Having shared their thoughts on what trends will shape the spirits category in 2016, Euromonitor considers the corporate side of the segment, Senior alcoholic drinks analyst Jeremy Cunnington forecasts little movement.

After a year of heightened activity in 2014 for spirits companies in terms of mergers and acquisitions, 2015 was, as predicted, a lot quieter. This year is likely to be only marginally more exciting, primarily due to a lack of obvious acquisition opportunities, exacerbated by the very high valuations for spirits brands and companies at the moment.

In 2015, perhaps the most interesting deal was Brown-Forman's move into Irish whiskey through its Slane Castle acquisition. The biggest deal in financial terms was Emperador's US$290m acquisition of Beam's Spanish brandy and Sherry portfolio, with the Philippines-based company seemingly grossly overpaying again.

  • Limited merger and acquisition potential

Tall valuations show not only the huge potential there is for international spirits brands, but also the scarcity of brands, with many of them privately owned. The high prices paid in 2014 for Beam Inc by Suntory (US$16bn), for the majority stake in United Spirits by Diageo ($3.16bn) and, perhaps more ridiculously, for Whyte & Mackay by Emperador ($729m), followed last year by the latter's purchase of Beam Suntory's brandy and Sherry portfolio, have encouraged all companies and brand owners wanting to sell to expect - and demand - very high prices for their assets. Unless sellers are more realistic - or potential buyers are that desperate - or see potential for huge synergies/growth, companies will shy away from acquisitions.

With one of the two major possible M&A deals having already happened with Sazerac's $544m acquisition of Brown-Forman's Southern Comfort and Tuaca brands, the only other one relates to the biggest merger and acquisition story of 2015, Anheuser-Busch InBev's acquisition of SABMiller. The latter holds 26.5% of South African wine, spirits and cider producer Distell. As a non-core asset, it seems likely that AB InBev will put the stake up for sale.

Distell not only has extensive distribution in South Africa, but also has built an extensive distribution network in other sub-Saharan countries and thus offers a great route to market for an international player. Chief among the companies looking at buying this stake should be Pernod Ricard and, possibly, Bacardi.

Pernod generally needs to be more active in the merger and acquisition stakes. Now that the wine and spirits group has become much stronger financially, it needs to strengthen to stop it falling too far behind Diageo. Its recent acquisition of Monkey 47 gin is a good start but, even in the longer term, the German craft gin is not something that will make a large impact. One other area it could work on is its US portfolio of brands, eg with a small-batch Bourbon, or perhaps it could strengthen its presence in other regions where it is weak, eg Latin America, through the acquisition of a local company.

  • Organic developments

With it likely to be a slow year in terms of mergers and acquisitions, it will be interesting to see how companies' strategies develop in 2015. Following its acquisition last month of 50% of its South African distributor, how will Beam Suntory continue to broaden its geographic spread? How will Edrington's major international push continue to develop? Will Bacardi manage to gain some stability at the top to develop a coherent strategy?

The most relevant question in future M&A activity will be whether we will see signs of Diageo turning around United Spirits and, like Pernod, creating a portfolio of higher-margin and profitable brands in India. If so, then this will pique the interest of other international players in the remaining independent Indian companies, offering us the prospect of potential activity in the medium term.

While there will be less blockbusting activity in the M&A arena than in 2015, it will still be interesting to see how international companies develop themselves during the year.