COMMENT: US key to Pernod, Fortune ambitions
Pernod Ricard and Fortune Brands are considering a US$13 billion bid for Allied Domecq, the world's second-largest spirits company. Were it to take place, Pernod and Fortune would split Allied's brands between them.
Some kind of consolidation is required. Allied, Pernod and Fortune all suffer from a lack of scale compared to US and global market leader Diageo. This is a significant issue in the US, where Diageo has gained substantially from having the scale to sign exclusive deals with local distributors.
There is also a good brand portfolio fit between Allied and Pernod. The larger firm's top brands are Beefeater gin, Stolichnaya vodka, Malibu rum liqueur, and Courvoisier cognac, while Pernod Ricard's leading brands are its namesake anises plus Martell cognac, Chivas Regal Scotch whisky and Jameson's Irish whiskey.
However, Pernod lags far behind Allied in terms of US presence, so the gains from merging the two firms would come more from cost-cutting than from boosting power over distributors. Since the strategic benefits to Allied's shareholders would be limited, Pernod would instead need to pay a hefty takeover premium to gain control.
Bringing in Fortune Brands, the second-largest US spirits player but a niche firm globally, helps solve Pernod's funding problems. It also benefits Fortune, allowing it to boost its domestic scale compared to Diageo. But since Pernod may need to cede much of Allied's US business to Fortune, a three-way deal could do little to boost the French firm's presence in the most important global spirits market.
A better outcome would be a genuine three-way deal that would create a serious global competitor to Diageo. Fortune Brands' spirits business (which accounts for around one fourth of the conglomerate's total revenues) could be merged into the enlarged Pernod-Allied group. However, there are likely to be too many corporate egos and fiefdoms at stake on both sides of the Atlantic for this to be feasible anytime soon.
The US consumer goods group Fortune Brands has confirmed it is in talks about launching a joint bid with Pernod Ricard for Allied Domecq....
Diageo is to launch a new global advertising campaign for Smirnoff Ice. The first ad in the global campaign, 'Garden', launches in Great Britain on April 11th on terrestrial and satellite TV. ...
Pernod Ricard is looking to acquire Allied Domecq....
Allied Domecq and Pernod Ricard have both been downgraded....
Diageo has completed another share buyback transaction....
Fortune Brands has started making moves to acquire in the European drinks industry, according to press reports....
E&J Gallo has announced a number of appointments within its European division....
Diageo's Smirnoff Signatures line of premixed cocktails is now available nationwide in the US....
- Why did Mast-Jägermeister buy Sidney Frank?
- Why consumers don't care about vodka's provenance
- Pernod Ricard's FY Performance by Region, Brand
- Japan follows in Scotch whisky's footsteps
- Brown-Forman's Q1 Performance by Region, Brand
- Diageo launches glass Bulleit & Cola bottles
- Pernod Ricard "in line" after full-year results
- Pernod Ricard releases social medial guide
- Bruno Mars rum rolls out across US
- Brown-Forman CEO unfazed by FX headwinds
- Global gin insights - market data, product innovation and consumer trends research
- Future growth opportunities for global spirits
- Global vodka insights - market forecasts, product innovation and consumer trends research
- Global rum insights - market forecasts, product innovation and consumer trends research
- Global Tequila insights - market forecasts, product innovation and consumer trends research