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The spirits category in 2018 - just-drinks' Review of the Year, Part III - FREE TO ACCESS

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As the year draws to a close, just-drinks takes a look back at the stories that have made the headlines across the global drinks industry over the last 12 months. Here, deputy editor Lucy Britner picks out the highs and lows for the spirits category.

Gin continued to be a big deal in 2018

Gin continued to be a big deal in 2018

More M&A

As usual, 2018 saw a fair amount of mergers and acquisitions - from bolt-ons to big deals. The year started with one of the largest deals in the last 12 months: In January, Bacardi acquired full control of Tequila powerhouse Patron in a transaction that gave the company an enterprise value of US$5.1bn. Speaking of all things agave, in the same month US division of Pernod Ricard sucked up the outstanding 16% of Avion Spirits, completing the buyout of its partner in the Tequila venture.

Zamora also hit the ground running with two acquisitions in January - first, the privately-owned Spanish group bought a "strategic stake" in premium sangría brand Lolea, then it took control of Martin Miller's Gin

Edrington put its Cutty Sark and Glenturret Scotch whisky brands up for sale in June and the Cutty Sark brand was snapped up by La Martiniquaise-Bardinet in November

Meanwhile, July saw Mast-Jägermeister become a shareholder in Germany's Gin Sul -  the group's first strategic investment in an external brand.

In November, Diageo completed the jettisoning of its "non-core" brands. The company offloaded 19 of its lesser-known spirits brands, including a dark rum, a sambuca and the Piehole flavoured-whiskey range, to US firm Sazerac for US$550m.

Fancy a gin?

If you didn't launch a gin this year, what were you doing? Everyone from craft distillers to Hollywood celebrities has brandished botanicals, rummaged for recipes and flaunted flavours. We started the year in the pink with the launch of Beefeater Pink Gin. The gin merry-go-round saw more pink gins later in the year, including one from Gordon's and a Bloom Jasmine & Rose gin from Quintessential Brands.

Also in 2018, Deadpool actor Ryan Reynolds bought into Aviation GinCampari Group launched a new gin brand, O'ndina, and William Grant & Sons doubled the capacity at the Hendrick's distillery. Oh, and Diageo added a few flavours to the Tanqueray stable, including Tanqueray Lovagae

So long, CEOs

2018 has seen an unprecedented number of spirits companies prepare farewells for their CEOs. At the end of May, Brown-Forman announced the pending appointment of Lawson Whiting as its next CEO, following Paul Varga's decision to retire.

Then in October, Beam Suntory's Matt Shattock announced he would step down as CEO next April, after ten years in the hot seat. Next, Constellation Brands emerged as the third major US-based drinks company to announce a change of CEO, with Rob Sands set to stand down early next year.

The year of CEO switches ended with Edrington CEO Ian Curle announcing his retirement, after 15 years at the top. He will be replaced by The Macallan MD Scott McCroskie.

Marie Brizard's roller-coaster 2018

This year didn't start well for Marie Brizard and by March, the company ended the tenure of its CEO. In July, the group used its H1 2018 sales update - in which the top-line fell year-on-year by 8% - to unveil former Diageo Hungary GM Andrew Highcock as its new CEO. Later in the year, Marie Brizard said it will sell some brands in a bid to reduce costs.

Let's hope 2019 fairs better for the group.

For the love of agave

Tequila and mezcal launches, acquisitions and innovations have been rife in 2018, with Stoli Group telling us at the end of February that it was preparing to enter the mezcal category. Diageo also added a mezcal under its Casamigos brand and even Sex & the City star Chris Noth got in on the agave action, with the purchase of majority ownership of ultra-premium Ambhar Tequila. In mid-November, Bacardi added a limited edition expression to its newly-acquired Patron Tequila brand that will be available only in the US. Patron Estate Release comprises liquid produced using 100% Weber Blue Agave grown within the grounds of the Hacienda Patrón.

Increased interest in the category has, of course, put a strain on raw materials, and CEOs continued this year to warn of higher agave prices - Campari Group's CFO Paolo Marchesini even described agave prices as "through the roof"

Incubators 'R' Us

In the ongoing quest to be more agile, take advantage of new tech or craft brands and cater to consumer demands, drinks companies continue to go big on their incubator investment funds and back startu-ps. In April, luxury goods firm Louis Vuitton Moet Hennessy launched a start-up support programme to boost innovation in the luxury market and in December, the firm launched the third edition of its Innovation Award as it looks to back luxury-focused start-ups.

Also in April, Anheuser-Busch InBev utilised its ZX Ventures development division to acquire UK-based e-commerce drinks business Atom Group, owner of the Master of Malts spirits e-tailer.

Moving the process along a few steps and Diageo made good on its Distill Ventures investment with the acquisition of Belsazar vermouth, later adding the brand to its high-end Reserve portfolio

Brexit

While the prospects for a no-deal Brexit this week look even more likely, the spirits industry earlier this year bemoaned such a fate. SpiritsEurope and the Alcohol Beverage Federation of Ireland released separate statements in October, both warning of the potential consequences should the UK and the EU fail to reach agreement on the former's departure from the latter in March. The two organisations flagged the risk of tariffs, the danger to Geographical Indications and the likelihood of delays at border crossings.

At just-drinks, we considered: What a 'no-deal' Brexit would look like for drinks companies.

Trade wars

A tariff row kicked off earlier in the year, when the US imposed higher taxes on imported steel and aluminium. Several countries and regions retaliated by imposing tariffs on US products, including whiskey. And, as the barriers went up, the spirits company widely-considered to be in line for a drubbing has been Brown-Forman.

Earlier this month, however, the Jack Daniel's owner said the tariffs had not affected the six months to the end of October too adversely, with fiscal-H1 sales rising 5%, compared to a 7% year-on-year increase in H1 2017.

A range of settlement panels are in the process of being set up by the World Trade Organization, in the hope of resolving the trade war.

just-drinks Review of the Year 2018 - December Management Briefing


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