Woolies may buy liquor group

PHIL REID/The Dominion Post

BREWING SPECULATION: Woolworths is said to be considering buying New Zealand-founded Independent Liquor Group.

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Retailing giant Woolworths is rumoured to be looking at trans-Tasman alcopops giant Independent Liquor Group in a plan to secure a supplier for its fast-growing private label beer business and cut its reliance on Fosters Group and Lion Nathan.

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

Independent, which was started in New Zealand by Michael Erceg, was sold for $1.25 billion to private equity firms Pacific Equity Partners, of Australia, and Hong Kong's CCMP Asia (now Unitas Capital) in 2006, after the death of Mr Erceg in a helicopter crash.

Speculation in the alcohol industry is that Woolworths has been doing a cost/benefit analysis of Independent Liquor. The business is believed to be worth about $700 million.

A source close to Independent Liquor said a tie-up with Woolworths made strategic sense. Not only would it give it access to capacity to increase its home brands, but it also would give it access to costings, which would be used as a threat over the bigger suppliers.

Independent Liquor has production facilities in Victoria and New Zealand.

Independent Liquor already contract-packages Woolworths home brand beer Platinum Blonde on the eastern seaboard.

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

A report from research firm The Nielsen Company shows Australians pushed spending on private label brands to a record in 2009. In the October year, private label share of grocery was 22.5 per cent and the average spending change versus a year ago was up 4.3 per cent.

Woolworths says it has about 2000 of its product lines are private labels and they have been growing at a rate of two to one against branded products. The Nielsen figures reveals that total alcohol private label brands took 1.2 per cent of the beer market.

- © Fairfax NZ News