News
Those nasty foreigners:
The Australian Bureau of Statistics’ (ABS) latest wine import figures make for interesting reading.
New Zealand shipped less wine but got more for it; whereas, Italy shipped less and got a lot less for it. France shipped more and got more; Portugal shipped more but got less; Spain shipped a lot more and received a few more dollars for its efforts; Chile was down a little in volume and proportionally down in dollars received; Germany was up a little in both; and, finally, South Africa was way down in both.
Much is being said about the threat of imported wine; however, after consulting the figures (above) relating to the majority of imports, one wonders whether the threat is justified. One is also left to wonder whether ‘all’ imports are cause for concern (if there is any concern) or if it is just an imbalance from New Zealand that we are seeing?
On or off line: On line supermarket shopping in Australia is on the increase and many wineries sell via a mailing list. Sydney based Kemenys has introduced on-line selling and it wont be long before it becomes a regular feature of the major supermarkets. Some stats from the UK may give a hint on its acceptance
1 in 7 British adults buys wine online yet a third say they would consider doing so,
The survey of 1,742 British adults found:
14% buy wine online
7% buy wine online less than 4 times a year
33% do not currently buy wine online but say they would consider it in future
Amongst reasons cited by those who don't buy wine online:
25% say it's too expensive
21% don't want to pay for delivery
14% don't want to wait for delivery
Amongst those who do buy wine online:
51% prefer to select their own bottles or cases
24% prefer mixed cases.
Average spend is £5.15 per bottle (£62 per case) with women claiming to spend slightly more (£5.25) than men (£5.08)
Then and Now:
Exports, to the end of March 2007 reported that volume was up 10 percent to 788 million litres and value up 4 percent to $2.91 billion. At the time The Key Report had an article saying, ‘To be honest, TKR is expecting the figures to flatten or decline. At $2.91 billion it would be great to see them top $3 billion, but we wouldn’t bet on it over the next couple of years.’
One year later: ‘In the year ended April 2008, the volume of Australian wine exports declined 8.5% to 730 million litres. Value declined by 4% to $2.81 billion.’
Another year later: ‘In the year ended April 2009, the volume of wine exports declined by 0.7% to 726 million litres and value fell 14% to $2.4 billion.’
‘In the year ended June 2010, the volume of wine exports increased by 3.3 % to 775 million litres (note increase is only on the previous two years still less then 2007) valued at $2.17 billion (note the reports changed from monthly to quarterly).’
The latest figures out are for the calendar year 2010: ‘Australian wine exports increased by 2% to reach 781 million litres valued at $2.1 billion. We didn’t think exports would top three billion dollars but do think this year they will fall below $2 billion.’
Tacky news-reporting is choc-full of phrases such as ‘Aussie battlers’, ‘level playing fields’ and ‘she’ll-be-right’; but none of it will get the Australian wine sector safely through the next two years. Hang in there for a tough ride.
The slippery slope: The big wine news for 2010 was held back until Christmas Eve when Constellation Brands announced it had sold its most of Australian and UK wine business for $230 million dollars retaining a 20 percent share which valued the whole around $290 million (what happens next will properly be the big wine news for 2011.)
For Constellation Brands the 80s was a decade of sustained growth and the 90s one of accelerated growth. It's hard to pinpoint the exact date when things started going wrong, and in reality it's likely that no single investment is to blame. However, it takes no great financial brain to recognise that when a company gets into a fanatical-acquiring mode and seemingly rushes towards the next purchase on borrowed money before bedding down the latest prize, then trouble is in store.
The first (public) unravelling of the empire can be seen when, in 2007, Constellation Brands transferred Mathew Clark into a joint venture with Punch Taverns; at the time Matthew Clark was valued at £120 million. Taking inflation into account, it looks as though the original purchase price of US$475 million had been somewhat devalued. Even ignoring inflation, Constellation received US$185.6 cash proceeds – over $50 million less than they had paid for the equivalent half in 1998.
In the financial year 2008 – which comprises 10 months of 2007 and Jan/Feb of 2008 – Impairment (write-down) of goodwill and intangible assets totalled US$812.2 million (around US$600 million of it directly attributed to Australia and the UK).
Moving forward to Christmas Eve 2010, Constellation Brands announce they have sold the Australian and U.K. business (Constellation Wines Australia and Europe, CWAE), to CHAMP Private Equity of Sydney, Australia. The transaction is valued at approximately A$290 million. The company will retain 'an approximate 20 percent interest in the business and receive cash proceeds of about $230 million.'
Without going into currency conversions, or considering inflation, or adding and subtracting the bits bought and sold, the fact remains Constellation Brands has managed to wipe out several billion dollars (Australian or American – it hardly matters) of wine assets in around a dozen years.
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