An acquired spirit
By: Chris Brook-Carter - 3 November 2005 14:54
Consolidation has been such a large part of the spirits market for so long now that I would go so far as to say that it has been the defining issue for the industry in the last decade.
My very first press conference as a journalist was the inaugural full-year results at Diageo following the merger between Grand Met and Guinness that created the World’s number one premium drinks group. Since then, the pace has rarely let up – that is until now.
On Friday I was interviewed by the business magazine Forbes for a piece the journalist was doing on Pernod Ricard. Inevitably, the conversation got round to merger and acquisition activity and, in particular, where the next big buy for the rapidly expanding French group would come from. For many years this was a fairly easy question to answer. But now, the options are beginning to look thin on the ground.
As we have discussed in our ongoing ‘Keep It In The Family’ series of features, the next level of family-run drinks groups look unwilling to play a part in the consolidation game, unless they are the ones doing the buying and, as the likes of Diageo and Pernod get bigger, competition issues become more and more of an issue.
However, that’s not to say consolidation is over, merely that it’s likely to take on a different shape. Campari certainly seems to believe there are opportunities out there, after its CEO made public in the last week a €500m war chest. Regional and bolt-on acquisitions are likely to be the key now in strategically important markets such as Latin America and Asia. Drinks companies, whether it is through joint ventures or smaller acquisitions, will be looking hard at expanding their presence in developing markets, particularly as the West continues to mature.
As the market leader, the position of Diageo in all of this will be crucial and just-drinks hopes to get an insight into the company’s thoughts this week, when deputy editor Olly Wehring sits down for an exclusive interview with CEO Paul Walsh. Keep your eyes peeled for the results of that chat.
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