Rémy Cointreau Scotch M&A move cuts chance of rival takeover – analyst

By Ben Bouckley

- Last updated on GMT

Related tags: Remy cointreau, Scotch whisky

Burlesque dancer Dita Von Teese and Cointreau have formed a partnership. (Picture Copyright: Remy Cointreau)
Burlesque dancer Dita Von Teese and Cointreau have formed a partnership. (Picture Copyright: Remy Cointreau)
Rémy Cointreau’s possible acquisition of single malt Scotch distillery Bruichladdich makes ‘good strategic sense’ according to an analyst who said it reduced the chance of it being acquired by a major rival.

Paris-based Rémy Cointreau (2011 turnover €1.026bn) announced on Monday that it had entered exclusive negotiations with Isle of Islay-based Bruichladdich Distillery’s shareholders with a view to buying its entire share capital.

In the event of a favorable outcome of negotiations, the signing of an agreement will remain subject to information and authorisation procedures in accordance with current regulations,” ​Rémy Cointreau said.

‘Determination to remain independent’

Jeremy Cunnington, Euromonitor senior alcoholic drinks analyst said: Regardless of whether this acquisition goes through, the move is further evidence of the company’s determination to remain independent and makes any chance of it being acquired by a major rival unlikely over the short to medium term.”

Cunnington added that both the premium positioning and image of single malt - (Classic Bruichladdich) is pictured below - fitted perfectly with the French company’s focus on higher-end spirits.

whisky

“More importantly, single malt fits perfectly with its key Rémy Martin cognac brand. Both categories have strong appeal among Asian consumers, with many of their key growth market being the same,”​ he said.

Any Bruichladdich acquisition would be unsurprising given the highly consolidated nature of the category, and few acquisition targets available, according to the analyst.

The acquisition was relatively minor given Rémy Cointreau’s balance sheet – Bruichladdich held only a 0.2% single malt world volume share in 2011 – Cunnington said, but the company had obvious growth potential.

Targeting other acquisitions?

However, he warned that Rémy Cointreau would either have to further increase capacity at the Bruichladdich distillery or consider other acquisitions to further this.

One possible means was by acquiring Beam Inc’s Scotch assets, which were likely to be broken up, or other independent distillers such as Benriach or J&G Grant, the analyst said.

“There is plenty of room to expand production, with the Bruichladdich distillery currently working at around half its maximum production capacity of 1.5m litres of pure alcohol,” ​Cunnington added.

Moreover, the company had also been given planning permission to rebuild a second distillery in nearby Port Charlotte, he said.

In February 2011, Euromonitor noted that – given Rémy Cointreau CEO Jean-Marie Laborde’s publically stated November 2009 interest in potential dark spirit or liqueur M&A – single malt Scotch fitted the bill as a premium category.

As a luxury product like cognac, single malts were riding high in China, Euromonitor said, while the category was expected to grow strongly in the US, South Korea, Taiwan, Poland and Russia.

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