A flurry of wine brands are changing hands. If you are considering buying a brand, there are a few things to consider including: who’s going to put the bins out? Luke Tyler from Brand Asset reports.
Chaos breeds opportunity, and there’s no shortage of either in the Australian wine industry right now.
The major players are looking to offload brands, and pressure on margins and cashflow is forcing smaller independent operators to consider their options.
There are great brands up for grabs, and more to come.
If you have access to capital and you’re weighing up buying another brand, here are a few traps worth thinking about before you jump in headfirst.
This isn’t a due diligence checklist.
Your accountant and lawyer will give you one of those. This is the stuff that tends not to make it onto the list.
A small brand doesn’t mean small work
Whether it’s 500 cases or 50,000, the effort to integrate a brand isn’t vastly different.
There may be fewer systems to deal with (which can be a problem in itself), but there’s still a website, an online store, social media accounts and a wine club that all need to be brought across.
You’ll still need to refresh the look and feel, sharpen the positioning and work out where it really fits in your range.
Don’t underestimate the work involved and what that takes away from your core business.
More volume doesn’t automatically mean more efficiency
Creating more throughput in the winery doesn’t necessarily ensure that your operation will be more efficient.
But every new SKU brings its own labels, bottles, varieties and possibly a different set-up in the winery.
The savings you modelled can quietly disappear in the extra complexity.
Are you paying for things you don’t need?
It’s rare for an acquisition to match your wish list perfectly.
A sale almost always comes with excess baggage: a vineyard with varieties you have no intention of keeping, winery equipment you don’t need and, most often, stock that is more of an anchor than an asset.
These ‘assets’ will all carry a value.
But if you don’t want or need them, treat them as liabilities and factor in the cost of ripping them out, selling them off or clearing them through low- (or no-) margin channels.
Work out who’s going to put the bins out
It’s easy to look at what the business needs and map it onto your current team: marketing goes to the marketing manager, winemaking to the winemaker, and so on.
But don’t overlook all the little things the owner has been doing to keep the business and the property ticking along.
Someone still has to put the bins out, water the garden and clean the bathrooms.
Cost it into the business case.
How much of the brand equity actually transfers?
How closely is the brand tied to the cult of the winemaker?
How much of the cellar door trade depends on the owner being there every weekend?
Will it still be a media darling once it’s part of a group?
There’s no formula for working out what a brand is really worth, but the smaller the brand, the more these factors matter.
Don’t assume customers, critics and the trade will give you a chance as the new owner and go along for the ride.
Don’t make assumptions about distribution
Last year’s sales are no guarantee of next year’s.
Get up-to-date figures, understand the distribution situation, and make meeting the existing distributors a priority during due diligence.
Stable market representation has never been more valuable, so make sure the current distributors are willing to come across with you.
None of this is a reason not to buy.
Plenty of good brands have thrived under new owners.
But the deals that work are the ones where the buyer knows exactly what they’re taking on, beyond the price and the case volumes.
Luke Tyler is the principal of Brand Asset, advising on strategy, sales and marketing. Visit brandassetadvisory.com.au or email luke@brandassetadvisory.com.au.