By Andy Young

After months of speculation Brown-Forman has confirmed that it has agreed to sell its Southern Comfort and Tuaca trademarks, with Sazerac agreeing to the acquisition.

The deal is worth US$543.5 million and the sale of the brands is expected to close by 1 March 2016. Brown-Forman CEO, Paul Varga, said that the decision to sell the brands was a continuation of the company’s efforts to focus resources on it highest strategic priorities. 

"We’re proud of the work undertaken over the years by our employees and partners on behalf of Southern Comfort and Tuaca,” Varga said. 

"Both brands played important roles in the Brown-Forman success story, and we will have fond memories of the enjoyment they brought to consumers, our partners, and to Brown-Forman."

President and CEO of Sazerac, Mark Brown, welcomed the brands to the company, which currently owns Buffalo Trace, Fireball and Pappy van Winkle, amongst others.

“We are very excited about the opportunity to acquire such iconic brands," Brown said.

"Brown-Forman has done an excellent job of building both brands over the years and we are looking forward to many more years of successful brand building.”

Jeremy Cunnington, senior alcoholic drinks analyst at Euromonitor International said the deal highlights challenges for the seller and acquirer alike.

"The challenge for Sazerac is two-fold," Cunnington said. "Firstly how to develop and turn around a brand which despite huge amounts put behind it has continued to decline and secondly that with little expertise and no other international brands or distribution to support the brand how will it maintain and develop Southern Comfort’s international presence. 

"The fact that Brown-Forman wanted to sell these brands is no surprise. As was seen with its wine brands, it is ruthless in divesting brands it sees no value in keeping. Southern Comfort saw volume sales decline by 21 per cent (4 million litres) between 2009-2014, despite much innovation; notably flavour additions, packaging redesigns and promotional activity.  

He added: "However, the divestment makes it even more reliant on its whisky and notably its bourbon/other US whiskey portfolio with 70 per cent of its spirits volumes reliant on the latter. While Brown-Forman’s  bourbon/other US whiskies brands are performing strongly, this will not last forever and the company should look to start developing other categories, due to the length of time it takes to seed and develop brands. 

"Sazerac and Brown-Forman face very different but big challenges. For Sazerac it will require a sharp learning curve. While for Brown-Forman there is a need to diversify and it would do well to try and diversify its portfolio using some of the money raised from this sale to move into new categories such as English gin or possibly rum rather than just re-investing in existing brands or returning money to shareholders or it will face the problems Bacardi has with its overreliance on its eponymous rum brand and struggle for growth."

The transaction is still subject to regulatory clearance in the US and what both parties have called “customary closing conditions”.

Brown-Forman has owned the Southern Comfort brand since 1979 and completed the purchase of the Italian liqueur Tuaca in 2002.

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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