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Zampa May Merge with Grover Vineyards

Posted: Wednesday, 27 April 2011 10:40

Zampa May Merge with Grover Vineyards

Apr 27: Nashik based Vallee de Vin, makers of Zampa wines are reportedly in advance stage of talks of merger with Bangalore based Grover Vineyards with the aim of gaining synergy and improving the combined market share, it is learnt from reliable sources. Subhash Arora who talked with various sources, puts the current status in perspective.

According to reliable sources and discussion with the various involved parties who refuse to confirm but do not deny either- perhaps due to superstition, two of the three partners of Vallee de Vin-makers of Zampa Wines, Deepak Roy and Ravi Jain have agreed to buy the presumably 18 % shares of Grover held by Brindco directly or indirectly as the first step. This will enable Grover Vineyards to terminate the exclusive national and international distribution agreement with Brindco which was a part of the condition of the original share purchase by the latter.

The minority shareholding of Jerry Rao also needs to be bought back before the two entities merge, with the Grover family and associates maintaining an absolute majority. Final details are reportedly being worked out though both sides prefer to keep their lips sealed. While the third partner of Zampa, Neeraj Deora denied any negotiations when contacted by delWine, Kapil Grover did confirm that in principle agreement had been reached. Ravi Jain was slightly more evasive and felt it was premature to report as a news item-especially for reliable and dependable magazine like delWine which is known for  Breaking News and its accuracy. He feels that it would be a few weeks before the negotiation would be news worthy.

Grover Vineyards, founded by Kanwal Grover in the 90s is owned in majority and run by Kapil Grover. The leading importer Brindco, owned by Aman Dhall and his family is a minority partner with under 20% shares and has exclusive marketing rights for Grover Wines. Jerry Rao, an-ex Citibank senior manager and Michel Rolland are also minority partners besides Veuve Clicquot. 

Once the closure takes place, the Board would be restructured. Understandably, four seats will remain with Grover while Roy and Jain and another representative from Zampa will keep the other three. As on today, the shareholding of Zampa is around a third each, with the three partners Deepak Roy, Ravi Jain and Neeraj Deora.

Grover Vineyard has had ambitious plans of expansion for some time now and has been planning to infuse capital through a strategic partner, for over a year. As Kapil Grover clarifies, this merged company will go out to look for the strategic partner- he has already had talks with a few interested investors.

There can be many a slip between the wine bottle and the lip. As Ravi Jain, MD of Zampa insists, until the documents are signed anything can happen and ‘within two minutes every thing can change and the whole deal can fall apart.’ Apparently 10th May is the last date for closing the transaction and if for any reason, either of the parties backs out, the deal could fall apart. It would be interesting to see what would happen to the marketing strategy of the company and the execution .

The amount required to buy out the shares of Brindco and Jerry Rao are speculated to be between Rs.150million to Rs.300 million, not a very easy task especially as Zampa has suffered yet another year of losses despite the sale of around 10-12,000 cases. As Ravi Jain admits, ‘we are keeping the production under control. The more we produce, the more we lose. What’s the point of increasing production?’

For several known reasons, the industry has had a tough time during the last couple of years with most producers undergoing losses despite the 2010-11 ending with cheerful notes. Sula has been the lone, sweet exception. Although Grover would not share the detailed figures, and the balance sheet need not be filed with the Registrar of Companies for 6 months after the year closing, our reliable sources indicate that it has also declared losses amounting to multi-million rupees, despite the sale of 73,000 cases.

The volume achieved by Grover may be a steady and respectable amount compared to the other producers, coming forward after a major quality fiasco a couple of years ago. But it pales in front of the shining star Sula whose incremental sale matched that of the all-year sale of Grover, with the leader achieving a total sale of 360,000 cases, higher sales growth due to lower priced wines notwithstanding.

The Grover-Zampa merged entity is expected to go for a massive expansion according to Kapil Grover, whose family owns the majority shares and who plans to continue to hold the controlling stakes in the new structure, The combine plans to leapfrog and capture much higher market share after putting into place the distribution system which will be reinforced by the presence of two stalwarts known to have built strong liquor brands. By his own conservative estimates, Kapil hopes the merged company will sell over 120,000 cases, representing about 40-45% growth as compared tow what the two have achieved individually during the year.

Brindco has been the exclusive Distributor for Grover during the period of about 4 years when the company bought the minority share in the company. It has been consolidating its imported wine portfolio and even adding select labels cautiously and also aggressively adding new hotel accounts which unfortunately for Grover Vineyards, are not the hunting ground for Indian wines.

If the merger does take place, it would be interesting for Sula as well and the consumers. Sula has been feeling too lonely at the top and would like someone to compete with the company in order to catapult it to newer heights, as Rajeev Samant often claims. The consumer would benefit from the merger- Zampa has developed a couple of excellent wines like sparkling and still Rosé which would be available more freely and possibility at more aggressive prices in a bid to increase volumes. The merged entity is expected to open new markets in a bid to compete head on Sula-nationally and internationally.

Without sharing any details, Kapil is confident of entering a new market with 10,000 cases to start with while continuing with the existing export markets. This will be a commendable achievement by any standards.

In a dull market where everyone is fixated on the high taxes and over capacity, this reasonably reliable news adds some spice for the industry watchers.  

Subhash Arora

       

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