INDIA/UK: Gruppo Campari floated as buyer for Whyte & Mackay - analyst
Diageo could change the marketing on some of United Spirits' whiskey brands
Nomura said a sell-off of the Scotch producer is the “most likely scenario” in light of Diageo's takeover of a majority stake in the Indian business, announced Friday. Proceeds from the sale of Whyte & Mackay would go towards paying down “existing debt” in United Spirits, Nomura suggested.
“We believe there would be some attraction for midsize players, such as Campari, in part of the business,” Nomura said. “Brands such as The Dalmore, Isle of Jura, would complement existing Scotch brand Glen Grant.”
However, analysts appear divided over the regulatory scrutiny United Spirits' ownership of Whyte & Mackay will provoke. Nomura said it does not expect “major regulatory issues”, with Diageo's share of the global Scotch market around 35.5%, compared to Whyte & Mackay's 1.2%.
But, Bernstein said that it is “highly likely that UK, and perhaps European, regulators will wish to examine the impact of the acquisition of Whyte & Mackay on the supply of Scotch". It added, however, that “given W&M's very low share of commercialised Scotch, this may not be an insurmountable issue”.
Meanwhile, Nomura noted a potential issue with the Scotch Whisky Association that the deal could provoke. The SWA has refused to allow United Spirits to become a member of the group, Nomura said, due to the marketing of some Indian whiskey brands, which attempt to “pass themselves off” as Scotch whisky brands.
“Although we would not expect Diageo to rename some of these brands , we would expect a change in the marketing of the brands to reduce any risk of 'passing off' i.e. fewer scenes of heather and bagpipes,” Nomura added.
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