Impact Seminar: Treasury And E.&J. Gallo On Premiumization Plans

With premium wines showing robust growth in the U.S. market, it’s no surprise that some of the industry’s biggest players are ramping up their efforts at higher pricing tiers. Market leader E.&J. Gallo has made a number of moves to diversify and premiumize its portfolio lately. Gallo’s general manager, Premium Wine Division, Roger Nabedian, addressed the Impact Seminar last week on the fruits of those initiatives.

“Wines selling above $8 now have more than a 51% share in the marketplace,” Nabedian noted. “Sparkling wines have been a key contributor—sparkling wines above $15 were up 30% last year.” Gallo has taken full advantage of the bubbly trend with its La Marca brand, the market’s top-selling Prosecco, and buttressed its position in the domestic sparkling segment with the acquisition of J Vineyards & Winery a year ago. “As we build our strategy at the $20 and above level, J will be a strong player there,” Nabedian said, adding that Gallo is also targeting the upscale segment through its LUX Wines import unit—including Allegrini, Poggio al Tesoro, Pieropan and Renato Ratti—and in spirits through its recent deal to become the U.S. importer for Whyte & Mackay Scotches including The Dalmore and Jura.

Meanwhile, Nabedian said Gallo is also taking advantage of new and fast-developing sales channels to drive gains. “On-premise, some of the fastest-growing opportunities for wine include theaters, natural/gourmet and fast-casual. We’ve seen great success selling a selection of wines in the Starbucks Evenings program,” he explained. “E-commerce is also on the rise for wine—this channel now accounts for $2 billion in winery revenues, and it’s expected to grow at least 12% annually for the next four years.”

Treasury Wine Estates (TWE) also has undertaken a broad premiumization strategy, combined with a decision to cull its portfolio. At the Seminar, TWE chief executive Michael Clarke discussed the group’s comeback efforts, emphasizing a continued migration up the pricing ladder.

“We’ve invested aggressively in our brands over the past two years, driving accelerated growth in the luxury portfolio,” said Clarke, adding that TWE’s 15 priority brands are collectively up 15% this year, compared to last year’s 3% gain. “By focusing on fewer brands, we’re accelerating revenue growth and also cleaning up our inventory position. We’re in a much better position today than two years ago, with a lot more luxury wine on the balance sheet.”

Clarke cited the Penfolds, Beringer and Stag’s Leap brands, as well as the higher-end tiers of Chateau St. Jean, as being key to TWE’s premium development. Meanwhile, recent innovations like The Gentleman’s Collection ($17), a Lindeman’s offshoot sourced from Australia and California that’s targeted toward Millennials, have been well received. According to Clarke, future TWE innovations will primarily focus on below-$20 extensions within existing brands and wines sourced from multiple regions, an approach which allows the company to “de-risk” supply.

Lastly, Clarke detailed plans for the brands TWE recently acquired from Diageo. Among them, Blossom Hill shows particular promise, he said, and TWE will move to it to a multiple-origin model looking ahead.

Grand Marnier Shares Surge Past Campari's Offer Price

Following the news that Campari has secured a €684 million ($773m) deal to acquire Grand Marnier, shares of parent company Societé des Produits Marnier Lapostolle have surged more than 60% to eclipse the €8,050 ($9,097) per-share price of Campari’s tender offer, which was filed on March 16. With Grand Marnier’s share price now around €8,353 ($9,426), the group’s market capitalization has risen to roughly €710 million ($802m)—nearly 4% above Campari’s bid price.

Some observers have suggested that shareholders may be inclined to see if Campari will raise its offer. However, Grand Marnier’s controlling family—which initially sold about a 20% interest in the company to Campari—has pledged to relinquish the rest of its shares to give Campari control if the tender offer doesn’t result in Campari gaining a 50.01% stake or higher.

News Briefs:

•Stoli Group USA is rolling out a new gluten-free vodka extension for its Stolichnaya vodka brand, in line with consumer trends toward gluten-free products. Made from 88% corn and 12% buckwheat, Stoli Gluten Free will retail for about $20 a 750-ml. The bottle features TTB-classified gluten-free messaging as well as a unique batch number and the signature of Rolands Zarinovs, who oversees Stoli vodka products. It will also be available in 50-ml. and 1-liter formats. Stoli Gluten Free will be available nationwide beginning in April.

•Italy’s Mondo del Vino is launching a new Barbera Appassimento in the U.S. under its flagship Ricossa Antica Casa brand. The new label is the first Piemonte DOC Barbera Appassimento. It retails at $26 a bottle and joins a Ricossa range imported by Touchstone Wines. Appassimento is a style more commonly associated with Valpolicella, but was approved for Barbera starting with the 2014 harvest. Mondo del Vino sells more than 4 million cases globally across its numerous brands, with the U.S. accounting for 6% of overall revenue.

Craft Brewing and Distilling News:

•Alaskan Brewing Company is introducing a new Boundary Range Hop Pack, featuring some of the brewer’s best-selling hop-focused beers. The 12-pack includes year-round Hopothermia Double IPA (8.5% abv), Big Mountain Pale Ale, Freeride Pale Ale and Icy Bay IPA. Big Mountain, last year’s spring seasonal, is returning exclusively in the Boundary Range variety pack. The Boundary Range Hop Pack is Alaskan’s second variety pack, after its Sampler Pack, and will be available throughout the company’s 17-state distribution footprint. A full profile of Alaskan Brewing Co. is on Market Watch’s website.

•Charleston, South Carolina-based Palmetto Brewing Company has partnered with contract brewer Brew Hub in a deal that will allow the South Carolina craft brewer to increase production by more than 40% and introduce a line of canned beers. Palmetto Brewing will produce its new canned beer series at Brew Hub’s recently expanded facility in Lakeland, Florida. The first in the series will be Lowcountry Pilsner (4.5% abv). Palmetto Brewing produced about 112,000 cases of beer last year, and the new partnership will allow it to increase production to about 160,000 cases annually.

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