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Are Brewery Acquisitions Good for the Wine Industry?

Why are breweries buying wineries? It’s actually a pretty good question as even though there are many similarities between the brewery business and wineries, there are also some significant differences that sometimes can the make the synergy difficult once a brewery has purchased a winery. I used to work for an Australian wine company that was purchased by a well known larger global brewery and was witness first hand to many of the difficulties and challenges that both parties faced. Inevitably it actually took a number of years of changing direction, strategies, and also personnel along the journey, to end up with a model that worked for both.

Firstly, both beer and wine are alcoholic beverages, and while the market dynamics may seem the same on the surface, they actually can be complete polar opposites. Of course when a brewery purchases a wine company, there are significant gains to made in supply chain management for both companies, such as packaging subsidies, buying power, and backend departments such as accounting and maintenance. Consequently, breweries can look at increasing the return on capital this way from a paltry 12% to somewhere manageable, such as 20-30% for a brewery. Wine companies are enormously capital intensive. A profitable wine company is appealing to a brewery where gains can be made on both sides with supply chain management, and synergies exist between departments.

However the difficulties can arise when marketing departments converge and “beer people” are expected to market and sell wine. Beer is much more a generic commodity with consistency bottle to bottle, year to year. A beer salesperson is always spruiking the same story, and they know the product is consistent, or should be. Wine, as we all know, has a much more in depth story and emotional attachment, from variety to variety, block to block, and vintage to vintage. It’s very true that real blood, sweat, tears, heart and should have gone into producing many wines. Winemakers and vignerons take ownership. They are the best people to tell the story. The company I worked for initially faltered by failing to recognise this difference, and respect was quickly lost in the market when “beer people” were selling the wine. A few head rolls and management changes later, and the company now has a clear direction and focus. The wine company essentially runs itself as it always did, save for the gains in certain areas, and returns for the brewery are starting to come to fruition.

The hard lessons were learned, and hence acquisition of wine companies by breweries is taken on a much more cautious path these days, but done right, the benefits are there for all involved.

About Jono Farrington

Jono Farrington
Jono Farrington holds a Bachelor of Agricultural Science (Oenology) from the University of Adelaide (formely the Roseworthy Agricultural College). He also holds a Post Graduate Degree in Business Management from Monash University. He worked in the wine industry for nearly a decade, completing vintages in Australia and Bordeaux, before setting up an equestrian training centre.

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