While it was difficult to imagine Cellarmaster’s being purchased by anyone else other than perhaps by Coles, it makes a great deal of sense for Woolworths to add its assets into its own rapidly expanding wine business. The more you look at it, the $340 million purchase from Archer Capital appears pretty good business. Since Archer Capital led the management buyout of Cellarmaster’s from Foster’s in 2007, at a reported value of $215m, it has broadened the scope of its operations. Today Cellarmaster’s comprises five integrated businesses, being the direct marketing wine clubs in Cellarmasters in Australia and New Zealand Wine Cellars in New Zealand, the Dorrien Estate winery in the Barossa Valley, the Vinpac International wine bottling operation and Carters & Associates, a New Zealand distributor. Woolworths is shortly to launch its new online wine retail service, but until this deal did not itself own a significant direct customer database. That has now been corrected with the addition of the Cellarmasters direct wine business, which represents 25-30% of the sales in the wine club and direct sales space in the Australian market. Add to that the successful Cellarmasters-controlled businesses of Wine IQ and Cellarforce, and Woolworths bolts on access to large wine club databases as well as powerful sales relationships with a large number of winery cellar doors. It also acquires marketing access to the wine-ark cellar club and stored wine resource, which looks very complimentary indeed to its existing Langton’s business. Woolworths is expected to retain Cellarmasters’ existing senior management. The resources represented by the Dorrien Estate winery and Vinpac International set up Woolworths to vertically integrate the production of its own wine brands, a strong trend in retail that is unlikely to diminish over the medium term. The deal is now falling under the review of the ACCC, but given that it represents a move by Woolworth’s into entirely new marketing channels, any move to block it would be entirely unexpected. Other than Langton’s , Woolworths’ existing wine operations are traditional bricks and mortar businesses operating under the Dan Murphy, BWS and Woolworths Liquor banners. Steve Greentree, General Manager of Woolworth’s Liquor, explained that ‘Our strategy is to innovate in line with evolving customer trends through a multi-channel, multi-brand and multi-platform liquor offer and the addition of Cellarmasters represents a perfect fit.’ CEO Michael Luscombe said: ‘Cellarmasters is a specialised business and a logical extension to our existing liquor portfolio’.
