Giants to pull out of drinks retailing

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The Independent Online
Allied Domecq and Whitbread are preparing to sell their off-licence chains. Andrew Yates says the move by the drinks giants heralds a huge shake-up of the troubled retailing end of the industry.

Allied Domecq is believed to have put its Victoria Wine off-licence chain on the market. Whitbread is also considering selling its off-licence business, which includes brands such as Thresher, Bottoms Up and Wine Rack.

Analysts believe that Parisa, the UK's largest independent off-licence group, is likely to launch a bid for one or both of the chains. Parisa was formed in August with the pounds 56m management buyout of Greenalls' off- licence chain backed by venture capitalists CVC Capital Partners and NatWest Ventures.

Nader Haghihi, Parisa's chief executive, said: "We are always looking for possible acquisitions as long as they are at the right price." However he refused to comment on whether Parisa was preparing to mount a takeover for Victoria Wine or Thresher.

Other venture capitalist groups are also likely to be interested in acquiring the chains.

A deal is unlikely to be concluded before the end of the year. Buyers and sellers will want to assess how the chains perform in the run-up to Christmas. However Allied and Whitbread are understood to have decided that the off-licence businesses no longer feature in their long-term strategies and at least one is likely to be sold within the next few months.

The off-licence industry has been hit by growing competition from the supermarket chains, which now stock a wide variety of beers, wines and spirits.

Drinks sales have also been affected by the surge in cross-channel shopping. Growing numbers of customers are going to France on day trips to pick up car loads of cheap booze.

The disposals of Victoria Wine and Thresher will prompt the long overdue consolidation of the industry. Some outlets and chains are likely to be closed and others rebranded as the new owners attempt to fight back against the supermarkets.

Parisa has already shown the way forward for the industry by launching Booze Buster, a discount chain designed to undercut Sainsbury and Tesco.

Other off-licence chains are also likely to come on to the market in the wake of the Allied and Whitbread deals.

Allied announced last month that Victoria Wine's trading profits had fallen by pounds 3m in the year to August. City observers point out that Allied no longer needs a chain of off-licences through which to channel its own beer, having effectively exited brewing with the sale of its 50 per cent stake in Carlsberg-Tetley. Allied is now willing to sell the businesses to concentrate on brokering a spirits merger with a number of international partners in the wake of the pounds 23bn merger of Grand Metropolitan and Guinness.

Whitbread is understood to be keen to expand its restaurant and pub interests rather than pump more investment into Thresher. Over the past few years the group has turned itself into a diversified leisure group after an acquisition spree which has seen it purchase David Lloyd's health clubs and the Cafe Rouge and Dome restaurant chains.

Thresher's operating profits rose just 3 per cent in the six months to August, well below the level of growth Whitbread achieved in its leisure business.

There is speculation that Whitbread is also looking to sell its brewing business. With beer sales in the UK falling, Whitbread finds itself with a 15 per cent share of a declining market.

Whitbread will announce today a pounds 50m investment in its Hogshead pub chain. It plans to open 40 sites next year and create 800 jobs.