Diageo sells wine stake to focus on spirits and beer

Diageo, the world’s largest distiller and parent company of Guinness Nigeria Plc has sold off most of its wine businesses in the United States and UK to Treasury Wine Estates, an Australian company, in a deal worth US$552 million.

The transaction involves sale of Sterling Vineyards, Beaulieu and Acadia in the US and Blossom Hill, the second-biggest selling wine by value and volume in the UK.

The deal is the latest in a string of sales by the spirits giant, which analysts say would help it focus on its core business, spirits and to a lesser extent beer that includes Johnnie Walker, Smirnoff, Captain Morgan and Guinness.

Diageo had found it difficult to grow wine sales in the US and emerging markets, in which it had invested immensely.

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Blossom Hill range of small wines

However, its wine holdings is small considering that it only accounts for a paltry 4 per cent of annual sales and 1.5 per cent of operating profits, according to analysts’ estimates.

Diageo’s chief executive, Ivan Menezes, said: “Diageo’s strategy is to drive stronger, sustained performance through focus on our core portfolio and today’s announcement is another element of that strategy in action. Wine is no longer core to Diageo and this sale gives us greater focus.”

The sale brings the total value of disposals by the company this year to £1bn from the sale of other businesses including Scotland’s luxury Gleneagles hotel and golf course.

We reported in July that Diageo and Heineken NV swapped assets to dissolve a South African joint venture they formed in 2004 to counter the dominance of SABMiller. That sale saw Diageo sell its entire beer stakes in the joint venture to Heineken and Namibian Breweries. And earlier this month Diageo, again swapped deals with Heineken, which saw the spirits maker sell-off its beer stakes in a Jamaican Brewery, Desnoes & Geddes and GAPL Pte Ltd, a Malaysian Brewery to Heineken and at the same time increased its holding in Guinness Ghana Breweries Limited.

According to Diageo, the money realized from the wine sale would be used to pay down debts, news welcomed by Moody’s, the credit rating agency.

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