Diageo in talks with Sula Vineyards

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Rumor has it that Diageo India could acquire a 26% stake in Sula wines. The world’s largest drinks company is in talks with a few domestic wine companies, including the Nasik-based Sula Vineyards, to buy a strategic stake. Sula Vineyards is projected to sell 1.25 lakh cases of wine in 2007 fiscal year. They sold 90,000 cases in 2006 for a topline of Rs.25-30 crore.


Sources said early-stage negotiations were on with the Samant family-controlled Sula, the second-largest Indian wine entity, to acquire a 26% stake. The talks have not yet reached a definitive stage even though Diageo is actively scouting for a presence in the country’s fledgling but fast-growing wine industry.
Diageo said it was looking at India’s wine sector but there was no specific development at the moment to comment on. Sula’s MD and CEO, Rajeev Samant, said: “I have no news about Diageo’s plans. We have no tie-up with them.”
However, multiple sources confirmed that at least two rounds of negotiations have taken place between the two players, with a Diageo team visiting the Sula wineries in the recent weeks. Sources said Sula could look at an enterprise valuation of Rs 80-90 crore. The winery with a top line of Rs 25-30 crore sold 90,000 cases in FY06, and is projected to sell 1.25 lakh cases in FY07.
In fact, sources had earlier mentioned that Sula could look at inducting a strategic or a large financial investor in a bid to prepare ground for the next growth phase. Private equity Global Emerging Markets (GEM) fund already owns a minority stake in Sula with the Samants holding the rest.
Sula is among the three leading premium domestic wine companies, the others being Champagne Indage and Grover Vineyards. Indian wine consumption is currently pegged at 8 lakh cases and growing at 20-30% year on year.
Observers said early signs of consolidation could be in the offing with Vijay Mallya’s UB Group unveiling plans for a serious wine foray.
Meanwhile, Diageo has been upping its profile in India, which is arguably the hottest growth market for alcoholic beverages along with China. Diageo, which has been trailing its global rival Pernod Ricard in both India and China, recently struck an equal joint venture with Radico Khaitan for tapping the mainstream IMFL market.
In 2001, Diageo hurriedly exited IMFL to focus on its imported international portfolio but revised the strategy with the domestic market witnessing sustained robust growth. Earlier this year, it inducted former McKinsey partner Asif Adil on board and now wants to look at all segments of alcoholic beverage business in India.
Copyright © 2006, Bennett, Coleman & Co. Limited. All Rights Reserved.

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