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Diageo blows out Montana

Published:  23 July, 2008

Diageo surprised both the wine trade and city analysts last week by declining its option to buy Pernod Ricard's New Zealand brand Montana for 320 million.

Diageo was granted the option (along with the opportunity to buy Bushmill's Irish Whiskey) when it decided not to back a rival bid for Pernod Ricard's takeover target Allied Domecq.

Paul Walsh, Diageo's CEO, said in a statement that, after examining the opportunities that the Montana business presents', Diageo has concluded that the purchase does not fit our investment criteria'.

Montana will now stay in the Pernod wine portfolio, which includes a number of famous names such as Australia's Jacob's Creek, Spain's Campo Viejo and fellow New Zealand wineries Corban's, Stoneleigh and Church Road. The addition of Montana makes Pernod the world's third-largest wine company, with sales of 23 million cases.

Pernod's interests in New Zealand now add up to almost 50% of the country's wine industry. George Fistonich, owner of New Zealand's third-biggest producer Villa Maria, told local press that it is essential Pernod acts responsibly and doesn't use the powers of its brands, distribution and financial muscle to dominate supermarket shelves and wine lists'.

Warren Adamson, UK director of New Zealand Winegrowers, said that he was surprised that Diageo didn't take [the option], but they've obviously done their homework and decided that it doesn't fit into their portfolio.

From our point of view, Montana has always been a great brand to work with and a good champion for New Zealand. It produces great wines at prices that bring consumers into the category but without devaluing it. Pernod would seem a good home for it, since they have taken auxiliary brands, and I'm sure they will continue to show support.'