|
UK-based Diageo has confirmed the sale of the isolated Monterey-based, Chalone Estate Vineyard, the last winery in its US portfolio to Foley Wine Estates. Last week it had also sold off its former Acacia winery facility in Carneros. This leaves now only UK-based Justerini & Brooks wine merchant, a competitor of Berry Bros & Rudd and two wineries- Four Seasons in India and one in China in their wine portfolio.
Diageo has been selling off their wine brands and companies since it reportedly sold $520 million of the majority of its shareholding to Treasury Wine Estate (TWE), which included various brands in the UK and USA .Chalone was left out of the package as TWE apparently turned down the offer to buy it. Foley Wine Estates confirmed its purchase of the estate for an undisclosed sum on Monday this week.
Diageo had purchased the Californian winery for $260 million in 2004, when the Pune-born IIM alumnus, Ivan Menezes was heading the North American operations. The sale then stood at 30,000 cases. Last year it achieved a sale of 166,000 cases. Its sale of Chalone means that Diageo no longer has any wine interests in the US. Menezes has publicly announced that wine is no longer a core business for the strategy of the company.
“Diageo’s strategy is to drive stronger, sustained performance through focus on our core portfolio and today’s announcement is another element of that strategy in action,” said Menezes in October, when the major sale was announced and reported by delWine . ‘Wine is no longer core to Diageo and this sale gives us greater focus,’ he has reportedly said now.
The new owners, Foley Estates Vineyard, believe that the one thing Diageo didn't do, was promote the brand by including the story of Chalone Chardonnay being placed third in the white wine category at the Judgment of Paris 1976. With the 40th anniversary around the corner, they believe they have a unique marketing opportunity and hope to promote the brand.
Impact on Four Seasons, their Indian Winery
With Ivan Menezes, the Pune-based CEO of Diageo announcing that wine is no longer a core business for the company, it seems highly unlikely that Four Seasons would last with the current owner for a long time. The speculation is rife since the company’s announcement in October 2015 (read the relevant article here) and has been seemingly affecting the business. After flirting with sales of 100,000 cases and claiming to be number two in the Indian wine industry in 2012-13, the sales went south perhaps to under 50,000 cases in 2014-15 and this year not being much better despite the company maintaining a brave facade. There is no visibility of the products in the market, according to most people in the trade.
However, the management of Four Seasons is optimistic about a turn-around and the long term future for the winery. When I called up Abhay Kewadkar, currently Vice President, Business Head and Chief Winemaker of the USL-owned wine company, he was busy in the winery in Baramati, supervising the harvest. He was not as worried about the future of the company as the immediate problem of organising grapes for this year’s crush. ‘There is acute shortage of grapes and our biggest problem is they are not available even at higher prices.’
He was echoing the thoughts of Rajeev Samant, founder-CEO of Sula when he had said over a month ago that grape supply would be the biggest problem of the current harvest and the price would touch the astronomical figure of Rs. 50 a Kg. ‘The prices are hovering at around Rs. 45-50 a kilo and even up to Rs. 5 more,’ says Abhay, who confirms they have crushed around 250 tons against the previous year’s 600 tons approx. He did not seem perturbed by the loss of the last bastion in the US portfolio. ‘It’s business as usual at the winery. We are still planning to bring out the Double Barrique wines and the sparkling wines will be launched,’ he said without committing a firm date.
It is our considered opinion that the company is in the process of secret negotiations and when it is more realistic in its asking price, the winery will be flogged off-lock, stock and barrel. Otherwise, the management at Diageo needs to make a Statement that they plan to support the Indian operations and remove the uncertainty and speculation in the market.
When a bright IIM Indian Alumnus is heading the global spirit company, he surely knows how to manage the wine business too and can take prudent decisions for the company. But what is good for the goose may not be good for the gander! They have a beautiful winery and a guest house facility unparalleled in India.
For an earlier Article on the sale of winery assets, visit:
View Point: Diageo Sale of Wine Brands spells Trouble for Four Seasons
For a visit to the winery three years ago, please visit:
Feature: Fifth Season at the Four Seasons Winery
Subhash Arora |