Why TWE bought Frank Family Vineyards

Treasury Wine Estates has announced it is acquiring the highly acclaimed Frank Family Vineyards (FFV), including the historic winery, brand and vineyard holdings, in a $434million deal.

TWE has pivoted its focus to the US market recently, with CEO Tim Ford describing the acquisition as a “compelling investment”.

“This is an important step in our ambition to become the market leader in the premium wine segment in the United States,” he said.

TWE said the FFV portfolio was complementary to Treasury Americas by “filling a key portfolio opportunity for luxury
chardonnay”. It added that it was well placed to enhance FFV’s growth given its leading luxury sales credentials, national distribution network and access to exceptionally high-quality vineyards. It’s also hoped the deal will give TWE exposure to new account partners in the US.

“We also look forward to welcoming the broader Frank Family Vineyards team to TWE, including their significant expertise and experience,” Ford noted. “This is a compelling strategic and financial investment, comfortably meeting our investment criteria and one we expect will deliver attractive growth and financial returns for TWE’s shareholders over the long-term.”

The acquisition has been partially funded by the divestment of low-margin brands in the US, including Beringer Main & Vine and Beringer Founders Estate, which have reaped $300million for TWE. Ford said the company’s divestment strategy had now concluded.

“We are ready to grow, we have done the fixing we need to do and our results have been pretty strong,” he said. “The Americas is the largest premium wine market in the world, so we have always had a business there that has had strengths and I think we have built on those over the last two years.”

The acquisition includes the Frank Family Tasting Room located at 1091 Larkmead Lane in Calistoga, the Benjamin Vineyard in Rutherford, the S&J Vineyard in Capell Valley, and a portfolio of award-winning luxury wines across three collections with retail price points ranging from US$38 to US$225 per bottle, all specially crafted by Frank Family winemaker and general manager, Todd Graff, who will remain with Frank Family Vineyards after closing.

Rich and Leslie Frank will maintain the ownership of Winston Hill Vineyard in Rutherford and the Lewis Vineyard in Napa, Carneros. Both vineyards will continue to source grapes for the Frank Family reserve tier after the sales agreement.

Frank Family Vineyards sells about 50% of its wine in independent liquor stores, 40% in restaurants and bars, and 10% direct to the consumer.

TWE targets luxury chardonnay market

Ben Dollard, Treasury Americas President, noted that the US was the largest premium wine market in the world. The Frank Family fills an important gap in the TWE portfolio as it strives to become a “meaningful player” in the US luxury Chardonnay sector. It improves Treasury Americas share in luxury chardonnay to number three overall in the market, and to
number two in the US$25 and above bracket.

It will also increase Treasury Americas’ coverage of on-premise accounts in California where FFV has established a strong presence. TWE noted during a webcast that the phones had been running hot in the 90 minutes since the announcement, with very positive feedback from distributors.

“The acquisition of Frank Family Vineyards represents an outstanding addition to the Treasury Americas brand portfolio and is another important step towards our ambition of becoming the premium wine market leader in the Americas,” he said.

“Rich, Leslie, and the entire Frank Family Vineyard team have built an outstanding legacy that we are excited to nurture for years to come. We are thrilled that Rich and Leslie will continue to be very involved and welcome the FFV team to Treasury Wine Estates.”

Rich Frank added: “Leslie and I look forward to continuing to be a part of the next chapter of Frank Family Vineyards, a business we have spent nearly three decades cultivating into a beloved luxury wine brand. We have prided ourselves on creating a family atmosphere among our staff and our guests and know this legacy will carry on. We, along with our team, are excited to remain actively involved with Frank Family, while also taking on new leadership roles with Treasury Americas.”

The transaction is expected to close in December 2021.

Alcohol spending remains strong in US

Despite the upheaval the pandemic has caused to people’s day-to-day lives over the past 18 months, spending on alcoholic drinks has been constantly resilient, IWSR consumer data shows. Spending in the off-premise remains in growth, driven by a rebound in incomes since August 2020.

Mariana Fletcher, Head of Analytics and Insights for the Americas at IWSR Drinks Market Analysis, said:

“There has been solid momentum in US drinkers’ spending patterns as there is less hesitancy to spend on alcohol. This is likely to continue in the immediate future, with positive net-spend predictions,” says Fletcher.

Millennials continue to be one of the most enthusiastic drinking demographics, consuming a wider range of alcoholic beverages while also being the generation that is more likely to have a higher spend average. IWSR consumer research shows that consumers who have higher levels of comfortability – including millennials – generally have higher spend intentions.

The proportion of US drinkers classified as generally ‘comfortable’ with life has shot up to 60%, compared with 35% in August 2020, and as a result have become more content shopping in stores, socialising, and going to events. The overall positive change in spending is largely due to fewer Americans spending less, rather than people actively spending more.

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