Luxury wine: Piper Heidsieck and Charles Heidsieck on Sale...After Remy Cointreau, could a chinese company be the next owner of both Champagne brands?

For wine professionals, this is not breaking news: Remy Cointreau, world's second-largest producer of cognac behind the Hennessy brand of French luxury products group LVMH Moet Hennessy Louis Vuitton, has put its Piper-Heidsieck and Charles Heidsieck Champagne brands up for sale in a deal which could raise as much as €450m. According to the UK wine magazine Decanter: "The news has provoked intense speculation over who will acquire the brands, with Diageo and Pernod Ricard named as possible bidders – although analysts believe a private equity group is the most likely buyer." What should we think about these speculations and what other names could be evoked? With the current strong interest for wine in Hong Kong, a big chinese name could make the deal.

Charles Heidsieck and Piper Heidsieck are on sale. Right but what should the buyer be aware of?

1) On the financial side: Sales dropped to 6.9m bottles in the year to March 2010 (of which Piper accounted for 5.6m and Charles 0.8m bottles). Bottom line: It is understood that Piper has never been profitable in the 20 years that Rémy Cointreau has owned it.

2) On the Human Resources side: Cost-cutting measures have included the announcement of 45 job losses (one quarter of the workforce) in February 2010, which prompted strike action at the company’s headquarters on the outskirts of Reims. Full measures were not applied.

3) Distribution: Buyer's major objective will be to develop sales internationally. Distribution of Charles and Piper Heidsieck was supported by the strong experience of Remy Cointreau group. The buyer will ideally have its own distribution network or would have tied up strong relationships with distributors in strategic places in the world.

4) Grape resources: Charles and Piper have good long-term contracts with vine growers. The buyer should make sure to pursue these long term contracts by strengthening relationships with vine growers. Then it will guarantee the buyer to maintain quality and volume achieved in the past.

5) Brand assets: Experts praise quality of Charles Heidsieck champagnes. From Brut Non Vintage to Blanc des Millénaires, the quality is very high but low volume makes it a little known brand worldwide compared to Piper Heidsieck. With over 5 million bottles and a new delicious top cuvee called Rare, Piper is a strong brand. But a major issue arises when it comes to branding: Confusing names. In fact, Charles Heidsieck and Piper Heidsieck are two labels along with the Heidsieck Monopole. If the name confuses the champagne connoisseur a little, most of occasional champagne buyers may be confused. This could unfortunatley have direct impact on brand image.

So Charles Heidsieck and Piper Heidsieck are now on sale. But who could buy them?

We can hear and read some rumors. Recently in Dow Jones : "Laurent-Perrier is "watching closely" Remy Cointreau's champagne unit sale process, Etienne Auriau, Laurent-Perrier's Chief Financial Officer said Wednesday. Even though Laurent-Perrier may not be interested for all the assets put on for sale, the company might be interested in the contracts to supply the wine producers, Auriau added."

Ok, very good point! But, in that sense, we can easily imagine that some other champagne brands might be interested in these contracts. So, next! A private equity group? It would make sense in fact but Champagne is a very specific industry and this fund must have a good experience in the Champagne industry. Or this private equity group would partner with a renowned champagne name to make this deal successful. An american company? With euro-dollar parity and economic uncertainty, it may not be the right timing for a US based company to make such an investment. Pernod Ricard? They currently make a great work to develop internationally Mumm and Perrier Jouet and enhance both brand images. So at this period, they are on hard work and they may not think about investing in new brands...

I may suggest 3 other directions. None is french!
First, the spanish Freixenet group: they already know about the champagne market (they own Abele) and have a strong and efficient distribution network. Freixenet is one of the most renowned and largest cava houses in Spain, similar in size and importance to France's Moet & Chandon. Going high-end may be an interesting strategy for them.
Second, the german Henkell & Co: One of the leading sparkling wine, they export to more than 70 countries worldwide. The Group is represented by owned subsidiaries in twelve countries. It has leader position for sparkling wine in seven countries and boasts a turnover of €628.6 million. Moreover they know about the specificities of the champagne market as they own Alfred Gratien and they built up a nice brand.
Finally, with the strong interest for chinese in wine, a chinese company could be interested in acquiring these 2 brands. Many names could come up and I won't make the full list but I would suggest one name: AS Watson. Watson's Wine Cellar opened its first store in Central Hong Kong and is now the largest specialist wine store chain in the region with 15 stores. A distinctive feature of each Cellar is the Fine Wine Room containing over 300 different vintages ranging from the top Chateaux from Bordeaux to emerging New World Classics from around the world. Watson's Wine Wholesale has grown significantly since its launch in 2000 and is now one of the top suppliers of wine to the food and beverage industry in Hong Kong. With a history dating back to 1828, the A.S. Watson Group has evolved into an international retail and manufacturing business with operations in 34 markets worldwide. Today, the Group operates over 8,900 retail stores running the gamut from health & beauty, luxury perfumeries & cosmetics to food, electronics, fine wine and airport retail arms. Also an established player in the beverage industry, ASW provides a full range of beverages from bottled water, fruit juices, soft drinks and tea products to the world's finest wine labels via its international wine wholesaler and distributor. ASW employs 87,000 staff and is a member of the world renowned Hong Kong-based conglomerate Hutchison Whampoa Limited, which has five core businesses (ports and related services; property and hotels; retail; energy, infrastructure, investments and others; and telecommunications) in 54 countries. So this HK based group is in the fine wine business, in the Manufacturing business with Water, fruit juices and soft drink, and also in the retailing. Moreover 350 - 450 million euros is an "affordable amount" for this giant company. In fact they would just need to sell Marionnaud business (perfume retailing) to get this money and invest it in Champagne!