April 6, 2018

U.S. private equity firm The Carlyle Group has acquired Accolade Wines, Australia’s largest winemaker, from CHAMP Private Equity for A$1 billion (US$772 million).

Under the terms of the deal, CHAMP III Funds, holder of 80 percent of Accolade, and Constellation Brands Inc., which holds the remaining 20 percent, agreed to sell their shares to Carlyle.

In business since 1853, Accolade is Australia’s largest winemaker, and the fifth largest wine company by volume in the world. The company sells more than 35 million cases of wine to 140 countries including China, Japan, Canada, the U.S., the UK, New Zealand, and countries across Europe each year. Exporting wine valued at more than A$350 million (US$269 million) annually, Accolade generates more than two-thirds of its yearly earnings offshore, and is expected to earn about $100 million before interest and tax this year.

The company’s portfolio is the only major wine portfolio that includes wines from each key wine-making geography, according to the company website. Australian brands includes Tasmania’s House of Arras, Grant Burge, St. Hallet, and the iconic Hardy’s, the top Australian wine in the UK. Wines from other geographies include the UK’s Echo Falls and Stowells; North America’s Geyser Peak, Atlas Peak, and XYZin; New Zealand’s Mud House Sauvignon Blanc and Pinot Gris, and Waipara Hills; and Chile’s Viña Anakena.

“We followed a deliberate strategy of creating a New World wine platform so that we now have wine making operations in Australia, New Zealand, South Africa, the United States and Chile, while also premiumising our local offering through the acquisitions of Grant Burge Wines and the Fine Wine Partners portfolio, which included brands such as St. Hallett, Petaluma and Croser,” said John Haddock, CEO, CHAMP Private Equity.

Asian Demand

In 2015 researchers at Adelaide University and Victoria University stated that Asian markets, led by China, will grow to dominate world wine consumption within the next three years creating significant shifts in global trade flows.

“It is the sheer size of China’s adult population, and the fact that grape wine still accounts for less than 4 percent of Chinese alcohol consumption, that makes the import growth opportunity unprecedented,” University of Adelaide’s Kym Anderson said at the time.

As the new owner of Accolade, Carlyle is expected to build out the company’s strategy in regard to the Asian market, and particularly China.

Australia is the fifth largest wine exporter in the world after France, Italy, Spain, and Chile, according to the Wine Australia Export Report June 2017.  In 2016-2017 Australia’s wine exports increased in value by 10 percent to $2.31 billion, due in large part to demand from China.

Australian wine exports to China skyrocketed by 63 percent last year to a value of $848 million – accounting for a full third of the country’s total wine exports for the year.

Not only demand, but trade relations are also playing a part in positioning Australia as a top wine supplier to China, and hint at the strategic move on the part of Carlyle. Since 2015 a free trade agreement has in place between Australia and China, and earlier this year China reduced tariffs on Australian bottled wines from 5.6 percent to 2.8 percent, and on Australian bulk wine to 4 percent, and plans to eliminate all tariffs on Australian wine in 2019. Also, being a U.S.-based firm, Carlyle’s bold entry into Australia’s wine sector comes as China began enforcing punitive tariffs totaling 29 percent on U.S. wines, reports Drinks Business.

-Lynda Kiernan