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Drouhin Family Buys Back Control of Their Burgundy Firm

The previous majority owner, a now scandal-plagued Japanese food conglomerate, parts with shares in Maison Joseph Drouhin.

Per-Henrik Mansson
Posted: June 9, 2003

Nine years after Burgundy's Maison Joseph Drouhin sought outside financial help and relinquished control to a Japanese food-product conglomerate, the Drouhin family has regained a majority stake in their wine-merchant firm.

The Drouhins bought back 11 percent of the Beaune-based négociant, increasing their shareholding from 49 percent to 60 percent. They did not release the value of that stake or their entire company, which makes 300,000 cases of red and white wines from the Côte d'Or, Chablis and Beaujolais. "But we are looking for ways to take over 100 percent," said general director Frédéric Drouhin.

Scandals at Drouhin's former majority owner, Snow Brand Milk Products Co., have forced the conglomerate to restructure, liquidate subsidiaries and fire thousands of employees, among other measures. But the Burgundy deal is independent of these developments, said Frédéric Drouhin.

The Japanese company, which had imported Drouhin's whites and reds since 1971, had come to the family's rescue in 1994, and bought 51 percent of the firm's stock.

"Burgundy was in crisis, and like other merchant houses, Drouhin had financial problems," said Drouhin. Loans taken out to finance the expansion of Maison Drouhin had become difficult to pay back when interest rates rose to double-digit levels in the early 1990s, just as the economy entered a recession after the first Gulf War, he explained.

Giving up control was painful for his father, CEO Robert Drouhin, now 69, who is the third generation to run the négociant firm that his grandfather, Joseph, founded in 1880. Under the arrangement, however, the Drouhins could buy back shares in the early 2000s if they could afford it. "It was a good deal for us," said the younger Drouhin, 35.

As promised, the Japanese company didn't interfere in the business or in the Drouhins' approach to winemaking. "They gave us carte blanche" in running the joint venture, named Société de Participation et d'Exploitation Vini-viticole, according to Drouhin.

But now Snow Brand will stop importing wine following the scandals that have weakened the company and forced it to streamline its businesses. In 2000, Snow Brand plants were blamed for producing bacteria-ridden milk that caused a large food-poisoning outbreak in Japan; other scandals involving mislabeling of food stuffs followed in 2002.

Meanwhile, Drouhin's financial picture has improved, allowing them to take advantage of the proviso in the 1994 contract to buy back shares. "In 2003, we have the financial capacity to do it," Drouhin said.

Robert Drouhin, who concluded the latest deal in April, said he was happy that his family had regained control. All four of Drouhin's children work in the firm: Frédéric, winemaker Véronique, vineyard manager Philippe and salesman Laurent.

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