By James Wells – publisher TheShout
The potential sale by Wesfarmers of Vintage Cellars to private equity for up to $300 million has been described by analysts and retailers as “crazy” and “nothing more than a fishing expedition”.
Since news of the potential sale of the 77-store chain broke, TheShout has been contacted by a number of retailers who compete with the chain and they have described the reasons behind the mooted sale as being largely about marketing rather than having any substance.
The independent retailers, who asked to remain anonymous, said the Vintage Cellars sale was “nothing more than a fishing expedition” and could be an attempt to create some headlines or even a valuation of the business prior to the appointment of John Durkan as managing director of Coles supermarkets and liquor on 1 July.
A retail analyst contacted by TheShout questioned whether there was actually any serious interest in the market for a potential sale, and noted that Wesfarmers has “previously looked at breaking up the group” but also noted that it would be “crazy to sell Vintage Cellars as it had such great brand equity”.
According to independent retailers, there is stronger speculation that the 1st Choice brand is under threat greater than the Vintage Cellars brand.
Newspaper reports claim Vintage Cellars sales are currently around $250 million, with profit between $15 million and $20 million, but that the small footprint of the store, premium consumer positioning and high head office costs reduce profitability.
There are currently 35 Vintage Cellars stores in New South Wales, 15 stores in Victoria, 12 stores in Western Australia, nine in Queensland, four in South Australia and one store in Darwin and Canberra.
Durkan, who is currently the Coles chief operating officer for the remainder of the month, has made it very clear that the returns from the liquor business have not been acceptable and that a major restructure is on the cards.
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