Brown-Forman to Sell Wine Unit
Brown-Forman to Sell Wine Unit
Brown-Forman Corp., the maker of Jack Daniel's whiskey, has put its wine business up for sale, according to people familiar with the matter, becoming the latest small wine operation to hit the auction block at a challenging time for some parts of the industry.
Brown-Forman, based in Louisville, Ky., has hired Rothschild to run the auction process, the people said. Private-equity firms and other global wine and spirits firms are expected to consider the business, which is unlikely to fetch much more than a few hundred million dollars. It's also possible that only part of the business will be sold, according to one of the people.
Separately, Constellation Brands Inc., the world's biggest vintner by sales, is close to selling the bulk of its non-U.S. wine portfolio to an unknown buyer, people familiar with the matter said. That deal, should it not fall apart, could come this week and fetch between $300 million and $400 million, the people said.
Spokespeople for Constellation and Brown-Forman declined to comment.
Constellation has been buffeted by a wine glut in Australia as well as falling prices in the U.K., where much of its wine is distributed.
Meanwhile, sales for some of Brown-Forman's eight wine brands have been sluggish in recent years. Brown-Forman's wine unit generated $310 million in sales in the company's fiscal year ended in April, down from $360 million in the year-earlier period. It now accounts for just under 10% of the company's net sales, which totaled $3.2 billion in the fiscal year.
Its mid-priced flagship brand, Fetzer, saw global sales volumes decline in fiscal 2010, slipping 5% to 2.2 million cases. Most of the company's higher-end wines, such as Bonterra and Sonoma-Cutrer, have continued to generate sales growth despite a tough economy.
Brown-Forman's wine division ranks No. 10 in size among wine companies in the U.S., according to Wine Business Monthly. The unit sells about 4.5 million cases in the U.S. and another 1.5 million outside the country per year. Brown-Forman sold its Italian wine brands—Bolla and Fontana Candida—in December 2008.
Some spirits companies have also found the wine business challenging because it is capital intensive and wine consumers tend to experiment with different brands, making it harder to build the brand loyalty enjoyed by many liquor products. Some have shed big wine brands in recent years. Fortune Brands Inc., which makes Jim Beam and Maker's Mark bourbon, sold its U.S. wine business to Constellation, for $885 million, about three years ago.
Foster's Group Ltd., the Australian wine and beer maker, earlier this year rejected a bid for its sluggish wine operation from a suitor reported to be private-equity firm Cerberus Capital Management LP.
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