Diageo offloads its Argentinian wine business

If you want to burn money quickly just invest in wine. This is the lesson one could draw from Diageo’s on-going attic sale. The world’s number one drinks company said on 5 November 2015 that it has sold its wine interests in Argentina to the country’s largest producer, Grupo Peñaflor. The sale includes the Navarro Correas and San Telmo wine brands along with production sites and vineyards, Diageo said.

The sale for an undisclosed sum follows Diageo’s disposal last month of its U.S. wineries and the UK business Percy Fox in a USD 600 million deal with the Australian wine company Treasury Wine Estates (TWE), formerly Foster’s wine division. This deal was given the green light by U.S. regulators on 3 November 2015, Australian media said.

Diageo is also reported to have put its Chalone California wine business up for sale after TWE opted not to buy it.

Once Chalone is sold, Diageo’s only remaining wine interests will include the London merchant Justerini & Brooks, plus local wine brands owned by Mey Içki in Turkey and USL in India, media reported.

Diageo’s exit from wine underlines that even global industry leaders sometimes become the victims of investment fashions. When wine was projected to become the next beer globally in the early 2000s, Diageo forked out USD 5 billion for Seagram’s wine business. But in the year to 30 June 2015, Diageo’s wine unit turned over only GBP 18.5 million (USD 28 million). What’s worse, the transaction between Diageo and Grupo Peñaflor will result in an exceptional pre-tax loss for Diageo of about GBP 60 million (USD 91.40 million) once the deal is completed, as expected, early next year.