National Distillers Puts Almaden on Block : Parent Loses Its Taste for Spirits
Almaden Vineyards, one of California’s oldest names in the wine business with roots reaching back to 1852, is up for sale--along with such brother brands as hot-selling DeKuyper cordials, Vat 69 Scotch, Gilbey’s gin and vodka, Windsor Supreme Canadian whisky and Old Grand Dad.
All are being turned out by their New York parent, the giant National Distillers & Chemical Corp. National, which began life as a liquor producer 64 years ago, now sees a future in the chemical business, which it entered in 1950.
National underscored its intent by coupling its for-sale announcement with news that it has agreed to buy Enron Chemical Corp. for $575 million. That purchase would make National the nation’s largest producer of polyethylene.
Enron Chemical is a unit of Houston-based Enron Corp.
“This acquisition reflects National’s determination to focus its resources in chemicals and propane marketing,” Chairman John Stookey said in a statement. “It is the company’s intention, therefore, to divest itself of its spirits and wine operations.”
If a buyer is found for the spirits and wine division as a whole, industry analysts estimate that it could bring as much as $500 million. In terms of immediate profitability, the best bait in the division is probably the DeKuypers line of cordials, which has had significant success with schnapps, especially its recently released peach flavor, said Jon Fredrikson, a San Francisco-based wine consultant. For potential buyers, he suggested looking abroad to Great Britain and Japan.
In this country, unconfirmed industry reports connected Anheuser-Busch Cos., the nation’s leading brewery, with a purchase of Almaden. A spokesman at the San Jose-based winery said Tuesday that he had heard that rumor “and everything else under the sun” but could confirm nothing.
Fredrikson placed the value of Almaden’s assets--including two major wineries, extensive vineyards, a huge inventory, bottling and warehousing facilities--at “in excess of $200 million.”
Almaden makes a full range of table, sparkling and dessert wines and brandy. But it is best known for its jug wines and medium-priced varietals--precisely the sector where competition and price-cutting has been most intense.
The division contributed 30% of National’s sales last year but accounted for only 22% of its profits. It ranked third in sales nationally behind Seagram Co., New York, and Heublein Inc., based in Farmington, Conn. Both competitors have major holdings among California wineries, where Seagram ranks second behind Modesto-based Gallo.
Meanwhile, National’s decision to pull out of alcoholic beverages comes as no big surprise, Fredrikson said, observing: “They’re 90% a chemical company, and the returns just aren’t there in their wine and spirits division.”
Other companies, including Coca-Cola, have ventured into the wine business and retreated.
Coca-Cola, with no indebtedness, had looked in vain for a 20% return on its investment in Wine Spectrum, Fredrikson said.
Wine Spectrum brands include Almaden rival Taylor California Cellars in the jug wine market and premium wines from Napa Valley’s Sterling Vineyards. Coke sold Wine Spectrum to Seagram in 1983 for $235 million.
NATIONAL DISTILLERS AT A GLANCE
National Distillers & Chemical Corp. is a major New York-based petrochemical company. It is also one of the six largest U.S. producers of spirits and wines including Almaden winery, which is currently for sale.
Revenue (In billions) 6 months ended June 30 ’86 1985 1984 1983 $1.16 $2.281 $2.24 $1.94 Net income (In millions) $11.4* $77.2 $51.4 $66.7 * (unaudited)
Assets (Dec. 31, ‘85): $2 billion Employees: 10,000 Shares outstanding: 30.6 million 12-month price range (NYSE): $29.875--$44.375 Tuesday’s close: $42.50, up $3.25
GRAPHIC-CHART: 1985 / PRODUCTS AS A PERCENTAGE OF SALES:
Petrochemicals and oleochamicals: 45% Spirits and wines: 30% Propane Marketing: 25%
