In This Article:
The shock announcement from Australian Vintage on the termination of CEO Craig Garvin’s contract, of course, sparks numerous questions.
What had it been about Garvin’s “conduct” that, in the view of the Australian Vintage board, demonstrated “a lack of judgement” by the chief executive?
What was it about that conduct that made it “inconsistent with the values of the company and the high standards expected of its chief executive officer”?
For now, no details have emerged. Garvin is reportedly weighing up his legal options. The Australian newspaper has said the former dairy-industry executive is considering embarking on a defamation case.
The personal ramifications are serious but, strategically, the news could also have profound consequences for Australian Vintage the business.
In February, the McGuigan wine brand owner said it was in “very early” talks over a potential merger with domestic peer Accolade Wines.
At the time, Australian Vintage said it was in “exploratory discussions” with Accolade, home to brands including Echo Falls and Kumala. It underlined, however, that there was “no certainty that any transaction will eventuate”.
The news of the talks came just weeks after weeks after an investor consortium took over Accolade to “build a more secure long-term future of the business”.
Last year, Australian Vintage launched a strategic review to “expedite value unlock”, which Garvin insisted at the time was not about selling the business.
However, the news of the discussions between the two Australia-based wine majors came five days after Australian Vintage booked a set of half-year results that included a dip in revenue and a 78% slide in net profit.
The company said it had “achieved margin and underlying earnings improvement”, pointing to growth in its underlying EBIT and net profit.
Garvin said the company was operating in “challenging industry conditions” but “efficient brand investment” and moves to remove costs from the business had, he said, boosted earnings and cash flow.
Nevertheless, Australian Vintage’s first-half net profit stood at A$2.8m ($1.9m), versus A$12.9m a year earlier and, given the difficult macro conditions facing the country’s wine sector, it wouldn’t be hard to understand why a possible combination with one of its peers might appeal to elements of the group’s management and board.
However, Garvin’s departure means that all of a sudden there are question marks about the prospect of a deal.
In the statement announcing Garvin’s departure on Friday (3 May), Australian Vintage said his exit “should have no impact on the preliminary discussions” between the two companies.