Constellation’s Christmas cracker
Thursday 30 December
When the google wine alert dropped into my inbox on Christmas Eve, I wasn’t expecting anything significant to happen. Then came news that Constellation, one of the world’s biggest beverage companies, has sold off its Australian and UK division.
There’s nothing quite like announcing an AU $290 million deal when everyone’s left the office for a week or two and have mince pies rather than pie charts on their mind. Of course, you can’t brush this one under the carpet but it has happened without too much fuss.
An Australian private equity fund, CHAMP, has bought the businesses and the deal is expected to be complete by the end of January. It includes the transfer of Constellation’s Australian, UK, and South African brands, wineries, facilities, vineyards, and the company’s 50% interest in Matthew Clark, the UK wholesaler. All CWAE employees will transfer with the business but there is uncertainty for those staff who will be unsure as to the future holds in 2011.
Constellation’s CEO Rob Sands said Australian wine no longer offered the profit margins it expected as part of its premiumisation strategy. “Constellation has implemented a strategy focused on driving profitable organic growth through premiumizing its world class brand portfolio and improving margins, return on invested capital and free cash flow,” he said. “The CWAE business sells quality wines from the important Australian appellation and has significant scale, but continues to be faced with challenging market conditions. Therefore, the business is no longer consistent with Constellation’s strategy.”
How did Constellation get into this sticky wicket? It paid US$1.1 billion for BRL Hardy in 2003. It was part of an acquisition trail, which included buying Zinfandel producer Ravenswood for close to $150m and Mondavi for more than $1bn. The debt soon piled up, the global economic crisis hit, Australian wine slumped and other wine producing countries got their act together. Not a recipe for success.
So, Hardy’s is off to pastures new at a fraction of the price paid in 2003 and Constellation has thrown plenty of extras in as part of the deal. They must have been feeling in the Christmas spirit.
South Africa makes it onto the rostrum
Tuesday 23 February
South Africa is now selling more wine in the UK than France. You would have got very long odds for that happening if you’d placed a bet 15 years ago.
The latest Nielsen stats put three New World countries on the UK’s best-selling rostrum: Australia, the US (well, California) along with the Safas. What a turn around in 20 years. According to the OIV, new world producing wine countries had 3% of the market in the late 1980s but in 2008, it was 30% and its share is clearly continuing to grow.
In the past year, South African wine sales have increased 20% by volume to 12.27m cases, while French wine sales continued on their slide into the abyss, dropping 12% to 12.26m cases.
Interestingly, South Africa released its volume figures but not its value figures, which leaves us guessing. Anyone venturing into a UK supermarket, will see there are plenty of deals on South African wine, which have been driving volumes and not value.
As Australia and Chile have seen, cheap isn’t cheerful for your wine industry. If you sell at less than a fiver, that damages perceptions of your wine industry and it’s difficult to claw your way out of that.
Nevertheless, South Africa has come a long way and the World Cup is coming in June putting the country firmly on the map.
Let’s Get It On at #pinot2010
Thursday 4 February
Burgundy is the world’s top dog when it comes to making Pinot Noir but at today’s tasting New Zealand fared much better in a blind line up of Pinots from around the world. Of course we’re in New Zealand so the tasting might have been a bit skewed but there were some real surprises.
There’s a whole number of reasons why the Burgundians looked rather unimpressive today: the 2006 vintage was patchy, the selection of wines was rather tight and closed, and you need more than a splash of wine to make a true assessment of them. They could’ve done with a nice game dish to accompany them too.
Nevertheless Oz Clarke was so unmoved by the 2006 Camille Giroud, Chambertin Grand Cru that he said he found it as exciting as a “bus timetable”. I awarded it a very average 16.5 out of 20 and thought it was a village level Burgundy. At the prices Grand Cru Chambertin commands, this wine shrieked daylight robbery.
In contrast, my favourite wines of the tasting were the 2007 Ata Rangi and the 2007 Felton Road Block 5. Both had beautiful purity, concentration and structure. The tannins were certainly a lot riper and the wines were much more approachable in their youth than Burgundy. The panel of speakers started getting carried away with comparisons to song lyrics in their tasting notes and critic Neal Martin claimed the Felton Road Pinot was his ‘Let’s Get It On’ wine. Unfortunately he wasn’t so complimentary to Russian River’s Littorai Pinot, likening it to a song from Flight of the Conchords, ‘Sugar Lumps’, in which Bret and Jemaine compare their testicles to the sweet cubes. I think I’d rather have Marvin Gaye.
It was good to see the NZ Pinots performing so well but one of the UK’s leading importers Hatch Mansfield warned producers not to set their sights only at the premium end of the market.
The average price for a bottle of New Zealand Pinot Noir in the UK is currently £8.93. Patrick McGrath MW, managing director of Hatch said, “I don’t think you want that premium to go any higher because you want to introduce Pinot to the greater public.”
“There’s a huge opportunity for it to become mainstream,” he added.
Tim Atkin MW agreed with McGrath. “ I believe Pinot Noir is a huge opportunity. Under £20 I would rather drink a New Zealand Pinot Noir. If you can crack the £9.99 market then the future in the UK export market is very bright.”
I’m not sure that’s what producers wanted to hear about their precious red grape variety.
The hill debate continues
Thursday 14 January
Last month after visiting Waipara for the first time, I noticed that the vast majority of vines were planted on the flat gravel lands while there were plenty of hillsides sitting unplanted. Coming from a European viewpoint, I questioned whether there was lots of untapped potential.
This led to an interesting debate with Brian Bicknell of Marlborough’s Mahi wines. While vines in Europe are planted on slopes mainly to find less vigorous soils, achieve better drainage, and a better aspect to the sun, he commented: “the weird thing is that the situation here is nearly exactly opposite [to Europe] as the valley floors were rivers only a couple of hundred years ago so certainly in Marlborough, and I believe in Waipara, the free-draining soils are on the valley floors. The silts and clay soils in most cases are still on the hills so it is quite a different situation to that of Europe.”
I’d heard about a winery in Waipara, Pyramid Valley, 15 minutes drive west into the hills, that was planting on limestone slopes with excellent results, so I headed up there to see what their view is on this whole hill thing.
Mike Weersing, a Burgundy-trained Californian, and his partner Claudia, planted the two hectare vineyard in 2000, after searching Europe, California and New Zealand for a place to plant Pinot Noir and Chardonnay. “We wanted to add a new terroir to the world that could say something about the place via the grape,” he said. They found parcels of clay and limestone and there’s still plenty of virgin land on the property to be planted.
So what’s his take on the hill thing?
“Historically it’s been easier to plant on the flat and producers like the wines they are making enough, so they don’t have the incentive to plant up the hills,” he says.
“They would make more interesting wines and they would have one-hundredth of the water needs of the vines on the flat gravels” He says this because clays on the hills retain water better than free-draining gravel, adding “the country is going to deplete its water resources with so much irrigation. We don’t have to irrigate on the clay slopes.”
So, is it laziness and complacency that is to blame for people heading up into the hills? Well at the moment, there is very little planting due to the oversupply and recession. When the financial crisis finally draws to a close, will there be more people looking upwards? Yes, it’s going to be more expensive to work, so it would only be for premium players but there could be lots of new and interesting wines made.
In Hawkes Bay, the Glazebrook hills surround the main grape growing area – the Heretaunga plains. According to Rod Easthope, chair of the Gimblett Gravels Winegrowers Association, they offer some new good-looking terroirs for the local producers. “There’s potential all through the hills with limestone. It’s elevated so they don’t suffer frost. But they are always going to be an adjunct to what people are doing now,” he said.
In my next blog, more on Pyramid Valley and its unfined and unfiltered biodynamic wines.
Retailers accused of paying ‘lip service’ to the green issue
Sunday 25 October
I’ve just attended a debate, which asked whether the promotion of environment credentials is a marketing ploy. The room was half-full at best, which is a sad indication of the importance of the green issue in the UK wine industry. Or perhaps everyone had gone on half-term a day early? Compared to the full-house at the recent low alcohol forum, it was a poor showing – I didn’t spot one major retailer.
It appears many wine producers are going green for the right reasons but retailers were accused of using the green message to suit their own agendas – making a profit. Unfortunately the supermarkets weren’t there to defend themselves, but there were some damning comments.
Michael Cox, UK director for Wines of Chile, which is one of the main producing countries leading the sustainability drive along with South Africa and New Zealand, said, “Most multiple retailers will pay lip service to green initiatives.”
The main problem is consumers see wine as a natural product and that means the word sustainable or organic on a wine label has less meaning than organic on a bunch of carrots. It goes some way to explaining why sales of organic wine have not kept pace with the rest of the organic industry. Cox added, “Having a social conscience does not appear to sell more bottles. The consumer is not prepared to pay a premium for organic wine because they don’t understand the concept. ”
Retailers are clearly doing things to help the environment such as the plastic bag reuse scheme but a cynic would argue it is only because the authorities have ruled they must reduce their plastic bag use. Angela Mount implied retailers didn’t give a damn about saving the environment – it is all about saving money. If the changes didn’t save money, then they wouldn’t do them. She argued bulk shipping and lightweight bottles improved margins for retailers, adding “I don’t believe the green issue is driven by the consumer. It is often a convenient ploy to reduce costs.”
Peter Darbyshire, MD of UK importer and distributor PLB agreed, “The green solution is to move the point of packaging as close to the point of sale. It is moving to the UK but sadly driven by retailers’ price motivation rather than the green agenda.”