US: Pernod Ricard, Fortune Brands terminate Absolut venture
Pernod will pay Fortune US$230m to exit the distribution arrangement for Vin & Sprit brands in the US from this October, both firms announced yesterday (28 August). Fortune's contract had been set to run until February 2012.
As part of the exit deal, Fortune has also agreed to pay Pernod $100m for the Cruzan Rum brand, the firms said.
Pernod has made no secret of its intention to exit the distribution deal with Fortune, following its takeover of Sweden's Vin & Sprit earlier this year. It said savings generated from ending the deal early would "more than offset" the compensation payout to Fortune.
Fortune president and CEO Bruce Carbonari sought to re-assure shareholders, following the news. "This is a win-win agreement that provides significant benefits to Fortune Brands," he said.
"We'll receive a cash payment of $230m. We're also pleased that we'll acquire a fast-growing premium rum brand. Rum is one of the most attractive spirits categories, and the addition of Cruzan fills a portfolio gap in premium rum with the category's fastest growing brand in the U.S."
The group, which also owns Sauza Tequila, Jim Beam and Laphroaig whisky, said it expected a one-off bonus of $180m in its third quarter, following its exit from the venture with Vin & Sprit.
It also predicted a one-year return on its investment in Cruzan, which it said was the fifth largest rum brand in the US, with worldwide net sales of approximately $50m, or 750,000 cases, in 2007. Sales from distributors to retailers grew in strong double digits last year, it added.
Pernod's assessment of Cruzan was slightly more muted, saying it had made a "close to break-even contribution" in 2007, after advertising and promotion costs.
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