The drinks sector is particularly fertile ground for mergers and acquisition activity, with a number of big businesses accustomed to making acquisitions to spur growth, new players popping up all over the place with new offerings, and clear efficiencies to be had when combining systems and processes.

The proposed merger between AG Barr and Britvic is a good example of how a number of factors need to be taken into consideration when considering a merger. Publicly-listed Barr still retains a strong 'family-run' brand and culture, with a powerful sense of its Scottish heritage. Britvic, on the other hand, is much more of a corporate entity, without a real 'Britvic Brand', and lacking the sense of independence that its smaller competitors such as Barr enjoys. If the merger goes ahead, Britvic is likely to benefit from the culture, systems and processes of Barr, yet Barr might find its culture lost in the bigger firm. Also in the mix are difficulties around deciding how much of each firm’s senior management remains in the new company, with neither firm wanting to be outnumbered by the other.

With this in mind, and the fact that, with any type of M&A deal, there are several factors that come into play that will influence its ultimate success or failure, here is an overview of some key considerations.

People and culture

With a typical drinks manufacturer employing a large workforce to produce, package and deliver its products, how these staff members are communicated with can affect the deal’s long-term success. While senior management is often incorporated into the management structure of the newly-created company, or kept on in an acquisition, the same can’t always be said for the wider employee base. Where an M&A deal results in cost-cutting, making redundancies can often be the first step to achieving this. What you don’t want in a post-M&A scenario is a disgruntled workforce, thanks to the implementation of sweeping changes as soon as the deal is complete.

This links to the overall cultures of both companies, and how these are to be integrated. Take the Coca-Cola Co's purchase of a majority stake in Innocent. The culture of the two companies couldn’t be more different – there’s one of the biggest and oldest global drinks brands and a relatively new business that prides itself on using all-natural ingredients. Coca-Cola will have to tread carefully if it tries to introduce its corporate processes into Innocent’s smaller, start-up style.


It’s a common rule in drinks industry that the majority of companies generally perform better in a particular sub-sector. Coca-Cola Co, for all its size, doesn’t sell alcoholic drinks. Likewise, the larger beer companies, such as SABMiller, Heineken and Anheuser Busch InBev, haven’t made noticeable acquisitions in the spirits sector – although there are exceptions to the rule, such as Diageo's ownership of the Guinness beer brand. While diversification can result in new revenue streams, same-sector M&A activities are often the most successful because they allow companies to stick to their core competencies and strengths, rather than having to learn about new markets, processes and supply chains. It also reduces the reliance on the target's management team, which, as discussed earlier, may not be on board or on-message with the acquirer.

Deal drivers

The clear attraction of some M&A deals is that, done in the right way, they can help cut overall costs for both parties. Often, it is the primary reason for initiating a merger or acquisition and, in certain markets, it can be particularly important - especially in very static markets. In the UK, for example, cost-saving is an important driver as it becomes harder to grow top-line market share by any noticeable amount. More recently, however, there has been activity around innovative drinks segments, such as cider, craft beer and drinks catering specifically to women. In addition, while a merger can help increase market share, there is much more to it than that. The increased company size means that it is possible to leverage economies of scale to get better prices from suppliers, as well as increase efficiency by pooling existing resources.

International activities

Mature markets with established economies have increasingly pushed companies to look towards growth from outside, whether via acquisitions or by forming joint venture partnerships, especially in those markets where majority acquisitions are restricted somewhat by regulatory hurdles. Diageo is a good example of a drinks company that has made smart acquisitions in emerging markets. 

The UK-headquartered drinks giant has acquired a stake in Indian spirits manufacturer United Spirits, and is expected to increase its stake in the firm in a phased manner. By doing this, Diageo can use United Spirits’ market knowledge and supply and distribution infrastructure to crack what is a very difficult market for western businesses.

Diageo is also making moves to do a similar thing in China, as it is in early stage talks to up its stake in domestic baijiu producer ShuiJingFang. However, its recent acquisition of the Turkish spirit brand Mey Icki should serve as a warning sign – the Turkish government has recently enacted a new law that forbids alcohol advertising, a move that could leave Diageo’s return on its investment in tatters.

Different countries can also have very different approaches to M&A. While for more developed economies, M&A is just part of everyday business life, for some brands in less developed economies, there can be a much greater sense of national pride attached to a brand and, therefore, less willingness to be part of any merger or acquisition, particularly with an overseas company.

Just ask Coca-Cola.

Not only can this make the initial deal tricky, but also making any M&A successful can prove harder than if it were to take place in a country where this is more a part of the business culture. An alternative strategy to M&A that is often adopted by international (foreign) buyers is pursuing a collaborative approach by forming JVs.


Successful M&A has helped many drinks brands increase their market share, improve their routes-to-market and grow their business. Yet, this is anything but a straightforward process. Without taking an objective look at each area of the deal, from the people involved to local market conditions and the business culture, unknown factors can irreparably damage a deal. However, with the correct due diligence processes in place, as well as market knowledge, there’s no reason why an M&A deal in the world of drinks can't be a success.

Grant Thornton UK LLP is a business and financial adviser with offices in 28 locations nationwide. The firm is a member of Grant Thornton International Ltd, an organisation of independent assurance, tax and advisory firms with around 31,000 people, across 100 countries. Grant Thornton provides advice for organisations to help boost growth. Proactive teams, led by partners in these firms, are available to solve complex issues for privately-owned, publicly-listed and public sector clients. For more details on Grant Thornton, click here.