Pernod buy good for local labels

Liquor giant Pernod Ricard has acquired its first US winery in a move the company says will accelerate sales of labels including Australian-made Jacob’s Creek in the world’s largest and most profitable wine market.

Jean-Christophe Coutures, chief of Pernod Ricard Winemakers, said the purchase of Kenwood Vineyards of California from US wine company F Korbel & Bros would rapidly expand Pernod’s reach in the US via Kenwood’s distribution network across 50 states.

“We are only No 16 in the US wine market, whereas in every other large wine market in the world we’re in the top three wine companies,” Mr Coutures said.

“The big issue we have is ­access to distribution, and Kenwood gives us larger and stronger distribution access which will benefit the rest of our brands.”

In a system dating back to the repeal of alcohol prohibition in the US in 1933, liquor producers can sell to retailers only via state-based distribution companies.

But rather than preventing ­liquor manufacturers from gaining excessive market power as planned, the system has more recently acted as a barrier to entry for competitors seeking to crack the US.

Kenwood produces more than 500,000 cases a year, with an average retail price of $US10 ($10.77) a bottle, ­although its “super premium” range sells for up to $US45 a bottle.

The acquisition, which includes about 100ha of vineyards, a winery and the rights to the Kenwood brands, is believed to have cost about $100 million but the final price will not be revealed until settlement next month.

In addition to being a conduit for Pernod’s Australian, New Zealand, Spanish and Argentinian wines, Mr Coutures said Kenwood would also be targeted for growth with an increase in marketing spend and a push into the unexplored export market.

“It has a lot of growth potential. The brand has heritage, it’s always had consistent quality, and we think it can double its case sales in three to five years,” he said.

“We have big ambitions in China and the US — but we didn’t have any brands in the US, and US-made wine represents 80 per cent of consumption there, so in order to be credible and reach our goal of doubling our business in the US, we needed to make an acquisition.”

Mr Coutures said Pernod would be interested in buying the US assets of Australian wine major Treasury Wine Estates, which owns several wineries including Beringer, Stag’s Leap and Chateau St Jean.

TWE boss Mike Clarke last month said the company’s US business was too important to give up, despite suffering a series of writedowns including a $160m hit on excess inventory that last year cost his predecessor David Dearie his job.