Constellation and Australian Vintage in merger talks
November 2, 2009
Chris Snow in Adelaide
Constellation Brands and Australian Vintage are in talks that could result in the creation of a major new, low-cost Australian wine company.
Constellation is considering combining some of its Australian and UK assets with Australian Vintage in exchange for a substantial but non-controlling share in the company.
The two companies, which together produce one third of Australia's wine, announced today that they were in 'preliminary discussions' about the deal.
It was aimed at combating what Constellation president Rob Sands said were the 'unprecedented negative operating conditions' currently facing the Australian industry.
Australian Vintage's labels labels include McGuigan, Sunnyvale, Passion Pop and Miranda.
Both companies have multiple premium brands. Constellation has Eileen Hardy, Thomas Hardy, Leasingham and Goundrey, and AV has McGuigan, Nepenthe and Tempus Two.
Today's brief statements gave no details of the operations being negotiated but Sands said the deal 'would create a more competitive entity, better positioned to deal with the current environment.'
Industry sources said this could confirm recent speculation that the companies' big volume popular premium wine operations would be melded into the new company.
Constellation also said the Australian Vintage deal was among a number being pursued with 'various parties'.
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Just what the Australian wine industry does not need is another "low cost" Australian wine!
Why position yourself against Chile, Argentina and others who really do have low cost real estate and labor when Australia has costs way above these countries. Grow up Australia! You are capable of making great wines albeit in lesser quantities and therefore making a profit margin on real costs. Driving production for low costs just puts people out of business, first your growers, second your vendors and third yourself. Then you get bought by some multi-national, multi-brand and the spreadsheet jockeys come up with great ideas like, hey there's a glut of grapes on the market, lets screw the growers on price and then screw the glass companies and the capsule companies on price then screw the Australian Taxpayer by asking for an export subsidy and then lets screw the consumer on quality by putting this rubbish under a nice label like McGuigan and selling it overseas as "Australian Vintage".
It is not going to take long for the consumer to work out he and everyone down the line is being screwed. Consumers have a way of dealing with that, they stop buying! Come on Australia, you are better than that, hasn't the Fosters debacle taught you anything? Grow good grapes, make good wine, sell it at a fair price, profitable for you and reasonable for the consumer, develop a reputation for quality and your customers will support you forever, because now they have a stake in your success.. Bill Williamson, Williamson Wines
Totally agree with the comments of Bill Williamson. The last thing Australia needs is another “low cost” producer. As a wine producing country we need to focus on mid to high end wines, where our wines are very good, not the bottom end of the market. The bottom end of the market is very low margin, and we simply cannot compete on a price level with Argentina, Chile, etc. We should be telling the world how good our regional and single vineyard wines are, not giving the French more ammunition to label all our wines as “industrial”, which is utter nonsense. Michael Lazarou, Australia
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