Pernod Ricard's unexpected move for Absolut in March set the tone for a year in which Diageo eschewed any significant acquisitions in favour of joint deals with existing brand owners. Olly Wehring reviews the major events in the spirits arena during 2008.

The economy aside, there was one transaction that defined the spirits industry in 2008, with the ramifications of the acquisition ringing in the ears of all the global spirits companies for much of the year.

In January, the Swedish government came good on its promise to offload Vin & Sprit, the owner of the Absolut vodka brand, when it opened the auction process for the company. At the time, all eyes were on Fortune Brands, the owner of Beam Global Spirits & Wine, which worked with V&S both in the US and in the global distribution alliance Maxxium. Despite speculation suggesting that companies including Diageo, Bacardi and Pernod Ricard were keen to buy the company, common consensus in the first few months of the year suggested there was only ever going to be one winner.

Diageo was the first to show its hand, however, when, in February, the company withdrew from the process. By securing the exclusive global rights to sell, market and distribute the Nolet family's Ketel One vodka brand, Diageo confirmed that it would not be competing in the race for Absolut.

Then, in March, almost everyone was surprised to see that the winner of V&S's hand was Pernod. The French company bagged the Swedish firm for a total enterprise value of EUR5.63bn (US$8.88bn), leaving Fortune somewhat in the lurch. The US-based company had sold off its wine brands to Constellation in November last year in preparation for a move for V&S, and the amicable departure of Beam Global's CEO, Tom Flocco, in October, was seen by many as an indication that the company had been caught on the hop.

While Fortune licked its wounds, Pernod set about untangling V&S from its alliances with Fortune in the US and its place in Maxxium. In August, Pernod agreed to pay Fortune $230m, and to sell it the Cruzan rum brand for $100m, in return for the early termination of the Fortune V&S joint-venture.

The purchase also suggested the end of Maxxium. With Rémy Cointreau set to exit in March next year, Pernod's success in pulling V&S out of the venture in October, at a price of $85m, left just The Edrington Group and Beam Global in the alliance. In September, the two companies announced, however, that they were going to continue to work together. From April next year, the two will take joint ownership of the Maxxium businesses in ten markets, including UK, Russia, China and Spain. Beam will then handle distribution for both firms in eight markets, including Australia, New Zealand, Germany and Canada, while Edrington will be responsible for Scandinavian markets, as well as Taiwan and Korea.

Rémy Cointreau, meanwhile, readied itself for life outside Maxxium by lining up a new marketing and distribution partnership in Europe with William Grant & Sons. The UK-based company will distribute Rémy's portfolio in the UK from April next year, while Rémy will distribute William Grant's brands in Belgium and Luxembourg.

Pernod's success in bagging Absolut, meanwhile, signalled the end of its international distribution licence for the Russian vodka brand, Stolichnaya. Consequently, Stolichnaya's Russia-based owner, the SPI Group, seemed ripe for acquisition, with Fortune again linked to a possible move. But SPI announced in August that it would not be selling Stoli and was planning to form separate distribution agreements in key markets. The following month Fortune stepped back from making an offer, and in November, SPI secured a distribution deal in the US with William Grant.

Away from the Absolut adventure, the world's biggest spirits company, Diageo, managed to keep away from acquisitions in 2008, preferring instead to plump for joint deals with existing owners. Following the Ketel One agreement in February, a few days later the firm signed a three-year global distribution and joint marketing deal with the Industrias Licoreras de Guatemala group of companies for the Zacapa rum brand. At the end of the three years, Diageo will have the option to buy a 50% equity stake in the brand.

The year ended for Diageo with speculation linking the company with The UB Group in India. Reports in the Indian media in November claimed the two were in discussions over Diageo acquiring up to a 15% stake in UB, which boasts a strong distribution presence in India. While UB's distribution footprint may appeal, however, it appears unlikely that Diageo will invest too heavily in the country, particularly while India's alcohol duty structure remains so disparate across the 28 states.

Amongst the other big spirits players, Bacardi toasted its success in gaining a stake in one of the real success stories of recent years. In July, the company acquired a "significant" though unspecified minority stake in The Patrón Spirits Company. The transaction was finally closed after a legal battle between Bacardi and the estate of the late Martin Crowley, who co-founded Patrón with John Paul DeJoria. Regardless, Bacardi will certainly be happy with its business this year, with Patrón's namesake ultra-premium Tequila brand boasting a 32.5% leap in sales values in the US in the year to the end of July.

Most certainly the biggest story in the spirits industry, however, like virtually all other industries, was the economic downturn that struck the world this year. With the credit market drying up, the likelihood of any major acquisitions in 2009 seems nigh on non-existent. But the major fear concerns the effect the meltdown has had on consumers. Despite the claims of many spirits companies, led by Diageo, that they offer "affordable luxury" with their products, trading down seems to be here to stay for the foreseeable future. While some premium offerings may be safe - those who have money will always have money, is the theory here - there is a vast swathe of spirits brands in the middle sector, placed just above value offerings, that will be fearing the worst, going forward.

If your brand is high priced or low priced, then, or is making hay in the lesser-affected markets of Eastern Europe, India or China, then 2009 might just be your year.

For more information on just-drinks' review of 2008 or any other management briefings, go to www.just-drinks.com/briefings

For a more in-depth view of the global spirits market, see the just-drinks research section.