Endeavour strikes gold: snares WA’s CapeMentelle from LVMH
Endeavour Group has snapped up the Margaret River-based Cape Mentelle Wineryfrom a subsidiary of French luxury goods conglomerate Louis Vuitton MoetHennessy for an undisclosed price.LVMH subsidiary Moet Hennessy, which owns brands including Dom Perignon,Glenmorangie and Krug, has offloaded Cape Mentelle after more than threedecades of ownership.
Endeavour declined to reveal the price, but industry sources suggested $18 millionto $20 million.Cape Mentelle, which helped put Margaret River on the map, was sold to Endeavour Group after a 12 monthprocess.
Globally renowned for producing a wide range of award-winning wines, and one ofthe region’s founding five wineries, Cape Mentelle will bolster Endeavour’s finewine portfolio, Paragon Wine Estates.
Cape Mentelle was established in 1970 with just 16 hectares of vines by industrypioneer David Hohnen and his brothers Mark and Giles. The business has grown to135 hectares of cabernet sauvignon, semillon and sauvignon blanc, shiraz,chardonnay and merlot vines across four vineyards within Margaret River.
The winery’s flagship cabernet sauvignon is sourced primarily from the originalWallcliffe Vineyard. Cape Mentelle’s sister winery, Cloudy Bay in New Zealand, isnot part of this transaction.
Endeavour chief executive Steve Donohue told The Australian Financial Review thatafter a near 12-month sale process, adding Cape Mentelle to its growing portfoliowas like “striking gold”.“We’ve been building our portfolio of premium Australian wine brands for a longtime, but with a lot of energy since about 2019 when we acquired Chapel Hill inMcLaren Vale,” he said.
“Margaret River has been something of a missing piece inthe puzzle, if you like – we didn’t have any exposure over there. It is such animportant part of the Australian wine story.
“It’s just a huge privilege to be able to get access to a brand and team of the qualityof that at Cape Mentelle.”
Other Paragon Wine Estates brands includeKrondorf Wines, Riddoch of Coonawarra,Shingleback Wines, Oakridge Wines inVictoria, Isabel Estate in Marlborough, NewZealand, and Josef Chromy Wines in Tasmania.
Cape Mentelle Vineyards Ltd’s parent group isVeuve Clicquot Properties, according to thelatest accounts filed with the corporateregulator.
Cape Mentelle’s gross profits rebounded to$647,945 in the calendar year to December2021 from a $5.53 million loss the year before.Revenue was about $1 million higher, at $6.5 million.
But the business posted a loss of $2.24 million for the 2021 year, after excluding theone-off $365.4 million sale of the Cloudy Bay Vineyard to its parent entity.
Mr Donohue conceded the Australian wine sector has been tough the past fewyears thanks to COVID and China’s trade embargoes, but sees “huge opportunity” withCape Mentelle, which is a pioneer of many of the region’s renowned wine styles.
Cape Mentelle is a member of Sustainable Winegrowing Australia, and was thefirst WA winery to obtain the Entwine accreditation for its sustainability program.
Estate director Penny Dickeson, viticulturist Dave Moulton and recently appointedsenior winemaker Eloise Jarvis are all sticking with the business, which exports tomore than 30 countries. About half the wine it makes gets sold to internationalmarkets. It is estimated that 50,000 cases will be produced this year.
Endeavour has long-standing relationships with wine producers across thecountry, and is one of the largest employers in the Barossa region, where DorrienEstate winery ,and bottling and packaging arm Vinpac employ more than 200people full-time, working directly with 50 grape growers in the region.
Endeavour also owns 1,675 BWS and Dan Murphy’s retail stores and 344 Hotels(including five managed clubs).Cape Mentelle estate manager PennyDickeson will stay with the business.
Cashless gaming
The winery purchase comes as another part of the business is under themicroscope: electric gaming machines, or pokies. NSW Premier Dominic Perrottethas plans for a cashless gaming card that willinclude spending limits, and is considering a $1000 to $1500 a day loss limit – whichis perceived as a major risk to hotel revenue and earnings.
Jarden analysts said Endeavour had the largest share of pokies and gamingrevenue across Australia, estimated at $700 mullion to $800 million in fiscal 2019.Others say the figure is closer to $1 billion.
Mr Donohue declined to confirm any number, saying: “We don’t disclose that levelof detail.”He said “there is a huge amount of speculation in the market at the moment” andEndeavour for a long time had engaged with the regulator and government on anyproposed changes to cashless gaming.
Jarden analysts estimated about 55 per cent of the hotels division earnings isderived from pokies, which means it is contributing more than 20 per cent togroup EBIT.
Barrenjoey Capital head of consumer research Tom Kierath flagged in a recentreport that more than 100 per cent of the annual profits earned by its hotelsbusiness comes from pokies that subsidise food, beverage and accommodationsales.His report says, “lower spend in a cashless gaming environment will significantlyimpact its profit and loss”, and it could wipe 35 per cent of earnings from the hotelsbusiness. Mr Kierath’s analysis assumes the “harm minimisation” initiativesbeing adopted by the Tasmanian government in 2024 will be rolled out acrossother states.
Endeavour was split off from supermarket giant Woolworths to become a separately listed company on the ASX in 2021.
EDV Price at posting:
$6.42 Sentiment: Buy Disclosure: Held
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