Winery Re-structure Affects Clare Valley

Winery Re-structure Affects Clare Valley

US liquor giant Constellation Brands is to put about $200 million of Australian wine assets on the market, rationalise its packaging operations, increase prices, slash jobs and shed about a third of the labels carried under its brand names. The restructuring, which will affect 350 jobs - about 22 per cent of the company's workforce - was a reaction to tough global market conditions, Constellation Australia's president John Grant said.

The move follows a strategic review of the Constellation Wines Australia business, formerly known as Hardy Wine Co, which Constellation acquired for $US1.9 billion ($2.085 billion) in January 2003.

The company is now struggling against the strengthening of the Australian dollar, increased duties in Britain, wine oversupply, drought-related production cost increases and tougher global competition.

Mr Grant said the company was repositioning itself "with a renewed focus on high-quality, higher-value wines to suit global consumer demands".

Constellation's US-based chief finance officer, Bob Ryder, said: "We are eliminating less profitable . . . (individual labels) . . . focusing on brand-building and increasing pricing to restore appropriate levels of profitability. These actions are designed to reduce our cost base and improve our margins."

The changes, announced after a seven-month review, were expected to yield a net gain of $50 million.

Constellation will quit two South Australian wineries - the 115-year-old, 4500-tonne Leasingham winery at Clare and the 10-year-old, 12,000-tonne Stonehaven winery at Padthaway. Goundrey Wines, a 37-year-old, 7000-tonne winery at Mount Barker in Western Australia, was acquired in 2006 when Constellation took over Canada's Vincor, is also to be put on the market.

Constellation will retain all three brands and all other brands including Amberley, Arras, Banrock Station, Barossa Valley Estate, Bay of Fires, Berri Estates, Brookland Valley, Chateau Reynella, Hardys, Houghton, Leasingham, Moondah Brook, Omni, Renmano, Stanley, Starvedog Lane, Stonehaven, Tintara and Yarra Burn.

But about 30 per cent of individual labels will be shed.

"There will be those where the profits are so skinny that they can't be seen and those where there's too much complexity," a company spokesperson said.