SOUTHCORP'S UK BUSINESS 'BROKEN'

Published: 23 July, 2008

Southcorp's executive chairman, Brian Finn, has called its UK wine business broken' and described its business relationships with some key retailers as close to adversarial. Speaking to analysts in Melbourne last week, as reported in the Australian Financial Review, Finn said that the UK business is in such a bad state it could take up to three years to fix. It was also suggested that Southcorp is trying to step away from the discount game, by attempting to renegotiate or end numerous promotional deals it signed with UK multiples - including year-long deals struck just before Keith Lambert left as CEO - without further worsening its relationships with the multiples. Finn said that the UK side of the business had virtually no business relationships intact. Rumours are circulating that the problems centre around a promotional deal struck with Tesco, which guaranteed Southcorp monthly gondola ends for a 1 million fee, a figure set to rise if sales targets were met. It is alleged in the Australian financial press that when Christmas sales were lower than expected, Southcorp was asked to take back some of the surplus wine. A spokesperson for Tesco refuted this claim, and said: As far as we are concerned, sales of Southcorp wines are stronger than ever and no wine has been sent back.' Last week, Southcorp announced a 97% drop in half-year profits, to A$5.9 million. Lambert received A$4.4 million as a golden goodbye.

Reynolds closes in UK Reynolds Vineyards, producer of wine from the Orange region, will close its UK sales office at the end of May. Sales will continue to be handled by D&D Wines International. The company said: As a consequence of the extraordinary downward pressure on margins for Australian wine in the UK market, Reynolds has decided to close its UK office. Neil Bruce, our sales manager for Europe, will be made redundant.'

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