Jeanjean and Laroche Wines: A successful Strategy is all about Momentum

(More wine news on www.vitabella.fr). In France, Jeanjean (a languedoc based wine group created in 1870) recently took over the control of Laroche wines. In fact, JeanJean will own 49% of a new group called "Advini" - listed on the French stock exchange - a marriage between low priced Languedoc wines and premium Chablis wines. With 1,450 hectares of vineyards, this new Eur190 million revenue generating group Advini will be strong enough to devevelop market shares internationally.
For JeanJean, this operation makes sense. On one hand, Jeanjean generated 64% of its sales in France in 2009, mainly through supermarkets and hypermarkets. On the other hand, 85% of Laroche revenues are made from exports. Recently hurted by a slow demand in UK, Japan and Russia, Laroche may also have suffered from its strategy to get out of supermarkets and focus on hotels/restaurants a few years ago. During that same period of time, Jeanjean went upstream and bought, among others, Ogier in Chateauneuf du Pape and Antoine Moueix with its grands crus from Saint Emilion. With these two important acquisitions, Jeanjean also wanted to increase its market shares outside France. This strategy proved successful as 36% of total sales are now generated by exports compared to 3% a few years ago.
What's next for JeanJean? The management recently presented its strategy for the future including an objective, over the next 5 years, to increase its international activities to more than 50% of total sales. Acquiring Laroche helped the group to go fast in that direction. It also helped the group to get an access to 100 hectares in Chablis appellation. Advini's portfolio now counts among the most reknown appellations in the world: Chateauneuf du pape, Saint Emilion and Chablis are names that ring a bell to most of wine drinkers in the world. This is a very good start but objectives must still be achieved on the operational level. And on the strategical level, the management will have to consider a new issue after this operation with Laroche. Should Advini divest operations in Chile (16 hectares) and in South Africa (70 hectares)? This is an important decision the management should rapidly make. Was it relevant for Laroche to make this investment at the time, is not the question.The question is: To divest or not to divest? Will Chilean and South African wines bring more value to the group and help reach Advini's objectives more rapidly in the future or will it burn cash and waste efforts that could be allocated now elsewhere more efficiently? Considering momentum will be key in this decision. (More news on www.vitabella.fr).