The Financial Times has reported that Pernod Ricard and Brown-Forman could be working to engineer what would be the spirits industry’s “only remaining mega-merger”, and that has got the industry speculating on what the implications of that merger could be.

The IWSR has used its data, which it says shows the merger would have a “material impact” on the industry landscape, as well as highlighting how it would shift the beverage alcohol market share.

Looking globally the IWSR said: “A combined Pernod Ricard and Brown-Forman would rival Diageo’s supremacy in the global spirits market. Pernod Ricard is already a strong global number two behind Diageo in terms of value, and a merger with Brown-Forman would cement that position.”

At present, according to the IWSR, Diageo, in 2019, had a 19 per cent share of the global spirits market by value, excluding national spirits. This was followed by Pernod Ricard with 12 per cent, Bacardi and Beam Suntory were third and fourth respectively, with Brown-Forman having the fifth largest share or four per cent.

A combined Pernod Ricard and Brown-Forman would command around 16 per cent of the global spirits market, bringing it much closer to Diageo and giving some brands the potential to grow further.

The IWSR explained this, saying: “Brown-Forman’s dominance of the American whiskey market in the US is driven by a portfolio of brands that includes Jack Daniel’s, Woodford Reserve and Old Forester.

“Brown-Forman’s whiskey portfolio also gives it a dominant position in many international markets, including in the UK (70 per cent category share by volume) and France (85 per cent).

“What is more, Pernod’s distribution network could help Brown-Forman to conquer new markets, such as India, where it currently has only a small presence. Pernod’s strong position in Indian whisky could provide Jack Daniel’s with a launchpad in what remains a difficult market to navigate.”

The IWSR added: “There are other opportunities that could come out of a Brown-Forman and Pernod Ricard merger. For example, it could give the current Pernod Ricard portfolio increased access to the US market for the Cognac, wine and Scotch whisky categories.

“Conversely, a merger could strengthen Brown-Forman’s current position in the gin, vodka and Scotch whisky categories as well. The potential synergies are clear.”

So what are the chances of the deal going ahead? According to Ron Emler in the UK’s The Drinks Business, there would be “immense obstacle to overcome”.

He wrote: “First and foremost, although both Pernod Ricard and Brown Forman are publicly quoted companies, in effect they both remain family controlled.

“No deal could be done without both families and their supporters agreeing it from the outset.”

He added:  “There is deep-seated personal attachment to both companies. Ricard is the grandson of founder Paul Ricard while Brown Forman’s chairman, Geo. Garvin Brown IV, is a fifth generation descendant of founder George Garvin Brown.”

While the merger would give the combined entity a stronger presence in a number of categories, for instance it would move ahead of Sazerac and Diageo in the US tequila market, but still leave it behind Proximo, Bacardi and Beam Suntory, there isn’t too much portfolio overlap so regulators are unlikely to put up too much opposition. But it remains to be seen whether the two families involved will proceed with such a bold move.

Andy Young

Andy joined Intermedia as Editor of The Shout in 2015, writing news on a daily basis and also writing features for National Liquor News. Now Managing Editor of both The Shout and Bars and Clubs.

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