“The acquisition of these super premium brands will allow Brown-Forman to re-enter one of our industry’s most exciting and consistent growth segments, Single Malt Scotch Whisky,” Brown-Forman CEO Paul Varga said in a press release.
The transaction is expected to close on or about June 1, 2016.
Responding to consumer preferences
The acquisition of whiskey brands reflects the company’s continued interest in responding to a growing consumer preference for whiskey and other dark liquors over lighter liquors like vodka and rum. In June 2015, Brown-Forman also purchased Slane Castle Irish Whiskey.
The purchase includes three malt distilleries (one for each of the newly acquired brands), a bottling plant, and the company’s headquarters in Edinburgh, Scotland.
Brown-Forman’s whiskeys reported sales growth in 2015. Whiskey brand Jack Daniel’s rose 33% to 21.3 million 9-liter cases in 2015 from 16 million 9-liter cases in 2011. Similarly, the company’s Woodford Reserve bourbon brand increased its sales volume 30% in 2015 to 400,000 9-liter cases.
Demand for premiumization
According to a report by IBISWorld, the whiskey and bourbon distilleries industry's growth since 2013 has largely been the result of major premiumization.
Consumers have experienced increasing disposable income since 2009, and as a result, many have sought higher-priced whiskey brands. Whiskey distillers are expected to continue steady growth into 2019, the market research report said.
The US in particular has experienced explosive growth with the number of distilleries reaching a post-prohibition high of 1,850, according to House Spirits CEO Thomas Mooney, who was speaking at The Beverage Forum event held in Chicago this week.
Product differentiation in the form of premiumization is the main driver of growth for many spirit brands including whiskey, he added.
In particular, demand for Scotch whisky continues to grow, especially in the US which saw roughly $541 million in exports from the UK, according to the Scotch Whisky Association.