Australian rules

Keeping wine simple and branddriven is, alas, in step with consumers’ tastes

WAS IT really only two years ago that Southcorp was in such a mess that most serious drinks companies wouldn’t have taken it on for free? From zero to $2bn hero in two fiscals is testament to some seriously effective house-cleaning from the current management.

The decision by Robert Oatley (founder of Rosemount) to sell his 19% stake to Foster’s may have accelerated the process, but there’s little doubt that the company would have seen some take-over activity some time this year.

Southcorp’s board are currently making lukewarm noises to the opening offer.  And assuming they reject it in the hope of flushing out more likely suitors and sparking a bidding war, who are the bidders likely to be?

Having just shelled out $1.3bn for Mondavi, it’s hard to see Constellation wanting to pay out almost twice that for Southcorp (which may also explain the timing of the Foster’s move). How about Diageo?  The world’s biggest drinks company remains committed to expanding its wine portfolio, and it is thoroughly underrepresented in Australia, still one of the hottest wine areas.

 There’s more compelling evidence, too: namely, that the US wine market remains a big driver for the monolith, and Aussie wine has been seeing double-digit growth there for several years. The chance to get its paws on brands like Penfolds and Lindemans is doubtless attractive.

But, Diageo has just shelled out $700m on Chalone and may not feel up to taking on the $2.3bn that Southcorp is looking for.  One company that, theoretically at least, is in the running is Allied Domecq.

Like Diageo, it is committed to expanding itswine portfolio, and it’s not afraid to spend big to get big companies like Montana and Bodegas y Bebidas.  But AD has shown little stomach for such mighty acquisitions as Southcorp.

There remains an Australia-shaped hole in its wine portfolio, but AD may try to fill it by picking up any brands castoff in the course of the deal.  Then there’s the visceral desire to keep iconic Australian brands in Australian hands.

The Foster’s management has already talked with pride of owning Brand Australia and is likely to fight hard (and pay big) to get it.  My prediction? Foster’s to win, while AD and Diageo fight over a handful of brands sold off to appease the competition authorities.

Binge thinking Appeasing the authorities is something the global drinks industry knows plenty about.  In France, drink has moved from a proud statement of national identity to social pariah in less time than it takes to age a decent XO, while the UK press is awash with stories of Binge rink Britain.

The industry is (albeit belatedly) desperate to show that it is doing its bit, which is why if you enter any booze website the first thing you’ll find is a large notice loudly trumpeting the company’s credentials when it comes to responsible drinking.

Given such a febrile atmosphere, it is courageous of the government to be championing 24-hour drinking, not least because of the apparent contradiction.  The idea of combating juvenile alcoholism by opening pubs for longer has been seized on with joy by lazy tabloid hacks who fail to appreciate that the big problem is less the amount of alcohol drunk than the speed with which it is consumed.

Five alcopops necked in 60 minutes of frantic promotion is far worse than six bottles drunk over four hours. If 24- hour opening is accompanied by a wholesale crackdown on promotions then Binge Drink Britain should be consigned to the Yesterday’s News pile.

Licensed to thrill? What, meanwhile, of goings-on at Threshers? The tail-end of 2004 saw a flurry of announcements, from a new range of Aussie ownlabel wines to ushering in Lay & Wheeler fine-wine cabinets and a reaffirmation of interest in the fine wine market. But is this plethora of announcements a series of U-turns or fine tuning? I think it’s the latter.

The general strategy of driving volume by keeping  wine simple and branddriven is, alas, in step with consumers’ tastes.  Purists shudder at the reduced choice and shelves stacked with own-label but, sadly, the huge majority of consumers probably haven’t even noticed.

What concentrating on the Origin range did do, however, was leave a space at the higher end of the market for people who had an interest in wine beyond its price and abv; a space that has been profitably exploited by Majestic, Oddbins and smaller independent merchants.

None of which means that Threshers made a mistake per se; only that it was a bit slow in realising that one supermarket-driven template doesn’t work across 2,000 stores.  Should it get the bolt-ons correct (and we’ll know inside the next 12 months), it could be the powerful retailer which its sheer size dictates it ought to be.