Jim Beam Brands enjoys good fortune

2005 has been an important year for Fortune Brands, owner of Jim Beam Brands Worldwide Inc (JBBW)

2005 has been an important year for Fortune Brands, owner of Jim Beam Brands Worldwide Inc (JBBW). July saw the company splash out a total of US$5 billion on 22 wine and spirit brands through Pernod Ricard’s takeover of Allied Domecq. Fortune Brands’ involvement enabled Pernod Ricard
to bypass any competition concerns that might have flared up as a result of the deal.

The issue of competition regulations was an important determinant in what brands were incorporated into the deal. Although all of the acquired brands were purchased direct from Allied Domecq, “trade ins” took place that were designed to facilitate the deal between Pernod and Allied. Key brands handed over to Fortune Brands included Courvoisier Cognac, which overlapped with Pernod Ricard’s Martell Cognac, and Maker’s Mark, which would have given the French player another US bourbon in its portfolio alongside Wild Turkey. The Maker’s Mark transaction was only cleared by the US Federal Trade Commission in October as a result of Fotune Brands already being well represented in the US Bourbon market with Jim Beam.

Pernod also let Sauza tequila, the number two in its sector in the US go to Fortune Brands but raised more eyebrows with the disposal of Larios gin, notably popular in Spain. Despite Sauza and Larios, JBBW’s newly acquired brands still mainly comprised dark spirits.

The combined turnover of these newly acquired brands is put at US$1.3 billion and will effectively more than double JBBW’s revenue. Canadean estimates this to represent an additional 16.9 million 9-litre cases.

This dramatic expansion has prompted a restructuring of the organisation and the establishment of a North American Spirits division headed by Jim Clerkin. Another ex-Allied Domecq recruit, Jim Newlands, was put in charge of the enlarged wine business.

db February 2006