Coles unwilling to let go of Vintage Cellars
COLES has no interest in selling its Vintage Cellars liquor chain despite reportedly receiving offers of up to $300 million from private equity buyers.
Industry sources yesterday described suggestions of a possible deal as “rubbish”. “It’s some bottom feeders looking for a bargain,” one source said.
Coles has a strong brand presence in the liquor business, with its Liquorland, Vintage Cellars and 1st Choice brands accounting for about 20 per cent of packaged alcohol sales.
The operation, however, has been performing poorly and is about half the size of Woolworths’ sprawling Dan Murphy’s and BWS empire.
Woolies is determined to entrench its dominance over Coles in liquor, with the head of the Dan Murphy’s business Martin Smith recently unveiling plans to open 10-12 stores a year for the next six years.
Last week, incoming Coles boss John Durkan promised to fix the “unacceptable” performance of the company’s liquor chain. He announced the second strategic review of the division since Wesfarmers took over Coles, saying he would take direct responsibility for it.
“The returns, frankly, have been unacceptable, and we’ve got a lot of work to do,” he said.
Coles’s renewed focus on liquor and the fact it’s about to again start trying to resurrect the business’s fortunes could have led to an opportunistic attempt by private equity to dislodge Vintage Cellars.
Durkan, however, will persist with the multi-brand approach as he reviews senior management positions.
The future of Kevin Rudd’s former economic adviser Andrew Charlton, who replaced Tony Leon as general manager of Coles liquor in 2012, is thought to be fluid.
The first strategic review of the business concluded that Coles’s stores were too small compared to Dan Murphy’s operation, had poorly located sites, and not enough stores co-located with supermarkets.
Durkan will now look at a range of improvements, including the supply chain and relatively high costs.
Source: The Australian - 6 June 14
