Treasury Wine Estates’ acquisition of US Frank Family Vineyards for $434 million is a major step in the company’s commitment to building its luxury portfolio and strengthening its presence in the Americas.
The Frank Family Vineyards (FFV) portfolio includes the winery, brand, and vineyard holdings. It has wines across three collections ranging from retail prices of $52 to $309. The suite is chardonnay led and supported by cabernet sauvignon, pinot noir and sparkling wine.
TWE CEO Tim Ford said the brand will fill the luxury chardonnay category, a segment TWE currently doesn’t occupy. The deal takes TWE’s share of the US luxury chardonnay market from 3.7 to 9.4 per cent, making it the third biggest player in the US. It will also see TWE’s US margin grow from 17 to 18.7 per cent and its total market share in the US luxury wine segment will grow from 5.3 to 7 per cent.
FFV winemaker and general manager Todd Graff will stay on with the business. The Frank family will maintain ownership of their Rutherford and Lewis vineyards but continue to provide grapes to the Frank Family reserve tier.
FFV generated NSR and EBITS of approximately $71.5 million and $28.8 million respectively, delivering an EBITS margin of 38 per cent. The business has an impressive track record of growth, with revenue having increased every consecutive year since 2009, TWE said.
Treasury Americas president Ben Dollard said the company was well placed to grow FFV through its multi-channel national distribution and sales platform.
“Increasing distribution in the off-premise channel and under-penetrated states both key priorities sales,” Dollard said.
Ford told the investor call on 18 November, early feedback from distributors was overwhelmingly positive.
TWE has a fraught history with its American arm. Most recently, its poor performance in 1H FY20 which reported a 17 per cent drop in the first half, prompting a profit downgrade that wiped $3 billion off its market capitalisation and saw the share price drop 40 per cent.
When Ford took the helm he announced an overhaul of the Americas business, having its volume while maintaining similar earnings and moving to a target of 25 per cent regional EBITS.
Earlier this year the company enlisted The Wine Group to sell its Beringer Main & Vine, Beringer Founders’ Estate, Coastal Estates and Meridian brands.
Ford said operational and organisational restructures in the US as well as divesting non-priority US portfolio brands and assets have delivered roughly $300 million.
The FFV acquisition will be funded via a combination of debt and cash, including proceeds from recent US asset divestments
Ford said over the next two years TWE would grow FFV’s capacity by sourcing grapes from TWE’s existing US grower network.
“We can increase [volume] quite significantly ahead of where the Frank Family has been able to do so to this point in time,” Ford said.
He said the ongoing involvement of Rich and Leslie Frank would guarantee the distinct style and quality of FFV wines would not be compromised.
