Pernod says no to Cuervo but declares interest in craft spirits
Pernod Ricard is not about to a deal with the Beckman family and take José Cuervo, the world’s best selling Tequila, into its portfolio, but its next foray in the mergers and acquisition market could be in the craft spirits sector.
Deputy chairman and chief executive Pierre Pringuet said in London yesterday that he had been surprised by reports from Paris last week that he wanted José Cuervo to fill the Tequila gap in his portfolio. “I was asked if it [Cuervo] is a desirable brand – and it is – but there are no on-going discussions about it,” he said.
Diageo, which distributes Cuervo until a distribution agreement with the Beckman’s runs out in the summer, wanted to buy the brand but walked away from it late last year when the Beckmans declined to sell. A Beckman subsidiary will take over distribution in the dominant US market.
Pringuet reaffirmed that Pernod Ricard too does not wish to enter distribution agreements for brands it does not own. “Distribution on its own is not enough,” he said. And while he confirmed that the French group would not be making a “transformational” acquisition within the next couple of years, he said that “tactical” purchases were an option.
He hinted that the dynamic craft spirits sector, especially in the US, was attractive and said: “You may see some activity in that sector quite soon.”
Craft spirits, which sell at premium and super-premium prices, have attracted much attention and growing consumer interest in the US. But finding a company or brand with the right growth potential will not be easy, although Pringuet hinted that he may soon be about to announce that he has done so.
“It’s all about size. Is there a specific recipe with distinctive packaging that makes a product stand out from major brands?” he said. The key question for Pernod Ricard was whether any craft product had the potential to be developed into a significant part of the Pernod Ricard portfolio, first in its home market and later globally. “All brands started small,” he said.
One company not in Pringuet’s sights is the troubled French group Belvedere, which has Sobieski vodka and Scotch brand William Peel in its portfolio. US film star Bruce Willis is among its shareholders with about 3% of the equity. Pringuet says Belvedere’s brands do not interest him.
Earlier this week, the administrator of French spirits group warned of “industrial and social disaster” if Belvedere’s shareholders don’t approve a debt restructuring that would see their stakes drastically diluted.
After four years of legal wrangling, Belvedere struck a deal with its creditors last September but it has had to call a second shareholder meeting on the plan because the minimum number of votes was not achieved at a meeting on Tuesday.
Belvedere, which was founded in 1991, went into administration in 2008 to protect itself from creditors demanding early reimbursement of €375m (£320m) of debt the company had issued in 2006 to buy Marie Brizard liquors.
Since then, the company has been “at war” with its creditors, especially Oaktree Capital Management, its main creditor and owner of rival Stock Spirits, which makes Poland’s Orzel vodka.
“There is no alternative plan,” the administrator said about the proposal to convert €629m of debt into equity.
“The consequences of the rejection of Belvedere’s plan would be an industrial and social disaster,” Frederic Abitbol said, referring to the company’s brands, and 3,315 staff worldwide, including 713 in France and 1,903 in Poland.
He said that if the If the present plan is defeated by shareholders, the commercial court overseeing the case will probably decide to liquidate Belvedere at a hearing on 11 March.
In 2011, Belvedere made a loss of €55m.
Click here to read more about the craft spirits movement in the US.