Bottles of Jacob’s Creek chardonnay, an Australian wine stand on display at a supermarket in London, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

Pernod Weighs Sale of Jacob’s Creek, Campo Viejo Wines

(Bloomberg) -- Pernod Ricard SA is considering a sale of its wine division, which includes Australia’s Jacob’s Creek and Spain’s Campo Viejo labels, according to people familiar with the matter.

The world’s second-largest distiller has held early discussions on a potential sale of the unit, which has sales of about $500 million, said the people. Deliberations are at a preliminary stage and Pernod may ultimately decide to retain the business, said the people, who asked not to be identified discussing private information.

“As a matter of policy, the company doesn’t comment on rumor or speculation,” Pernod Ricard said in an email.

The maker of Absolut vodka began studying options for the division since before being targeted by Paul Singer’s Elliott Management Corp., one of the people said. The activist investor disclosed a stake in December, calling for 500 million euros ($565 million) worth of cost cuts at Pernod Ricard, which trails only Diageo Plc in the spirits business.

“The group is under no external pressure and has already mentioned several times that it intends to continue the dynamic management of its portfolio,” Pernod Ricard said by email.

Pernod Ricard shares rose 0.5 percent to 156.10 euros at 9:32 am in Paris, giving the company a market value of 41.4 billion euros.

Less Profitable

The Paris-based company’s wine operation is less profitable than its roster of spirits brands. While Pernod Ricard has acquired vineyards such as Kenwood in California and Helan Mountain in China’s Ningxia region in recent years, Chief Executive Officer Alexandre Ricard has favored expanding in faster growing craft liquor by buying brands such as Monkey 47 gin and Del Maguey mezcal.

“For me, this makes a lot of strategic sense as it’s a relatively small part of the group, with lower growth and lower profitability,’’ Sanford C. Bernstein analyst Trevor Stirling said.

The company has also divested other products it doesn’t consider central to its strategy, such as the Domecq line of brandies and Paddy Irish Whiskey.

The wine industry is more fragmented than the beer and spirits sectors, where players have driven consolidation over the past several decades to gain advantages in distribution and supply costs. In 2016, Diageo sold its wine business to Treasury Wine Estates Ltd., the Australian producer of Penfolds, for $600 million.

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