wine brands, not only is the wine business not icing on the cake in the financial report, but also the overall environment of the wine market is cold. According to public information, in the past ten years, the sales of Pernod Ricard's wine business have fallen by about 6.5%. Now, after the divestment of the wine business, can Pernod Ricard maintain "freshness" in the domestic consumer market with its spirits brands?
Divestment of wine brands again
It is understood that Pernod Ricard's divestment of wine brands involves some of the established international brands owned and operated by Pernod Ricard, which produce 1 million cases of 9 liters of wine per case from three regions every year. Among them are Jacob's Creek (Jacob's Creek in Australia; Ten wine brands, including Stoneleigh in New Zealand and Campo Viejo in Spain. According to the announcement, the transaction is expected to close in the second half of 2025.
Regarding the business divestiture, Pernod Ricard said that the sale of the wine segment will further strengthen the group's premiumization strategy and focus resources on the high-end spirits and champagne portfolio to drive the continuous growth of the core business. Notably, Pernod Ricard will retain its United States wine brands as well as several wine brands from France, Argentina and China.
In addition, from the perspective of the receiver, AWL, which is about to take over Pernod Ricard's wine business, is a consortium of international institutional investors, including the well-known private equity Bain Capital. It is understood that AWL owns Accolade Wines, the second largest wine company in Australia.
Regarding the amount of the transaction and some details, the editor interviewed the relevant departments of Pernod Ricard, but did not receive a reply as of press time.
Yin Kai, founder of Chaoyinhui (Shanghai) Brand Management Co., Ltd., said that the consumption scenarios of spirits and wine are quite different, and the overlap of consumer groups is not as high as imagined. As a result, the wine could not create synergies with Pernod Ricard's strong spirits team. Pernod Ricard previously sold part of its wine business, but this time compared to the previous time, it sold more brands and a wider range of countries of origin, and only retained the champagne business.
In fact, this divestiture of the wine business is not the first time Pernod Ricard has diveted. In January 2019, Pernod Ricard publicly stated that it would continue to sell other wine assets after selling Argentina wine brand Graffigna. At that time, Pernod Ricard's Australia and New Zealand wine brands became a wine business for sale. The deal was valued at $1 billion, and in addition to Coca-Cola, global equity giant Carlyle Group, international wine giant Fortune Group, and a number of large global private equity companies were all interested in Pernod Ricard, but ultimately all failed.
Wine practitioners pointed out that this round of wine brands sold is larger than in 2019. If the sale of Argentina wine brands in 2019 was a test of the waters, then the sale of more than a dozen brands in this round is based on strategic considerations. Judging from the current global consumption situation, it is difficult for Pernod Ricard's wine business to make a large contribution to the performance, so it is inevitable to be sold.
30% VS 4%
Hidden behind Pernod Ricard's sale of wine business, there is not only the problem of pressure on its own performance, but also the cold factor of the wine consumption market.
According to public information, Pernod Ricard has more than 30 wine brands, of which wine brands account for nearly 30%. In FY2023, Pernod Ricard's net sales from the wine business accounted for only 4% of its total sales. Based on Pernod Ricard's net sales of 12.137 billion euros (about 96.43 billion yuan) in fiscal year 2023, the net sales of the wine business will be about 485 million yuan. It is worth noting that in the first half of the 2024 fiscal year, net wine sales fell sharply by 11% year-on-year again.
Shen Meng, director of Chanson Capital, said that compared with the sales revenue of Pernod Ricard's other business segments, the wine brand sold this time was eliminated due to weak profitability. With the sale of this part of the business, Pernod Ricard will further optimize its asset portfolio, retain brands with more revenue potential, and concentrate resources on development.
If the failure of the wine sector to add to the performance has become the active reason for Pernod Ricard's ruthless sale of a number of wine brands, including Jerkas, then the weakness of the domestic wine consumption market and even the global wine consumption market has become a passive factor for Pernod Ricard to sell off its wine business.
According to authoritative estimates by the International Organization of Vine and Wine (OIV), global wine consumption in 2023 will be at its lowest level since 1995. Among them, global wine production fell by 9.6% from the previous year to around 23.7 billion liters, the lowest level since 1961. This data undoubtedly aggravates the "anxiety" of the global wine market.
While the global wine consumption market is cold, on the other hand, in the domestic wine market, data from the Liquor Importers and Exporters Branch of the China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce and Animal Husbandry shows that the total value of domestic wine imports in 2023 will be 1.16 billion US dollars, less than 1.56 billion US dollars in 2013, hitting the lowest point in the past decade.
Yin Kai pointed out that imported wine has fallen for six consecutive years, although from the customs data from January to May has stopped falling, but the confidence of wine dealers is generally insufficient.
How to "Deus Ex"
After relieving the "burden" of wine, Pernod Ricard relied on whisky to conquer the domestic market. In fact, it's not the first time that a spirits brand has spun off the wine segment to focus on the spirits channel. Diageo had also experienced the "pains" of divesting its wine business.
It is understood that in 2015, Diageo sold wine assets in United States, United Kingdom, Argentina and other places. In this regard, Yin Kai said: "Pernod Ricard sold the wine business nine years later than Diageo. This is not to say that Pernod Ricard thought of selling nine years late, but it has been looking for opportunities. Whether it is Pernod Ricard or Diageo, the sale of the wine business is based on their own strategic considerations. ”
It is worth noting that although Pernod Ricard's winery in the eastern foothills of Helan Mountain in Ningxia is among the ten wine brands that were sold this time, its "presence" is still low in terms of sales performance in the domestic market. Xiaobian visited some terminal markets in Beijing and found that among the wine brands currently on sale, including Great Wall, Changyu, Penfolds and Rothschild wineries, the products are all commonly purchased by consumers. In the end market, it is difficult to find Pernod Ricard's domestic wine products.
At the same time, as a strengthening item of Pernod Stock, the whisky track is also facing a squeeze development trend in the domestic market.
In recent years, the domestic whisky market has continued to expand, and with the influx of many brands, Pernod Ricard's competition in China has intensified. According to the "100 Bottles Whisky 2023 Industry Outlook Report" released by 100 Bottles App, as of October 2023, there are 43 domestic whisky distilleries. Among them, the number of wineries in Yunnan, Qianchuan and Sichuan reached 11.
According to incomplete statistics, among the many wine companies, there are many well-known wine companies such as Diageo and Luzhou Laojiao. It is reported that in addition to Pernod Ricard's factory in China, in early November 2021, Diageo announced an investment of 500 million yuan to build a malt whisky factory covering an area of about 66,000 square meters in Eryuan County, Yunnan Province.
Not only that, the leading liquor companies are also constantly laying out the whisky track. In 2019, Yanghe Co., Ltd. reached a cooperation with Diageo, a world-renowned liquor group, to launch the first Chinese whisky "Zhongshiji"; In 2021, Luzhou Laojiao and United Kingdom Kirin Group launched Kylin DS, a product blended from Solvay and Baijiu (Guojiao 1573). Subsequently, in August 2022, Luzhou Laojiao and Kirin Spirits completed the signing of a cooperation agreement on the China Whisky Project; In April this year, the commencement ceremony of the Emeishan Gaoqiao Whisky Liquor Industry and Tourism Integration Project, invested and constructed by Langjiu Group, was held in Gaoqiao Town, Emeishan City, Sichuan.
Yin Kai further pointed out that the whisky market has entered a new level of step-by-step development, and among the major domestic manufacturers, Yanghe Co., Ltd. and Luzhou Laojiao are doing some diversified allocation. However, baijiu is in a relatively strong stage and will continue to be in this state in the short term, so the development of imported whisky brands in China is facing great challenges. In addition, Pernod Ricard's business in China has been challenged by brandy. The largest contributor to Pernod Ricard's revenue is mainly brandy products, and at present, the mainland is holding hearings on EU-related brandy anti-dumping cases, so it will also affect the future development of Pernod Ricard in China to a certain extent.
Liu Yibo, Feng Ruonan/text
Part of the source: Beijing Business Daily Courtesy of the enterprise