April in the Northern Hemisphere is a month of promise: longer days, flowers in bloom, warmth. In my neck of the woods at least, all is fresh and new, and the birds are in full voice. At the same time, could it be that we are glimpsing the first green shoots of recovery for the global drinks trade?
Analysts had expected more doom and gloom from Moët Hennessy’s first-quarter results, so the 5% uptick in organic sales came as a welcome surprise – not least because the growth was equally spread across the company’s Cognac, Champagne and table wine activities.
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True, there were caveats: Q1 is far from being the most significant trading period for the business, there were benefits in terms of the timing of the Chinese New Year celebrations and Easter; and the comparison was a relatively soft one, boosted by shipment phasing ahead of price hikes for Champagne in the important Japanese market.
But the increase in revenues is not to be sneezed at, even if the picture remains more mixed than that 5% headline figure might suggest. The success story is largely one of improved trading in Asia; the US remains difficult.
Another part-good, part-bad curate’s egg of a results announcement was offered by Pernod Ricard last week with its Q3 numbers. The double-digit decline in reported sales was all about currency fluctuations, with organic sales essentially flat. In the recent difficult context, that constitutes a recovery of sorts.
Both Moët Hennessy and Pernod remain cautious about the rest of the year and who can blame them, given the recent global performance of the spirits industry? Pernod is feeling particularly bearish, predicting a 3-4% downturn in revenues for the year to June, as the multi-stranded conflict in the Middle East piles further woe onto existing geopolitical and macroeconomic difficulties.
Here, the company’s exposure to global travel retail – over the years, largely a positive attribute – isn’t helping. The effective closure of UAE airport hubs has taken a big chunk out of GTR revenues, which account for 5% of group sales. The Middle East region as a whole, meanwhile, has a 2% slice, and has been growing well in recent years.
The timing of this development could hardly have been worse. After the pandemic-induced slump, GTR has been recovering well – even more so as the market in China has opened up to Cognac once more, following its decimation thanks to the ongoing Beijing-Brussels trade spat. Pernod’s GTR sales grew by 11% during Q3; but they will probably decline across fiscal 2026 as a whole.
What would everyone give for a period when nothing much happens for a few months?
It’s as if the industry’s leading players are engaged in a highly frustrating game of Whac-a-Mole: no sooner do they tackle one issue than another one pops up – often the result of political decisions based around military interventions or protectionist trade manoeuvres. What would everyone give for a period when nothing much happens for a few months?
Why Sazerac-Pernod deal feels unlikely
Whether recovery is imminent or not, I’m not sure the recently announced numbers will much affect the ongoing negotiations around the Brown-Forman/Pernod Ricard/Sazerac love triangle.
I don’t know what to make of Sazerac’s gambit here. Is this essentially a defensive move, designed to frustrate the formation of an entity that would leapfrog the company to create a clear number two to Diageo in the US? Or at least to push up the price of the deal, eroding shareholder value?
Whatever the motivation, I can’t get my head around how this would work. News of Sazerac’s bid – said to be $32 a share, or US$15bn – emerged on the same day that the company announced the name of the distillery – AJ Bond – that would spearhead its foray into Tennessee whiskey. That’s the segment utterly dominated by Brown-Forman’s monolithic Jack Daniel’s.
As this suggests, any tie-up between Sazerac and Brown-Forman would catch the eye of anti-trust authorities, given their combined overweight presence in American whiskey. And does Brown-Forman really want to wade deeper into that category at the moment, especially with a player whose revenues are largely (around 90%) concentrated in the US market?
The synergies would be less compelling, the potential to build Brown-Forman’s international sales diluted and then there is the question of structuring the deal in a way that would please both controlling families. This latter point also applies to the Pernod/Brown-Forman union but here the chat about a “merger of equals” at least suggests some sensitivity to the point.
At a time when the spirits industry’s leading players have been keen to trim their roster of non-core products, Sazerac has been happy to keep hoovering more of them up. Just over a decade ago, to take a highly relevant example, the company spent $543.5m on buying Southern Comfort and Tuaca from… Brown-Forman. In late 2018, it splurged a further $550m on taking the likes of Seagram whisky, Myers’s rum, Booth’s gin and Goldschläger off Diageo’s hands.
This suggests to me a philosophical schism between Sazerac and Brown-Forman that may prove impossible to bridge, unless I’m missing something here (it has been known). And that strategic lack of harmony makes a deal with Pernod, by comparison, look eminently sensible – even if its motivation probably says more about the continuing challenges inherent in the spirits marketplace in the remainder of 2026 and beyond. Indeed, both Bloomberg and Reuters, citing unnamed sources, reported today (20 April) that Brown-Forman favours a deal with Pernod.
To return to our upbeat springtime analogy, those green shoots may not be quite so apparent after all, given this context. As any gardener (or vineyard owner in Champagne or Chablis) will tell you, one bad frost at this time of year can spell disaster.
That said, it does feel as if recovery is at least edging into sight on the horizon, even if it remains tantalisingly just out of reach. But it’s way too soon to make a definitive call on that, especially in a world as volatile and unpredictable as this one. As former UK Prime Minister Harold Macmillan is reputed to have said (but probably didn’t): “Events, dear boy, events.”
