This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
News
Campari buys 70% stake in US whiskey brand to bolster Bourbon offering
The world’s largest drinks groups have been engaged in a flurry of activity, making this autumn one of the busiest periods of portfolio adjustment for some while, reports Ron Emler. The Campari acquisition, announced today, is just one of them.
Strengthened by strong free cash flows and the readjusting of debt portfolios while cheap interest rates existed has triggered a significant jockeying for position as global trading conditions gradually return to normal.
Today Campari has announced buying 70% of Wilderness Trail Distillery, a super premium Bourbon whiskey range and that it will take over the full company by 2031. Chief executive Bob Kunze-Concewitz said the takeover will make Bourbon the “second major leg
after the aperitif portfolio”.
It will give Campari a significant extra offering in the key American spirits market and will add to last week’s purchase of a 15% stake in London-based Catalyst Spirit, the incubator house behind Howler Head Kentucky straight Bourbon. They both add to Wild Turkey in its portfolio.
Kunze-Concewitz sees Bourbon as vital to the group’s growth. The enterprise value of Wilderness Trail is US$600m.
In the summer Campari bought Picon, the leading bitter aperitif brand in France, from Diageo for €119m. The desire to widen its portfolio into a fast-growing sector is behind Jack Daniel’s owner Brown-Forman’s swoop on the Spanish owned Diplomatico rum brand for an undisclosed sum. It is the leading super and ultra premium rum in the US in a category that has grown at a combined annual rate of 17% over the past five years.
For its part, Diageo has been very active. After selling the Archers peach liqueur brand to De Kuyper Royal Distillers (giving the Dutch company a virtual monopoly of peach-based spirits) it then bought the Australian premium cold brew coffee liqueur Mr Black, which is the category leader in the US. That move followed taking an Initial stake in Mr Black in 2015 via Diageo’s own incubator stable, Distill Ventures. No prices were disclosed for either transaction but Diageo’s Indian subsidiary, United Spirits, received some £90m when it completed the already-announced sale of 32 commodity brands to Inbrew.
That allows USL to concentrate its focus on Diageo’s premium and imported spirits portfolio as it drives towards extra premiumisation and greater margins in the sub continent.
Diageo has also been active in further shaping its beer portfolio in Africa. In the summer it sold Guinness Cameroon to Castel for £389m. The move was made to exploit Castel’s more dynamic distribution system in the country, where it will brew Guinness under licence.
Return on capital invested was very much in Diageo’s thinking when it announced it would increase its stake in East African Breweries up to a maximum of 65% via a tender issue, a transaction that could cost it up to approximately £160m. While it does not intend an eventual full-takeover, Diageo is paying a 40% premium for the extra stake in EAB, which has seen its shares halve in value since 2015.
The drive to supply China with non-Australian sourced Penfolds triggered Treasury Wine Estates’ acquisition of a majority stake in Chateau Lanesson in Bordeaux. That gives Treasury some 390 hectares to add to its other vineyards in France, California and China
itself to supply wines to the People’s Republic after Beijing imposed punitive tariffs on Australian production as part of the ongoing political spat about human rights and the origins of the Covid-19 virus.
Back in June, Ann Muckerjee, the head of Pernod Ricard’s US operation, surprised analysts when she said the French group did not need to “win” the Tequila war raging in America. She was seeking to emphasise that despite soaring demand for premium agave spirits in the world’s most profitable market, the strength of the other brands in its portfolio and the data based programmes behind them would drive extra profitability for the French company.
Since then Pernod Ricard has taken a majority stake Cordego 1530, the ultra premium and prestige Tequilas to add to its Olmeca, Altos and Avion offerings. It has also bolstered its presence in the market for Mexican spirits by joining forces with Casa Lumbre (which produces the Oje de Tigre mezcal) to develop the sotol brand Nocheluna, which will be launched in the US in the near future.
Some 29% of Pernod Ricard’s sales come from the US compared with 39% of Diageo’s. As part of its drive to increase that proportion the French group has agreed to “significantly” increase its minority stake in the Sovereign Brands’ portfolio of super premium wine and spirits brands.
Sovereign is described as “one of the fastest growing companies in the beverage alcohol industry” with products such as a super premium French sparkling wine Luc Belaire and a range of Caribbean rums. The two are collaborating on incubating products.
Pernod Ricard will have the option of further increasing its stake in Sovereign at a later date. In 10 days’ time we will learn whether Constellation Brands’ shareholders have agreed to end their two-tier share structure at a cost of about $1.5 billion. While the Sands family will still control almost a third of the company, the restructuring will make Constellation more attractive as a potential merger partner and more readily able to finance any takeover activity through the issue of shares.
But even before that Constellation has moved to unscramble its longer-term relationship with Canopy Growth, the Canadian cannabis group in which it made a $4bn investment which it recently wrote down by US$1.1 billion.
Canopy is consolidating its US assets under one umbrella in anticipation of eventual Congressional approval of cannabis products.
Constellation remains convinced this is a major source of new profitability but plans to convert its holding of 36% into exchangeable (sellable) shares in return for withdrawing from Canopy’s board and management. Together with the revised share structure, Constellation will become more streamlined an attractive to investors.
Finally, while not M&A activity, Remy Cointreau is also branching out through launching a super-premium fragrance brand, Maison Psyche, echoing LVMH in combining the skills of perfumery and distillation to create ultra luxury and a broader appeal among the rich.
Related news
Can an algorithm become better at tasting than a human?