The logic in Henkell Freixenet’s interest in Pommery – and why it could presage more wine M&A

Here we spell again. A period oregon truthful aft Pernod Ricard and Brown-Forman terminated discussions implicit their mooted “merger of equals”, we person different “will they, won’t they?” M&A saga connected our hands. The projected acquisition of a bulk involvement successful Maison Pommery & Associés by Henkell Freixenet whitethorn beryllium considerably smaller successful presumption of the sums progressive but, successful the satellite of sparkling wine, it’s a precise large woody indeed.

Henkell Freixenet – portion of the family-owned Oetker Collection KG – has built a ascendant presumption successful the satellite of fizz, amassing €1.25bn ($1.45bn) successful revenues past twelvemonth acknowledgment to a roster of brands that includes a mates of satellite leaders: Freixenet, the planet’s biggest sparkling vino brand, and Mionetto, the starring planetary Prosecco.

The company’s stock of the planetary sparkling vino marketplace (excluding Champagne, Lambrusco and the Russian market) stood astatine conscionable nether 10% (volume and value) successful 2024. In an manufacture arsenic fragmented arsenic wine, those are awesome numbers.

The scope of segments covered by the concern is beauteous comprehensive, spanning Cava, Prosecco, Crémant and Sekt, positive (through 2022 acquisition Bolney Wine Estate) English sparkling. If the institution has a weakness, it lies successful the information that it is earnestly underweight successful the astir lucrative sparkling vino class of them all: Champagne. Alfred Gratien is simply a prime location but constitutes a comparatively tiny portion of the Champagne universe.

Maison Pommery & Associés would alteration that. It comes with a top-ten Champagne brand, Pommery, positive Vranken, Charles Lafitte and the precocious launched Maison Pompadour – a high-end Pommery offshoot sourcing effect from the house’s historical 25-hectare vineyard successful Reims that has been much than 20 years successful the gestation.

Maison Pommery is besides a concern successful modulation – successful fact, there’s an statement for saying that it’s been successful modulation for astatine slightest a mates of decades, perchance adjacent dating backmost to the acquisition of Pommery from LVMH successful 2002.

The historical Vranken-Pommery Monopole (the sanction of the concern until this year) exemplary was powerfully focused connected selling ample volumes of comparatively inexpensive Champagne successful the French home market. That was good – if fiercely competitory – successful an property erstwhile France hoovered up good implicit fractional of Champagne’s planetary volumes. But the semipermanent structural diminution of the home Champagne marketplace has changed that dynamic.

The company’s effect has been a semipermanent effort to premiumise, progressively edging retired of low-margin, high-volume trading and what is coyly referred to arsenic “interprofessional sales” – the alternatively grey commercialized successful anonymous bottles betwixt Champagne operations.