Gallo, based in Modesto, California, is the largest winery in the world and the foremost winery in the art of grape growing, winemaking, distribution and marketing of wines.
An initial cash consideration of €16.4 million for the purchase will accompany a deferred consideration of up to €3.6 million payable subject to the performance of the business in the period to April 2012. C&C is funding the transaction which is not subject to any legal, tax or regulatory clearances from its existing cash resources.
The move puts C&C the Number Two cider company with an estimated 20 per cent share in the growing US cider category, a 0.2 per cent part of one of the largest LAD markets in the world.
Hornsby’s in the off-trade will complement the on-trade East Coast presence of Magners in the US market.
Stephen Glancey, C&C’s Chief Executive Officer designate, commented that the purchase was a significant step towards the development of the Group’s international, cider-led strategy.
In addition to the global intellectual property rights to the Hornsby’s brand and goodwill associated with the brand, C&C will also acquire stock including raw materials, work in progress, finished goods and Point Of Sale materials.
The Hornsby’s cider brand was launched in 1994 by Gallo to complement its wine and spirits portfolio and to enter the growing US cider market. Gallo initially launched the brand on the West Coast of the United States. While the brand’s greatest penetration remains on the West Coast, its distribution now spans the entire US.
In the year ended 31st December 2010, Hornsby’s volumes were 61,000 hectolitres and net revenue was about €8.5 million. The business is currently delivering low single-digit revenue and volume growth.
C&C estimates that annual US sales of cider are currently 400,000 to 500,000 hectolitres and cider category volumes are growing at approximately 20 per cent per annum.
Sales of Magners in the US were 45,000 hectolitres in the financial year ended 28th February 2011. This represented volume growth of 38 per cent on the prior year. Sales in the US expected to grow by over 20 per cent in the 2011/12 financial year.