Published 7th January 2010WOOLWORTHS is rumoured to be looking...

Published 7th January 2010


WOOLWORTHS is rumoured to be looking at the country's biggest alcopops maker, Independent Liquor Group, as part of a plan to secure a supplier for its fast-growing private-label beer business and reduce its reliance on Foster's Group and Lion Nathan.

Speculation in the alcohol industry is that the retailing giant has been doing a cost-benefit analysis of Independent Liquor, including an outright acquisition, a partial acquisition or a formal strategic alliance. The business is believed to be worth about $700 million, which is sharply lower than the price two private equity operators bought it for three years ago, and could therefore prove a stumbling block in any sale.

The rumours emerged as competition between Coles and Woolworths hots up and the ability to grow gets harder without running into competition issues or legislative problems.

Independent Liquor is the biggest supplier of alcopops in Australia and New Zealand, but also produces and distributes spirits, beer and wine, including Tuborg, Haagen and Carlsberg, and Mystic Ridge and Grove Hill wines.

A spokesman for Woolworths refused to comment. "There are lots of rumours about Woolworths' plans but we don't comment," he said.

A source close to Independent Liquor said a tie-up with Woolworths made sense. He said not only would it give it access to capacity to increase its home brands, but it would give it access to costings which would be used as a threat over the big suppliers, Foster's and Lion Nathan. ''They can say, 'we will do it ourselves if you don't give us certain products at a specified margin','' he said.

It would also continue Woolworths' strategy to integrate vertically across the supply chain, give it an internal capability for beer and alcopops production as well as wholesaling capacity. Independent Liquor has production facilities in Victoria and New Zealand.

Independent Liquor, which was sold to the private equity firms PEP and Unitas in December 2006 for $NZ1.3 billion, already contract packages Woolworths' home-brand beer Platinum Blonde.

Woolworths also has the private-label beer Dry Dock and wine brands including Bailey and Bailey. It is the exclusive distributor of the Mexican beer Sol.

If a deal goes ahead, it would be the next step in Woolworths' plans to increase its private-label brands across groceries and liquor. It would also follow a move by Woolworths last year to buy 25 per cent of the West Australian boutique beer operator Gage Roads, which makes private-label beer to sell in Woolworths liquor stores.

A recent report from research firm The Nielsen Company shows Australians pushed spending on private-label brands to record levels last year. In the year to October 31, their share of the grocery sector was 22.5 per cent and the average spending change compared with a year ago was up 4.3 per cent.