Eckes to focus on juice
beverage business in order to focus on its fruit juice operations,
citing increasing competition and declining margins as its main
reasons for the sale.
German drinks group Eckes has decided that the competition in the European wine and spirits sector is too much to handle and has announced the decision to concentrate on its fruit juice unit, selling off its alcohol operations to raise cash to fund the expansion.
With the world's three largest spirits groups - Diageo, Allied Domecq and Pernod Ricard - all based in Europe, there is less and less room other players such as Eckes to expand. Even though the German group is Europe's fourth largest spirits group, it does not have the big budgets of the larger groups to support its brands.
However, the Eckes fruit juice unit - the biggest in Europe - is much more international, and the company has decided that this offers the best prospects for future growth. Eckes has therefore begun talks with potential investors regarding the sale of its alcoholic beverages division to a "a financially strong, internationally active organisation with core activities in alcoholic beverages".
Executive Board chairman Herbert Verse said: "With an equity capital base strengthened substantially through proceeds acquired from the sale, and by concentrating our core competence on fruit beverages, the Eckes Group will be in a position to expand its European leadership position in this sector consistently.
"As a family business, the Eckes Group can only expand its market position in the present capital-intensive competitive environment with large, globally active corporations if it concentrates its resources and finances in one of its primary business fields. The sale of the highly profitable alcoholic beverages division will establish the foundation for further growth and a successful future for our corporate group and its employees."
Verse said that the growing trend towards health, sport and wellness drinks meant that there was considerable potential in the fruit beverages market, one which Eckes already dominates. The company said that its volume growth in 2001 had been twice that of the market as a whole, and that its profitability had increased substantially over the last five years.
While perhaps not at quite the same level, the Eckes alcoholic beverages division has also performed well over the last few years, making it an attractive acquisition target.
Eckes said it was still too early to say what impact the sale would have on the company's facilities in Germany and abroad, although Verse stressed that "aside from price as the crucial criterion governing our choice of an investor, we shall also focus on the interests of our employees as an essential aspect of negotiations".
Eckes is present in 11 countries throughout Europe, although most of its European subsidiaries are relatively new, since the company only began to reduce its dependence on the German market in the mid 1990s. Few of its alcohol brands have any significant international presence, although Stock brandy is a big brand in the Czech Republic, Italy and Austria.
The division posted sales of €363 million in 2001, while the juice unit registered turnover of €574 million. Including the Joker company in France, acquired last year, Eckes is expecting fruit juice sales of €720 million this year.
