Pernod Ricard becomes a serial acquirer in high-end brands…

The French wine & spirits group made six key acquisitions in 2019, designed to strengthen its premium brands portfolio.

The premium segment of the Alcoholic Beverages market is forecast to grow at c. 5% CAGR between 2019 and 2023, compared to just 0.4% for ‘standard-and-below’ spirits over the same period.*

The acquisition strategy is leveraging booming categories and reinforcing must-win, key strategic markets, explains Pernod Ricard’s CEO Alexandre Ricard, who has made the group one of the most acquisitive in the industry.

When Alexandre Ricard became CEO of Pernod Ricard in 2015, the world’s second largest wines & spirits group was experiencing sluggish sales and the stock price was flatlining. Since then, the group’s sales have increased by c. 25% (FY19 rev: €9.2bn) and the stock price by c. 60%.

His thoughts on the premiumization trend:

“I think premiumisation is here to stay and is still by far a big value creation lever. People are trading up to higher quality brands all over the world, led by the US. People always aspire to ‘better’ and that is the story of civilisation…That is the area we want to play in. We do not see any strategic interest in the trade down part (standard and value-for-money segments). We like selling premium products that have a story.”

And on organic & external growth:

“Last year, for the first time, more than half of the world’s population had enough disposable income to be categorized as middle class. By 2030, there will be 2 billion more middle-class people in this world…People are drinking less but drinking better – and we expect the premiumization of our brands, our strong position in luxury spirits, to be one of the factors accelerating our growth.”

“From an M&A point of view, our strategy is clear and simple. Number one is to leverage dynamic categories. The gin and whisky categories and bourbon in particular. It drove us to do Smooth Ambler [acquired in 2017], TX Whiskey [acquired Firestone & Robertson Distilling Co in 2019], Rabbit Hole [acquired in 2019], and Castle Brands [acquired in 2019]…Some of these US whiskey brands are designed to stay regional, others to be national, and of course travel retail will be an opportunity for some of these to go beyond the US market…Where we see ‘demand spaces’ that we are not in, and believe we ought to be in, we will look to new products, bolt-on acquisitions or partnerships where the entrepreneur who created this new brand is still driving the business. This is what we have done with Smooth Ambler bourbon and artisanal mezcal producer Del Maguey Single Village…”

 

Alexandre Ebin
Alexandre Ebin
Associé
France