US luxury wine business Frank Family Vineyards acquired by Treasury Wine Estates

USA – Treasury Wine Estates has made a bold step towards building its luxury portfolio and strengthening its presence in the Americas by acquiring US luxury wine business Frank Family Vineyards (FFV) for $315 million.  

FFV, located in Napa Valley, California, has a portfolio that includes the winery, brand, and vineyard holdings.  

It has wines across three collections ranging from retail prices of US$52 to US$309. The suite is chardonnay-led and supported by cabernet sauvignon, pinot noir, and sparkling wine. 

FFV generated net service revenues (NSR) and EBITS of approximately US$71.5 million and US$28.8 million respectively, delivering an EBITS margin of 38 percent.  

The business has an impressive track record of growth, with revenue having increased every consecutive year since 2009, TWE said. 

Treasury Wine Estates says that it is well-positioned to support FFV’s growth given its ‘luxury sales credentials’ and national distribution network. 

Company CEO Tim Ford said the FFV brand will fill the luxury chardonnay category, a segment TWE currently doesn’t occupy.  

The deal takes TWE’s share of the US luxury chardonnay market from 3.7 to 9.4 percent, making it the third biggest player in the US.  

It will also see TWE’s US margin grow from 17 to 18.7 percent and its total market share in the US luxury wine segment will grow from 5.3 to 7 percent. 

FFV winemaker and general manager Todd Graff will stay on with the business while the Frank family will maintain ownership of their Rutherford and Lewis vineyards but continue to provide grapes to the Frank Family reserve tier. 

Australia-based Treasury Wines Estates has a fraught history with its American arm and most recently reported a 17% drop in sales in 1H FY20, prompting a profit downgrade that wiped US$3 billion off its market capitalisation.  

When Ford took the helm he announced an overhaul of the Americas business, halving its volume while maintaining similar earnings and moving to a target of 25 percent regional EBITS. 

Earlier this year the company enlisted The Wine Group to sell its Beringer Main & Vine, Beringer Founders’ Estate, Coastal Estates, and Meridian brands. 

Ford said operational and organisational restructures in the US as well as divesting non-priority US portfolio brands and assets have delivered roughly US$300 million.   

The FFV acquisition will be funded via a combination of debt and cash, including proceeds from recent US asset divestments 

Ford said over the next two years TWE would grow FFV’s capacity by sourcing grapes from TWE’s existing US grower network. 

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