just On Call - Beam Global Spirits & Wine upbeat on 2011
Maker's Mark surpasses 1m case sales in a year for first time
Beam Global Spirits & Wine is planning fresh launches in Bourbon and vodka in 2011 as the group enters the year in confident mood, but analysts think a takeover remains likely.
Fortune Brands has said that its Beam Global Spirits & Wine business is planning "exciting innovations" in the two spirits categories in 2011. It said that the drinks unit is growing in confidence as consumer demand in Europe and North America improves and emerging markets remain strong.
Beam Global, which owns brands such as Jim Beam, Sauza Tequila, Maker's Mark and Courvoisier Cognac, reported net sales up by 8% for 2010, to US$2.66bn. Sales increased more quickly in the fourth quarter, by almost 10% to $818m. The performance contributed strongly to a solid year for Fortune Brands, the group said today (4 February).
The firm's management told analysts on a results conference call that it has seen a "modest return to premiumisation" in North America. In Europe, the UK and Germany have also improved, although Spain has continued to struggle. Global spirits sales increased by between 1% and 2% in value in 2010, Fortune estimated.
Maker's Mark Bourbon was one of the company's key growth drivers in 2010, surpassing sales of 1m nine-litre cases for the first time.
Fortune said its performance reinforced its confidence that the second half of 2011 will be the right time to separate its three businesses - spirits, golf and home. "We see a propserous future for Beam Global as an independent spirits company," the company's management told analysts today. "[Beam] Operating margins are at the forefront of the industry and we expect it will generate strong cashflow," management said.
Analysts strongly expect takeover bids for a standalone Beam Global, but Fortune hinted that, rather than selling up, the company may seek acquisitions. A strong cashflow could yield "opportunities to enhance the portfolio", the group said.
Fortune forecast that operating profits for Beam Global will increase by mid-single to low-double digit percentage points in 2011.
Morningstar analyst Philip Gorham agreed with Fortune's management that the separation of Beam Global from golf and home "is a positive move and the individual businesses will generate greater value than the intrinsic value of the conglomerate on a discounted cash flow basis".
However, Gorham said in a note that he believes a buyout of Beam Global is still probable. "We expect several firms to be keen to add Jim Beam to their portfolio," he said.
Pernod Ricard could be one company out of the race for Beam brands if the separation plan does complete in the second half of 2011 as planned. "If this is the case, we believe it is unlikely that Pernod Ricard would be able to participate in any competitive bidding process for the Beam Spirits & Wines assets," said Evolution Securities today. Pernod has repeatedly said that it is committed to paying down debt throughout 2011.
Several analyst groups, including Evolution, think that Diageo and Bacardi would be favourite to buy Beam Global and share the spoils. Evolution values the entire Beam Global business at $8.7bn.
Beam Global Spirits & Wine is to bring its Sourz brand to UK television screens for the first time, through its Maxxium sales and marketing JV....
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