Pernod and Brown-Forman Speak
Pernod says it has fully acquired Vin & Sprit from the Kingdom of Sweden, following the European Commission’s decision to authorize the transaction. The transaction is valued at €5.69 billion, including debt.
“The acquisition of V&S enables Pernod Ricard to assume co-leadership of the global wine and spirits industry,” said the company in a statement. “Absolut, the number one premium vodka worldwide, is the ideal addition to complete Pernod Ricard’s brand portfolio and makes the Group the second-largest player in the US.”
THE ABSOLUT COMPANY. The Absolut Company has the worldwide responsibility of Absolut including production. It becomes part of the brand-owner network, alongside Chivas Brothers, Martell Mumm Perrier-Jouet, Irish Distillers, Malibu-Kahlua International, Pernod Ricard Pacific and the joint venture Havana Club International.
Ketil Eriksen has been appointed ceo of The Absolut Company and reports to Thierry Billot, deputy managing director of Pernod Ricard in charge of brands.
PERNOD RICARD NORDIC. In order to maintain it decentralized structure, Pernod is putting in place two Swedish-based business units within V&S. Pernod Ricard Nordic will market Pernod Ricard’s international and local brands in Sweden, Denmark, Finland, Norway, the Baltic States and Iceland. The company was created by merging V&S wines, V&S Distillers, and Pernod Ricard Nordic Countries (Pernod’s current distribution subsidiary in the Nordic region).
Michel Mauran becomes its managing director, reporting to Laurent Lacassagne, chairman and ceo of Pernod Ricard Europe. In addition, Rolf Cassergren has been appointed coo in charge of finance, marketing, communications and operations for Pernod Ricard Nordic. He reports to Michel Mauran.
Bengt Baron, the current chief of V&S, will assist with the integration until October 31, when he will leave the group. Anders Narvinger has also agreed to continue his position as chairman of the board of V&S.
DISPOSED BRANDS. Pernod says it will shed about $1.57 billion in assets, which includes the following V&S brands: Groenstedts Cognac, Red Port, Star Gin, Dry Anis and Lubuski Gin and Serkova vodka (owned by Pernod).
In addition, Pernod will end its distribution agreements for Stolichnaya vodka outside Russia and for Royal Canadian whisky in Sweden.
The disposals, coupled with improved cash generation and profitability, would help cut net debt to below four times earnings before interest, tax, depreciation and amortization (EBITDA) from six times EBITDA within the next three years, said the company.
EXECUTIVE COMMENTS. In today’s conference call, managing director Pierre Pringuet said: "The question is, of course it is the right acquisition? It is the right brand? Strategically, it is the right thing to do. But is it the right moment to have basically about Euro 12 million of debt? And the answer is, first of all, we couldn’t choose. It was either to go for it or not to go for it. We had no choice. Secondly, yes we will certainly work to decrease the debt. Keep in mind that this ratio of net debt/EBITA is 6 times and is precisely the same ratio we had for the Seagram’s deal and more recently the Allied deal.”
PERNOD POSTS STRONG FISCAL YEAR RESULTS
Managing director Pierre Pringuet said he doesn’t see evidence of a severe economic downturn in Pernod’s numbers, hinting that reports in the media have exaggerated the issue. He maintained that Western markets (Europe and the U.S.) are still growing, albeit at a moderate rate and slower than a year ago.
Growth of the 15 strategic brands was very strong overall, gaining 11% in value and 5% in volume. Ten of these brands reported double-digit growth rates: Martell (+24%), Jameson (+21%), Mumm (+18%), Havana Club (+17%), The Glenlivet (+14%), Perrier Jouet (+14%), Stolichnaya (+12%), Chivas (+11%), Ballantine's (+11%) and Malibu (+10%).
Over the full financial year, the spirits business grew in value by 9%. The wine business grew by +6%, compared to +1% in the previous financial year. Overall, second half growth (+7%) remained strong following a very good first half (+10%), against a background of further appreciation of the Euro against most other currencies.
Absolut (world leader in premium vodkas) recorded excellent performances, said the company, illustrated by its accelerated growth in the first half of 2008 (+12% compared to +9% in the calendar year 2007) and a volume of 11.3 million 9-liter cases sold, which is a 600,000 liter case increase compared to last year.
UNITED STATES “SATISFACTORY.” Overall, the U.S. continues to do well amidst a tough economy, said Pernod. North America grew 5%, with spirits gaining 4.4% and wines rising 9.6%. Pernod said there was a shift of consumption from the on-trade to the off- trade in the U.S., although premium brands continued “satisfactory growth.”
This includes Jameson, The Glenlivet, Malibu and Wild Turkey for spirits and Montana, Perrier Jouet, Mumm Napa and Campo Viejo for wines. At the same time, brands with weaker franchises suffered from the economic downturn, including Kahlua, Beefeater and Chivas. Absolut grew 5% in the 12 months to June 30, according to Nielsen.
Jameson depletions were up 24% in the year, with Nielsen numbers rising 29% and NABCA up 20%. Glenlivet 12-month depletions grew 6%, with Nielsen numbers up 3% and NABCA up 5%. Malibu depletions grew 5% in the U.S., while Nielsen and NABCA numbers grew 5% and 7%, respectively.
The Kahlua situation remains difficult, with depletions declining -7% and NABCA down -3%. Nielsen numbers, however, grew 2%. Similarly, the U.S. gin market remains tough, as represented through Beefeaters performance. Twelve month depletions declined -3% and NABCA and Nielsen numbers were down -3% and -0.5%, respectively. Depletions of Stoli, meanwhile, grew 3%, while Nielsen was flat and NABCA declined -1%. Chivas Regal 12-month depletions declined -6% in the U.S. and Nielsen numbers declined -6%.
Absolut is reportedly losing some share in the U.S. do to its middle tier pricing. It’s too expensive for consumers trying to cut costs, but it’s not expensive enough (like Grey Goose or Ketel One) to do especially well in trendy bars.
Pierre said Absolut has been subject to too many price promotions in the past and that he will ensure it doesn't stray far from $20 a bottle in stores. He also wants to cutback on the recent proliferation of new flavors for Absolut.
Montana wine saw strong growth in the United States. Depletions were up 15% and Nielsen up 12%. Pierrier Jouet had “satisfactory” growth in the U.S.
ORGANIC GROWTH STRATEGY. Pernod says it is changing its growth strategy and will instead focus on existing labels rather than making more acquisitions over the next few years.
“‘Organic growth is a must,’ Pernod managing director Pierre Pringuet said in an interview with WSJ. He noted that ‘antitrust authorities will look at any new acquisitions even more carefully,’ making additional purchases difficult.”
In November, Pierre will replace Patrick Ricard as ceo.
“Because the company has grown so much in recent years, it could soon find itself in the same position as industry leader Diageo: unable to make big acquisitions because it already has dominant positions in most segments,” said the WSJ article.
However, Pierre insisted Pernod will likely make more acquisitions once it pays some of the debt, most notably in the bourbon and tequila categories where the company currently has a gap.
EMERGING MARKETS TO THE RESCUE. Meanwhile, Pernod Ricard finance director Emmanuel Babeau forecasts emerging markets (India, Russia and China) will continue to do well, while the United States and Europe will have “more subdued” growth.
"Even in difficult years, the consumer protects what for him holds pleasure value," Pernod Ricard Finance Director Emmanuel Babeau told Reuters in an interview.
"This has been one of the best years for Pernod Ricard over the past 10 years with strong growth in emerging markets and a limited slowdown in Western Europe and satisfactory growth of our premium brands in the U.S.,” he also said in today’s conference call.
WORD FROM UBS. “Consistent with our thesis that spirits are relatively safer than beer in a weaker consumer environment, we include Pernod and Campari as most preferred” alcohol beverage companies in Europe, said UBS analyst Melissa Earlam.
BROWN-FORMAN: YEAR OF CHANGES
CEO and Chairman Paul Varga began the conference by putting fiscal 2008 in context and reviewing the business environment “that influenced how we behaved” last year. One, Brown-Forman was still “very new” to Casa Herradura last year and the transition, including cultural aspects and incorporating a private company into a public one, was still ahead of B-F. Paul remarked that the Casa Herradura team displayed “some of the most impressive work we’ve seen in years.”
Two, five senior level executives retired from the company at the same time, which Paul admitted “made me a little nervous to be honest.” However, he maintained that the company was prepared for the management shift and was able to promote a lot of fresh faces that have helped generate new ideas.
Lastly, the company saw some softening in the consumer environment last year, including tightened spending and a switch from the on-premise to the off-premise.
“This posed a challenge to us,” he said. “But I was particularly proud of the organization because we needed to tighten our belt...we still invested very nicely but it was at a lower level.”
Paul said that as consumers in the U.S. started going to bars and restaurants a little less, and opted to drink at home, “it required us to take resources we’d put on the on-premise to the of-premise.” As a result, the second half saw strong financial results. Paul said it’s still a good environment for growth.
The fastest growing brands in fiscal 2008 were Gentleman Jack and Woodford Reserve. The newly re-packed Gentleman Jack grew at the fastest rate, surpassing the 200,000 case mark last year. Woodford Reserve grew beyond the 100,000 case mark.
Paul characterized this as “examples of homegrown growth,” and says it will be a part of the company’s growth strategy for now on.
In addition, B-F is increasingly focused on becoming a more global company as it expands in foreign markets.
CHATEAU MONTELENA COULD SELL FOR $150 MILLION
As we reported earlier this week, Michel Reybier, owner of Chateau Cos d’Estournel, grand cru classé of Saint-Estèphe, is in discussions with Chateau Montelena’s founder, Jim Barrett, to acquire the Chateau Montelena Winery in Napa Valley, pending regulatory approval this fall. Chateau Montelena is famous for its chardonnay wining the renowned Paris Tasting of 1976, or “The Judgment of Paris.”
The Barrett family acquired the 125 year old Chateau Montelena in 1972.
“This is a perfect fit – a dream marriage,” said Jim Barrett in a statement. “We could not have asked for a finer team to carry on this legacy.”
Several publications have speculated that it will cost about $110 million or higher. However, we’ve heard Chateau Montelena’s price tag could be as high as $140 million to $150 million.
Until tomorrow, Megan
“When everyone is against you, it means that you are absolutely wrong-- or absolutely right.”
Albert Guinon
--------- Sell Day Calendar ----------
Today’s Sell Day: 17
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
YTD sell days Over/Under: +0
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
“The acquisition of V&S enables Pernod Ricard to assume co-leadership of the global wine and spirits industry,” said the company in a statement. “Absolut, the number one premium vodka worldwide, is the ideal addition to complete Pernod Ricard’s brand portfolio and makes the Group the second-largest player in the US.”
THE ABSOLUT COMPANY. The Absolut Company has the worldwide responsibility of Absolut including production. It becomes part of the brand-owner network, alongside Chivas Brothers, Martell Mumm Perrier-Jouet, Irish Distillers, Malibu-Kahlua International, Pernod Ricard Pacific and the joint venture Havana Club International.
Ketil Eriksen has been appointed ceo of The Absolut Company and reports to Thierry Billot, deputy managing director of Pernod Ricard in charge of brands.
PERNOD RICARD NORDIC. In order to maintain it decentralized structure, Pernod is putting in place two Swedish-based business units within V&S. Pernod Ricard Nordic will market Pernod Ricard’s international and local brands in Sweden, Denmark, Finland, Norway, the Baltic States and Iceland. The company was created by merging V&S wines, V&S Distillers, and Pernod Ricard Nordic Countries (Pernod’s current distribution subsidiary in the Nordic region).
Michel Mauran becomes its managing director, reporting to Laurent Lacassagne, chairman and ceo of Pernod Ricard Europe. In addition, Rolf Cassergren has been appointed coo in charge of finance, marketing, communications and operations for Pernod Ricard Nordic. He reports to Michel Mauran.
Bengt Baron, the current chief of V&S, will assist with the integration until October 31, when he will leave the group. Anders Narvinger has also agreed to continue his position as chairman of the board of V&S.
DISPOSED BRANDS. Pernod says it will shed about $1.57 billion in assets, which includes the following V&S brands: Groenstedts Cognac, Red Port, Star Gin, Dry Anis and Lubuski Gin and Serkova vodka (owned by Pernod).
In addition, Pernod will end its distribution agreements for Stolichnaya vodka outside Russia and for Royal Canadian whisky in Sweden.
The disposals, coupled with improved cash generation and profitability, would help cut net debt to below four times earnings before interest, tax, depreciation and amortization (EBITDA) from six times EBITDA within the next three years, said the company.
EXECUTIVE COMMENTS. In today’s conference call, managing director Pierre Pringuet said: "The question is, of course it is the right acquisition? It is the right brand? Strategically, it is the right thing to do. But is it the right moment to have basically about Euro 12 million of debt? And the answer is, first of all, we couldn’t choose. It was either to go for it or not to go for it. We had no choice. Secondly, yes we will certainly work to decrease the debt. Keep in mind that this ratio of net debt/EBITA is 6 times and is precisely the same ratio we had for the Seagram’s deal and more recently the Allied deal.”
PERNOD POSTS STRONG FISCAL YEAR RESULTS
Managing director Pierre Pringuet said he doesn’t see evidence of a severe economic downturn in Pernod’s numbers, hinting that reports in the media have exaggerated the issue. He maintained that Western markets (Europe and the U.S.) are still growing, albeit at a moderate rate and slower than a year ago.
Growth of the 15 strategic brands was very strong overall, gaining 11% in value and 5% in volume. Ten of these brands reported double-digit growth rates: Martell (+24%), Jameson (+21%), Mumm (+18%), Havana Club (+17%), The Glenlivet (+14%), Perrier Jouet (+14%), Stolichnaya (+12%), Chivas (+11%), Ballantine's (+11%) and Malibu (+10%).
Over the full financial year, the spirits business grew in value by 9%. The wine business grew by +6%, compared to +1% in the previous financial year. Overall, second half growth (+7%) remained strong following a very good first half (+10%), against a background of further appreciation of the Euro against most other currencies.
Absolut (world leader in premium vodkas) recorded excellent performances, said the company, illustrated by its accelerated growth in the first half of 2008 (+12% compared to +9% in the calendar year 2007) and a volume of 11.3 million 9-liter cases sold, which is a 600,000 liter case increase compared to last year.
UNITED STATES “SATISFACTORY.” Overall, the U.S. continues to do well amidst a tough economy, said Pernod. North America grew 5%, with spirits gaining 4.4% and wines rising 9.6%. Pernod said there was a shift of consumption from the on-trade to the off- trade in the U.S., although premium brands continued “satisfactory growth.”
This includes Jameson, The Glenlivet, Malibu and Wild Turkey for spirits and Montana, Perrier Jouet, Mumm Napa and Campo Viejo for wines. At the same time, brands with weaker franchises suffered from the economic downturn, including Kahlua, Beefeater and Chivas. Absolut grew 5% in the 12 months to June 30, according to Nielsen.
Jameson depletions were up 24% in the year, with Nielsen numbers rising 29% and NABCA up 20%. Glenlivet 12-month depletions grew 6%, with Nielsen numbers up 3% and NABCA up 5%. Malibu depletions grew 5% in the U.S., while Nielsen and NABCA numbers grew 5% and 7%, respectively.
The Kahlua situation remains difficult, with depletions declining -7% and NABCA down -3%. Nielsen numbers, however, grew 2%. Similarly, the U.S. gin market remains tough, as represented through Beefeaters performance. Twelve month depletions declined -3% and NABCA and Nielsen numbers were down -3% and -0.5%, respectively. Depletions of Stoli, meanwhile, grew 3%, while Nielsen was flat and NABCA declined -1%. Chivas Regal 12-month depletions declined -6% in the U.S. and Nielsen numbers declined -6%.
Absolut is reportedly losing some share in the U.S. do to its middle tier pricing. It’s too expensive for consumers trying to cut costs, but it’s not expensive enough (like Grey Goose or Ketel One) to do especially well in trendy bars.
Pierre said Absolut has been subject to too many price promotions in the past and that he will ensure it doesn't stray far from $20 a bottle in stores. He also wants to cutback on the recent proliferation of new flavors for Absolut.
Montana wine saw strong growth in the United States. Depletions were up 15% and Nielsen up 12%. Pierrier Jouet had “satisfactory” growth in the U.S.
ORGANIC GROWTH STRATEGY. Pernod says it is changing its growth strategy and will instead focus on existing labels rather than making more acquisitions over the next few years.
“‘Organic growth is a must,’ Pernod managing director Pierre Pringuet said in an interview with WSJ. He noted that ‘antitrust authorities will look at any new acquisitions even more carefully,’ making additional purchases difficult.”
In November, Pierre will replace Patrick Ricard as ceo.
“Because the company has grown so much in recent years, it could soon find itself in the same position as industry leader Diageo: unable to make big acquisitions because it already has dominant positions in most segments,” said the WSJ article.
However, Pierre insisted Pernod will likely make more acquisitions once it pays some of the debt, most notably in the bourbon and tequila categories where the company currently has a gap.
EMERGING MARKETS TO THE RESCUE. Meanwhile, Pernod Ricard finance director Emmanuel Babeau forecasts emerging markets (India, Russia and China) will continue to do well, while the United States and Europe will have “more subdued” growth.
"Even in difficult years, the consumer protects what for him holds pleasure value," Pernod Ricard Finance Director Emmanuel Babeau told Reuters in an interview.
"This has been one of the best years for Pernod Ricard over the past 10 years with strong growth in emerging markets and a limited slowdown in Western Europe and satisfactory growth of our premium brands in the U.S.,” he also said in today’s conference call.
WORD FROM UBS. “Consistent with our thesis that spirits are relatively safer than beer in a weaker consumer environment, we include Pernod and Campari as most preferred” alcohol beverage companies in Europe, said UBS analyst Melissa Earlam.
BROWN-FORMAN: YEAR OF CHANGES
CEO and Chairman Paul Varga began the conference by putting fiscal 2008 in context and reviewing the business environment “that influenced how we behaved” last year. One, Brown-Forman was still “very new” to Casa Herradura last year and the transition, including cultural aspects and incorporating a private company into a public one, was still ahead of B-F. Paul remarked that the Casa Herradura team displayed “some of the most impressive work we’ve seen in years.”
Two, five senior level executives retired from the company at the same time, which Paul admitted “made me a little nervous to be honest.” However, he maintained that the company was prepared for the management shift and was able to promote a lot of fresh faces that have helped generate new ideas.
Lastly, the company saw some softening in the consumer environment last year, including tightened spending and a switch from the on-premise to the off-premise.
“This posed a challenge to us,” he said. “But I was particularly proud of the organization because we needed to tighten our belt...we still invested very nicely but it was at a lower level.”
Paul said that as consumers in the U.S. started going to bars and restaurants a little less, and opted to drink at home, “it required us to take resources we’d put on the on-premise to the of-premise.” As a result, the second half saw strong financial results. Paul said it’s still a good environment for growth.
The fastest growing brands in fiscal 2008 were Gentleman Jack and Woodford Reserve. The newly re-packed Gentleman Jack grew at the fastest rate, surpassing the 200,000 case mark last year. Woodford Reserve grew beyond the 100,000 case mark.
Paul characterized this as “examples of homegrown growth,” and says it will be a part of the company’s growth strategy for now on.
In addition, B-F is increasingly focused on becoming a more global company as it expands in foreign markets.
CHATEAU MONTELENA COULD SELL FOR $150 MILLION
As we reported earlier this week, Michel Reybier, owner of Chateau Cos d’Estournel, grand cru classé of Saint-Estèphe, is in discussions with Chateau Montelena’s founder, Jim Barrett, to acquire the Chateau Montelena Winery in Napa Valley, pending regulatory approval this fall. Chateau Montelena is famous for its chardonnay wining the renowned Paris Tasting of 1976, or “The Judgment of Paris.”
The Barrett family acquired the 125 year old Chateau Montelena in 1972.
“This is a perfect fit – a dream marriage,” said Jim Barrett in a statement. “We could not have asked for a finer team to carry on this legacy.”
Several publications have speculated that it will cost about $110 million or higher. However, we’ve heard Chateau Montelena’s price tag could be as high as $140 million to $150 million.
Until tomorrow, Megan
“When everyone is against you, it means that you are absolutely wrong-- or absolutely right.”
Albert Guinon
--------- Sell Day Calendar ----------
Today’s Sell Day: 17
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
YTD sell days Over/Under: +0
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
posted at 11:42 AM
<< Home