Foreign investors move into American wine

Press, 23 May 1988, Page 33

Foreign investors move into American wine

NZPA-Reuter San Francisco The wineries of America, labouring in a country of relatively low wine consumption, are drawing keen interest from foreign investors trying to exploit a growing taste for United States wine abroad. Almost 15 per cent of the wine produced in the United States now flows from wineries acquired or begun by non-American companies, according to Hambrecht and Quist, a San Francisco investment banking firm. Wine aficionados say the list of well-known Californian labels produced by foreign-owned companies is long, and growing longer — Almaden, Buena Vista, Simi, Beringer, Domaine Chandon, Firestone, Piper Sonoma, Ridge and numerous others. John Fisher, head of Hambrecht and Quist’s consumer group, told NZPA-Reuter in an interview that he expects overseas investor interest in the SUS2.B billion United States wine industry to remain strong at least through this year, especially for better wines.

“The advantage they have with foreign currency, and their strategic compulsions to make good

acquisitions in wine are not going to change in the next 12 months,” he said. Fisher said the acquisitions would probably focus on medium-sized and small wineries producing premium and super-premium wines. Super-premium wines retail for SUS 7 and up for a 75cl bottle, while premiums start at SUS 3. The cheaper jug wines have lost some of their popularity in the 1980 s.

California, which dominates wine-making in the United States and accounted for 95 per cent of United States wine exports last year, has more than 400 commercial wineries, ranging from small financially marginal operations to giant producers such as Gallo, the world’s largest. About one out of 10 of the wineries — including the huge Almaden, Inglenook and Beaulieu vineyards which Britain’s Grand Metropolitan Pic bought a year ago for SUSI. 3 billion — are now in foreign ownership.

These owners include the British, Swiss, Canadians, West Germans, French, Spanish and Thais. Although a few foreign acquisitions date back to the 19705, most came within the last five years.

The Japanese, whose Suntory beverage com--41

pany now owns the Chateau St Jean and Firestone vineyards, have shown a particularly strong interest in United States wineries in the late 1980 s, said Jon Fredrikson, president of Gomberg, Fredrikson and Associates, a leading wine consulting firm.

“There will be another two or three Japanese acquisitions this year, and it would not surprise me if there is one or two from Europe,” he said. No single factor encouraged foreign investors 'to enter the United States market, although the weak dollar aided the trend, Fredrikson said. He said that the acquisition fever reflected the general foreign investor interest in the United States. Several French and Spanish wine makers established a foothold on United States soil by starting to produce sparkling wines, a market segment with increasing sales to American consumers.

Imports of United States wines to the traditionally sake-loving Japanese have risen.

According to the Wine Institute, a San Franciscobased trade organisation, Japan imported about nine million litres of wine last year, “The Japanese are investing principally in super-premium California

labels with the idea of exporting some of them to Japan,” said Fredrikson. In addition, the Japanese — under United States pressure to even the trade imbalance by buying more American products — have spotted the public relations value of buying California wine. Toyota recently began shipping mini-bottles of wine bought from cen-tury-old Wente Brothers, the oldest continuously run family-owned vineyard in California. The wine will be served on Japan’s Bullet Trains. “They were 187 ml bottles, so if you add them all up, it turns out - to be only 2000 to 3000 cases of wine,” said Fredrikson. “I figured that was worth only about two Toyotas in the balance of payments, but they got some tremendous publicity.”

Canadian - based Seagram in March signed an agreement with C. Mondavi and Sons to market the Napa Valley winery’s Charles Krug and Mondavi wines world wide.

“We expect increasing activity in acquisition not just of wineries but of marketing rights for wineries, which is where these large global companies can bring economies of scale to premium and super-premium winery owners,” said Fisher.