Absolut maker sells off yeast plant

By Neil Merrett

- Last updated on GMT

Related tags Alcoholic beverage

Beverage manufacturer V&S has announced its intentions to sell
off a yeast production facility in Denmark to Canadian group
Lallemand, as it continues to chase improving profitability in its
spirit operations.

The Sweden-based group, known to many as producer of the Absolut brand of vodka, announced on Monday that it had agreed to offload the site, which produces yeast and molasses alcohol predominantly for Denmark, for an undisclosed price. V&S's decision to sell the site reflects the growing profitability in the market for more premium spirits brands, as changing consumer tastes and increased commodity prices have hit at the margins for some other alcoholic beverages like lagers. The plant situated in Grenaa, employs a staff of 81 with sales from the site reaching about in 2006 of about €24m, the company said. According to the company, continued growth in sales of the group's spirits brands helped in part drive a five per cent increase in revenues to €288m during the third fiscal quarter ending Operating profit as a result also increased by 23 per cent to €73m, which, according to group chief executive officer Bengt Baron, was a result of its focus on core brands like spirits. "V&S has divested several operations in the past year, primarily ones that are not part of our core business,"​ he stated. "Accounting for this fact and the weaker US dollar, operating profit increased by seven per cent and net sales by 14 per cent between January and September this year." ​ By increasing its focus on production of V&S' core brands, the company will be expecting to increase the value of its operations to prospective buyers. The sale of the Grenaa plant comes after the Swedish government announced in June that it would move to sell the state-owned company, and its flagship Absolut brand, putting one of the world's biggest vodka labels up for grabs. Although the Swedish government has begun preparatory steps over selling off its assets, there is as yet, no decision made on a timeline or the form of the sale, the group stated in its half year results. With consumption for premium spirits brands undergoing strong growth in markets like the US, many firms have shown a strong desire to add premium vodka brands to their portfolio. In February, Constellation Brands announced it intended to buy the fast-growing Svedka vodka brand from Guillaume Cuvelier and Alcofinance for $384m. Svedka is one of the fastest growing vodka imports in the US, and increased volume sales by 60 per cent last year to 1.1m cases. This deal is likely to be dwarfed by a deal for Absolut though, with the sale expected to fetch around $5bn (€3.7bn) to $6bn (€4.4bn) in revenue for the Swedish government. Though the cost may appear excessive, there are thought to be a number of potential suitors in for the brand. Earlier this year, Pernod chairman Patrick Ricard said he was interested in Absolut, claiming he would consider a move for the brand should the country's government decide to sell it. However, he is not expected to be alone in this desire, according to industry experts. David Hallam, an analyst with Evolution Securities, told BeverageDaily.com earlier in the year that most major drinks firms would likely be interested in Absolut. He said Bacardi appeared to fit "most neatly" but added that US companies "that don't have exposure in that particular product" may also stand a good chance. Brown-Forman and Fortune Brands could be two front-runners alongside Bacardi, and the latter already has a distribution agreement with V&S in the US. UK-based Diageo, the world's largest alcoholic drinks group, is thought to be ruled out due to its ownership of Smirnoff, Absolut's biggest competitor.

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