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Spirits

INDUSTRY NEWS | M&A Update

May 4, 2009 By: Donna Hood Crecca


Possible merger and acquisition activity among major beverage alcohol brand suppliers is causing plenty of industry buzz these days. Among the big names involved are Diageo, which is ruminating on an acquisition of Moet Hennessy USA. Such a move would expand the portfolio of largest spirits company in the world, which already includes the Johnnie Walker, Guinness, Cuervo and Tanqueray brands, diversifying it into Cognac, premium wines and Champagne. The deal being considered involves Diageo taking majority control of Moet Hennessy, which is owned by LVMH Group, at a price tag upwards of $10 billion. Its key brands include Hennessy, Dom Perignon and Grand Marnier.

The wires are also lighting up with speculation about Bacardi taking over Brown-Forman. However, observers predict that Bacardi’s debt ratio is too high to allow for such a deal. The two already partner in the UK, Germany, Mexico and parts of the United States. According to UBS analysts, Bacardi would have to unload several brands to accommodate such a deal, which would not be easy in this environment.

Fortune Brands, meanwhile, is watching the M&A action, but refraining from participation. At the recent annual shareholders meeting, CEO Bruce Carbonari acknowledged that opportunities exist but good deals are hard to find because the multiples on spirits brands remain high. Beam Global, a key component in the Fortune Brands portfolio, acquired Cruzan Rum from Pernod Ricard USA in September.

Meanwhile, on the distributor front, Southern Wine & Spirits and Glazer’s Distributors continue on the road toward finalizing their strategic joint venture in 2009.

What does all this mean? That the industry landscape is shifting yet again, and consolidation will lead to brand shifts, altered marketing plans and distribution scenarios. For nightclub, bar and restaurant operators, such changes can prove to be a boon or become the bane of their existence; a boon to business as new leadership gets behind a particular brand and infuses it with support and programming, a bane as support for a brand declines or distribution is interrupted. Stay tuned.


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