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Champagne is extra intently related to celebration than wine.
However Pernod Ricard boss Alexandre Ricard can be justified in cracking open a celebratory bottle of pink, after the French drinks group’s deal to promote most of its wine enterprise, together with the Jacob’s Creek and Campo Viejo manufacturers. It’s a clever transfer: world wine consumption continues to empty away.
Pernod is promoting its wine belongings in Australia, New Zealand and Spain — representing annual manufacturing of 90mn litres — to a consortium of buyers led by Bain Capital. The identical group earlier this 12 months took over Australian wine producer Accolade Wines, proprietor of Hardys.
Getting out of lower-margin wine was at all times more likely to be a query of when, not if, for Pernod, whose core companies revolve round spirits reminiscent of Chivas Regal whisky and Absolut vodka. UK rival Diageo unloaded its wine in 2015.
Particulars on the deal are skinny. However Pernod’s working margins in wine — though by no means disclosed — are more likely to be round half of the group’s common of 27.6 per cent, estimates Jefferies analyst Edward Mundy. In 2023 its wine output fell 2 per cent 12 months over 12 months, versus 11 per cent progress at its worldwide spirits manufacturers. Wine accounts for 4 per cent of its €12.1bn annual web gross sales.
International wine consumption has been in decline because it peaked at about 25bn litres in 2007. Final 12 months that fell to an estimated 22.1bn litres, based on the Worldwide Organisation of Vine and Wine (OIV).
Youthful drinkers desire throwing again cocktails or spirits. Lately, wine costs have risen as producers handed on increased prices. However alcohol consumption can be dropping as shoppers develop into extra health-conscious.
The result’s that world wine manufacturing in 2023 was 7 per cent increased than consumption. Quantity ought to decline by a mean 1 per cent a 12 months out to 2028, based on drinks analysis group IWSR. And no progress is predicted from rising costs both — even when some components of the market, like rosé, are extra resilient.
In Australia, market situations have been notably punishing since China in 2020 imposed tariffs on imported Aussie wines. These have been lifted this 12 months, however not earlier than the market suffered a harmful glut. In mid-2023, inventories of Australian wine have been 16 per cent above the 10-year common.
The customer of Pernod’s wine manufacturers will need financial savings from the mixture with Accolade. The deal requires competitors approval first: the joint enterprise can have a share of about 27 per cent of the Australian market, based on Bernstein’s Trevor Stirling. But when regulators approve, anticipate additional offers to be uncorked.