By Ian Neubauer
Australia’s struggling wine industry copped another blow yesterday (August 7) after Constellation Wines Australia (CWA), owner of the Hardys label, announced it would sell some of its Australian wine assets.
The announcement will see 23 vineyards and 10 wineries put up for sale, and one in three Constellation SKUs put on the chopping block. It also puts under uncertainty 350 jobs.
It follows the conclusion of a review that took into account the strengthening Australian dollar, duty increases in the UK, a economic downturn in the US, a wine oversupply in Australia and drought-related cost increases, including the cost of water and fuel.
CWA president, John Grant, said the company was responding to the difficult global environment and making hard decisions now to benefit the company in the long term.
“The review has identified the need to streamline our company, thereby underpinning our future,” he said. “This has included reinforcing the strength of our key wine brands through investing in brand building, strengthening our sales team, and reducing our production footprint by consolidating production in the Riverland and Sunraysia regions.”
Changes to the business will include the sale of winemaking facilities in Clare and Padthaway in SA and Mount Barker in WA, streamlining its product portfolio and adjusting fruit sourcing requirements, the relocation of its Swan Valley bottling operation to Reynella in SA, and a reduction in the number of bottling shifts at Reynalla.
The company said the announcement would help strengthen Australia’s wine sector by focusing on higher quality and higher value wine and putting price increases into place.
“We did not say we are going to solve problems of the industry,” added a CWA spokesperson. “But if we don’t take actions we need to underpin the company’s success now, there will be no future for us and we will all be in a lot of strife.”
The announcement could not come at a worse time for Foster’s, which is currently undergoing a strategic review of its underperforming wine business. CWA’s sell-off will likely reduce wine asset values in Australia and make it harder for Foster’s to maintain its position in the sector.
CWA shares have traded steadily over the past week and were changing hands for $2.34 at midday today (August 8).
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