Woolworths has announced it will be expanding its liquor portfolio with the acquisition of The Cellarmasters Group from Archer Capital for $340 million.

Cellarmasters is one of the largest direct-to-home wine retailers and providers of contract bottling and wine services with operations in Australia and New Zealand, including Cellarmasters, NZ Wine Society, WineIQ, CellarForce and WineMarket.com.au.

The business, which had recently announced a 6 per cent increase in its half-year, said it will be an add-on to its existing liquor portfolio of Dan Murphy’s, BWS, Woolworths Liquor and Langton’s.

Woolworths CEO Michael Luscombe said this move shows that the company continues its focus on achieving growth for shareholders.

“Cellarmasters’ portfolio of innovative businesses and brands will benefit from the added value of Woolworths’ logistical and distribution capabilities, as well as the ongoing support of our capital and managerial resources,” he said.

“In return, this acquisition will not only accelerate growth in our liquor business through new and enhanced capabilities in production and operational services but will enable us to serve a whole new customer segment in terms of the direct marketing channel.”

According to the company, Cellarmasters operates using a direct marketing business model that focuses on outbound direct contact and online platforms.

Luscombe said Cellarmasters’ proven expertise in direct wine marketing will add a new and complementary customer channel to the Woolworths Liquor Group, reflecting the multiple ways in which consumers now search for and purchase wine.

“Direct wine marketing is an exciting and emerging segment of the industry that is ripe for further investment and innovation. Cellarmasters is a specialised business and a logical extension to our existing liquor portfolio,” he said.

Cellarmasters also has a winemaking operation, Dorrien, which produces a range of wines which are distributed through the Cellarmasters direct channel.
In addition, Cellarmasters provides a range of services to the winemaking community such as bottling, packaging, storage, filtration and testing.

“The Cellarmasters' wine production facility Dorrien will also enable Woolworths to enhance its capability in private label wine products. This is a combination that will help Cellarmasters to further cement its strong reputation as a direct wine business and realise its future growth potential,” Luscombe said.

Completion of the acquisition is expected to occur no later than May 2011, subject to closing conditions, including no regulatory intervention.