Whyte & Mackay pulls out
You may recall that when approval was given to Pernod-Ricard to complete the
purchase of Allied Domecq, it was based on the condition that they divest themselves of Glen
Grant.
Glen Grant, while not a major brand here in the States, is the number one
Scotch in Italy and the number two best selling malt whisky in the world (by
volume). FYI, Italy tends to hover just under the top
ten Scotch markets based on consumption.
Pernod already has a rock-star single malt in their line-up with The Glenlivet, one of the world’s best known Scotch brands. The Glenlivet is the number three best selling malt whisky in the world (by volume) and number one malt whisky in the US market (by sales).
Whyte & Mackay, which was ready to take Glen Grant off of Pernod's hands, has had a change of mind. The bottom line is that Whyte thinks the asking price for Glen Grant, at £75
million, is simply too high.
According to Whyte & Mackay Managing Director, Bob Brannan:
Glen Grant is not for us. The multiples being paid are very high and
we have good brands of our own. It would strengthen us in Italy, but it is not a priority market for us.
Despite the breakdown in the Glen Grant acquisition, Whyte is continuing to
negotiate with Pernod on the acquisition of other brands - though neither side
is specifying what those brands are, OR if they are even talking about Scotch
whisky brands. Says Brannan:
There are certain brands likely to fall out of the Allied deal. They
are on the disposals roster and we have conversations going on. We will look at
brands that might not have been developed as much as they might have been or
operate in certain key markets.
Potential Targets
If Pernod's Scotch brands are on the block, there are a few potential targets.
Pernod owned single malts: Aberlour, Benriach, GlenDronach, Glen Grant, Glen
Keith, The Glenlivet, Longmorn, Scapa, Strathisla, and Tormore.
Pernod owned blends: Ballantine's (Worldwide) Chivas Regal (Worldwide), Clan Campbell (France, Spain, Italy),
Passport (Spain, Brazil, South Korea, and the US),Royal Salute (UK), Something Special (South America, South Korea), and 100 Pipers
(Spain, Thailand).
As far as Pernod’s structure is concerned, at this point, it appears that the
Allied Domecq name will continue, if only as an operating unit, but how the
brands themselves are divvied up in the Pernod portfolio has not been clarified
as of yet.
The Glenlivet, Chivas Regal, and Ballantine’s are likely not for sale as Pernod
identifies these three among its 14 key brands.
Laphroaig finds a new home
I was surprised that Pernod let Laphroaig go, as this still leaves them without ownership of an
Islay-based distillery, while competitor Diageo has two (Lagavulin & Caol
Ila).
Laphroaig was instead acquired by US based Fortune Brands as part of the
Allied buyout. (Teacher's, a well-known blended Scotch, was also acquired by Fortune.)
Laphroaig, despite its phenomenal growth and hardcore fan base, was something
of a step-child under Allied. Now that it's moved to Fortune, I’ve been told that they view Laphroaig as a
“tremendous brand.” We'll see if they will take steps to elevate the Islay distillery to its rightful place of honor as one of the "key brands."
The Whyte & Mackay line
Whyte & Mackay currently owns Isle of Jura, Dalmore, Tamnavulin, and
Fettercairn single malts, as well as a number of regional blended Scotch whiskies (most of whose names will not ring a
bell to the US consumer).
They've been doing a great job trying to get mind-share amongst Scotch
drinkers with Isle of Jura and The Dalmore (with such innovations as The
Dalmore Cigar Malt and Jura Superstition), but the brands certainly are not top
of mind to most consumers. Fortune Brands, which currently has US distribution rights to The Dalmore, seems to be doing an admirable job pushing the
Dalmore line here in the US.
What now?
I think Whyte made the right choice by passing on Glen Grant. In my humble
opinion, they'd be better off using the money to grab an A-list single malt or
continuing to market their existing line.
But this begs the question - Glen Grant has to go - who will step up to the
plate with that big, big check?
Diageo is always waiting in the wings to pick up some bargains and grow
their list of brands, but fair competition rules in UK and EU may limit the
chances that Diageo would be able to acquire (or be interested in) Glen Grant.
And there's always the question of Is
Diageo Too Big?
Stay tuned, it is likely to get interesting.
