What’s the saying? ‘If you can’t see it, then it’s not there, but if you can see it, then it’s too late.’ Something like this crossed my mind yesterday, when word dropped that Brown-Forman and Pernod Ricard were in discussions about potentially merging.
‘If you’ve heard that they’re talking,’ I mused, ‘then they’ve already decided.’
My view of this was affirmed overnight, when the two brand owners issued separate statements saying virtually the same thing: “If agreed,” the pair said, “this partnership would be akin to a merger of equals, drawing from the talent and expertise of both companies, and creating value for shareholders.”
Compare and contrast with the following line from Brown-Forman nine years ago, when Constellation Brands came calling with a takeover bid: “It is important to reiterate that Brown-Forman is not for sale.”
“For nearly 150 years, the company and the Brown family have been committed to preserving Brown-Forman as a thriving, family-controlled, independent company. That commitment is unchanged, and our goal is to continue creating value for all shareholders for generations to come,” the group said at the time.
So, yes, we’re in ‘when’ territory – not ‘if’.
Some hurdles still to clear
That’s not to say that the process will be trouble free; not by a long chalk.
For a start, there’s the meeting-and-greeting of the two controlling families to look forward to – how the extended Brown family will cope with a watering down of its 67.5% ownership of Brown-Forman’s voting shares is going to be fascinating to see. Then, in France, there’s the Ricard family, who while owning 15% of Pernod Ricard’s shares and 21% of its voting rights, also count the CEO among its ranks.
Then, there’s bound to be pushback in the US, as some of those pesky foreigners come over and get involved with an American icon. After all, a newly merged spirits giant may make Jack Daniel’s great again, but what about making America great again?
Portfolio prospects
More by luck than design, I’m sure, but Brown-Forman would appear to have spent the last nearly three years pruning its portfolio to make itself more appealing to Pernod Ricard.
The divestment of vodka mark Finlandia to Coca-Cola HBC in mid-2023, was followed five months later by a near-total reduction of its presence in wine, with Californian chardonnay specialist Sonoma-Cutrer Vineyards heading to The Duckhorn Portfolio. Fast forward to July 2024 and Pernod Ricard’s long-muted desire to withdraw from wine was finally – and almost completely – realised as Banrock Estate, Campo Viejo and Jacob’s Creek departed for Accolade Wines’ successor, Vinarchy.
Talk about ‘meant to be’.
Of the group’s spirits footprints, I hold out little hope for Brown-Forman keeping hold of Slane Irish whiskey, which operates in a category overshadowed – nay, monopolised – by Jameson. Similarly, the scotch single malt trio of Benriach, Glendronach and Glenglassaugh will more than likely have to head to pastures new, barely ten years after joining the Kentucky-headquartered group. Maybe someone should put a call into India’s Radico Khaitan?
Elsewhere, the pair’s gin and rum presence offers little in the way of overlap – in the former, Pernod Ricard’s Beefeater and Monkey 47 actually sit quite well alongside 2022’s acquisition by Brown-Forman, Gin Mare, although Fords Gin’s prospects may come under review. Havana Club, meanwhile, could be a more-than-happy bedfellow with Venezuela’s Diplomatico. As for tequila, both brand owners hold quite low-numbered cards in the shape of El Jimador and Herradura (Brown Forman), and Altos, Avion and Olmeca (Pernod Ricard).
And, whither the Paris-headquartered American whiskies? I’ll put it this way: I can see Brown-Forman stepping away from the negotiation table if any of its domestically-produced portfolio is brought into ownership question. The North American Distillers unit, then, will be lucky if it gets to celebrate its second anniversary this July.
One potential clash that won’t catch the authorities’ eyes when it comes to monopoly concerns is Jack Daniel’s and Jameson. The pair have both made the US their most important market in recent years, but could the shift among brand owners to target consumption occasions over portfolio gaps mean the two whiskies find themselves fighting over the same consumer?
‘Significant synergies’
The pleasant air of the complementary brand portfolios jars heavily, though, with the references both companies made in their statements yesterday to “significant” synergies.
Indeed, with both Brown-Forman (since the start of last year) and Pernod Ricard (since June) having gone on the record as actively working to consolidate their respective headcounts – by its nature, an understandable approach during a downturn – a combined entity would accelerate this consolidation starkly.
There’s an element of confirmation bias I’ve seen today, in the suggestion that Brown-Forman is big in the US, while Pernod Ricard has Europe and – albeit to a lesser extent – Asia Pacific covered. Both companies have long been highly international in their strategies – there won’t be many markets out there that aren’t home to in-house operational units for both groups.
Let’s be under no illusions here – the ‘synergies’ they reference are employee numbers, first and foremost.
How big are we talking?
After all of this, then, what size would a combined entity be? On a sales basis, the business would still sit behind Diageo – but not by much. Last year, for example, Diageo’s top line over the 12-month period came in at just under US$19.8bn. Brown-Forman/Pernod Ricard, meanwhile, almost hit $15.6bn.
In market capitalisation terms, Diageo still leads, at around $42bn to Brown-Forman/Pernod Ricard’s combined $31bn.
On a competition basis, what will be particularly interesting to see is how a larger rival affects Diageo’s strategy, going forward; especially at a time when the London-headquartered company is undertaking some deep soul-searching of its own.
For the better part of a decade, the spirits industry has been saying that the days of transformational M&A are behind us. In 2026, however, that viewpoint no longer applies.
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