USA: Pernod Ricard acquiring Firestone & Robertson Distilling Co. in Texas
Pernod Ricard, the owner of Absolut Vodka and Jameson Irish Whiskey, is acquiring Firestone & Robertson Distilling Co., which has produced the TX premium whiskey and bourbon brand since 2012. Terms of the acquisition were not disclosed, Food Dive reported on August 6.
The acquisition includes the Whiskey Ranch, the brand’s distillery that is open to the public for tastings on the outskirts of Fort Worth, Texas.
This deal comes on the heels of the French spirits giant acquiring Rabbit Hole Whiskey in June as it looks to bring brands into its portfolio with "unique and comprehensive value propositions," the company said in a release.
As the second largest liquor company behind Diageo, Pernod Ricard is doing well for a family business. Sales from recurring operations increased 6% in fiscal year 2018, compared to 3.6% the year before. However, outside investor Elliott Management Corp., a New York-based investor group led by billionaire Paul Singer, thinks it could do better.
Elliot, which revealed its more than a 2.5% stake in the company in 2018, specifically pointed out the French liquor company’s M&A strategy as a sore spot that could use improvement. One particular pain point is Pernod's acquisition of Absolut in 2008 for $8.3 billion, a deal the company has struggled with ever since. Faced with pressure to make up the 5% point lag behind Diageo, Pernod has recently increased its investment targeting of craft and premium liquor brands.
As consumers turn away from beer and traditional spirits, alcohol companies like Pernod have branched out to attract millennials and younger generations. Sales of distilled spirits have climbed in recent years, Beverage Dynamics reported, citing figures from the Distilled Spirits Council. Last year was the ninth straight year of record sales and volumes, which were up 2.2% to 231 million cases compared to 2017. Millennials are driving much of that growth, and they aren’t looking for items that have been on the shelf for a decade. They are looking for brands that elevate craft and premium ingredients.
In response, Pernod Ricard acquired Rabbit Hole Whiskey in June and premium gin brand Malfy in April. While its most well-known brand may be Absolut, it is interesting the company is focusing on other spirits with M&A. In today’s market, vodka has been falling out of favor as spirits consumers are looking for upscale versions of their favorite classic cocktails, which have been driving increased sales of premium tequila, gin and bourbon. This has been the case for years. Vodka volumes grew only 1.6% in the U.S. in 2014, which was slim compared to whiskey's 7.3% growth, according to the Distilled Spirits Council's 2014 Industry Review.
These changing trends have prompted alcohol companies to reassess their portfolios to shed underperforming brands and pick up rising stars. Diageo recently sold 19 of its lower end brands and purchased Casamigos, George Clooney's fast-growing tequila brand. And Constellation sold its wine brands for $1.7 billion this year while investing in cannabis and women-owned brands.
Although Pernod has yet to shed brands, it could be a smart move to add another craft whiskey into its portfolio, especially one that has generated a loyal following since its release seven years ago. Already Pernod Ricard already owns major whiskey brands such as Chivas Regal, The Glenlivet and Jameson as well as Smooth Ambler Spirits, another American craft distillery.
While this acquisition is likely to attract current fans of the Texas-based whiskey and consumers who are interested in craft liquor, TX could also serve as an indicator for the direction of Pernod Ricard’s acquisition strategy going forward. Premium craft spirits have been in vogue for several years, so consumers may begin tiring of the over-saturation of craft — similar to what is happening in craft beer. Then again, spirits companies have always produced a variety of options, which could be what people want in the long run.
08 August, 2019
