Absolut buy to aid Pernod Ricard's spirit domination

By Neil Merrett

- Last updated on GMT

Related tags: Pernod ricard, Patrick ricard

Pernod Ricard claims it has further consolidated its grip on the
global wine and spirits market after winning the battle to purchase
Sweden-based Vin & Sprit (V&S), manufacturer of Absolut
vodka.

After the company's success within a recent auction by the Swedish government, which currently owns V&S, Pernod Ricard now expects to complete a €5.2bn deal for the drink maker by the summer. Upon completion of the deal, Pernod Ricard expects to become joint leader of the entire global spirits market with a 27 per cent share of the market, amounting to sales volumes of 91m cases of wine and spirits. According to Pernod Ricard, the Absolut brand alone sold 11 million nine-litre cases during 2007, making it one of the leading premium vodka labels in the burgeoning global market for spirits, particularly in the US. Company chairman Patrick Ricard said the move would continue the group's push to further develop spirits brands to meet strong global growth for the products, following a number of other recent acquisitions in the segment. These include the purchase of manufacturers Seagram and Allied Domecq."[Absolut's] integration within our portfolio of premium brands combined with the strength of our worldwide distribution network paves the way for outstanding growth prospects,"he stated.​ "We become thus the co-leader of the global wine and spirits industry." Global presence With the addition of Absolut to its brands, Pernod Ricard says it would become the second largest spirits maker in theUSmarket, currently the world's largest for the segment, from its current position of fourth. V&S' brands, are currently distributed in the country through a joint venture between itself and 51 per cent majority holders Fortune Brands, which is expected to continue until 2012. ​While the deal will not include V&S' 10 per cent holding in Beam Global Spirits & Wine, Pernod will also acquire brands like Cruzan rum, helping to make it the market leader for wines and spirits in the Nordic market. Absolut and the other V&S brands will be added to Pernod Ricard's existing portfolio of goods including, Chivas, Ballantine's, The Glenlivet, Jameson, Martell, Beefeater, Ricard, Malibu and Kahlua. Pernod Ricard will continue to distribute rival vodka label Stolichnaya during a 'short' transitional period while the rights are handed over to another company as a result of the deal, the company said. Premium vodka market​ A growing number of manufacturers have expanded into the premium vodka​ segment over the last year on the back of strong growth in the segment. Global vodka sales were estimated to amount to $48.5bn in 2006, according to market analyst Euromonitor. By 2012, global sales volumes for Vodka are set to rise by 7.3 per cent from 2002, Euromonitor added. However, this growth is expected to undergo a slowdown between 2007 and 2012, attributing just 1.4 percentage points worth of the total growth over the ten year period. Over the same five-year period, growth within the total spirits market is expected to increase by about 10.8 per cent according to the analyst's figures. Changing consumer appeal​ In analysing the market, Euromonitor therefore urged caution over the drive to enter the premium vodka market, which it claimed was "notoriously fickle​." "The recent admission that if you remove the advertising, there is very little premium content in any vodka makes that super premium image very fragile,"​ the analyst said.

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