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E.&J. Gallo Acquires Asti Winery, Souverain Brand From Treasury Wine Estates

July 21, 2015

Treasury Wine Estates CEO Michael Clarke has made no secret of his intentions to revamp the wine giant’s supply chain as part of his ongoing turnaround plan, and on Monday evening Treasury took a significant step in that process, agreeing to sell its Asti Winery and vineyards in Sonoma County, along with the Souverain brand, to E.&J. Gallo. While financial terms weren’t disclosed, TWE, which put the Asti winery on the block in March, booked a $7.5 million loss on the sale. TWE will lease back part of the Asti property’s vineyards to source fruit for luxury wines as part of the deal, which is expected to close July 31. The company says it has already begun transferring its commercial and masstige wines produced at Asti to Paso Robles, with luxury wines formerly made at the site moving to Beringer.

TWE Americas president Sandra Le Drew said the divestiture “forms part of the business’ commitment to optimize our supply chain and accelerate a separate focus on our Luxury & Masstige versus Commercial portfolios globally,” adding that the sale is in line with “TWE’s strategic roadmap.” Clarke signaled that change was coming to TWE’s supply chain late last year, telling Bloomberg in November, “We can achieve our growth agenda without owning some of this infrastructure.”

With the acquisition, Gallo gains 275 planted acres of vineyards in the Alexander Valley and a winery capable of crushing 35,000 tons of grapes. It also adds the Souverain brand, which Le Drew said has a long heritage intrinsically tied to the Asti winery site. TWE relaunched Souverain early last year, introducing a new range of North Coast wines at around $15 a bottle. Now producing premium Chardonnay, Sauvignon Blanc, Merlot and Cabernet Sauvignon, the brand declined 4% to 80,000 cases in the U.S. market last year according to Impact Databank, and has been roughly stable by volume for the past five years.

In a statement, Gallo said the addition of the Asti Winery—which joins 12 other California and Washington wineries in its portfolio—supports its goal of increasing its Sonoma County presence, while Souverain marks another step in developing its expanding premium wine stable.

 

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