Another merger possibly in the works

[ratcheer]

(I'm not sure where to post this, because I cannot post in the Industry News forum. But, this certainly relates to bourbon, so I'll put it here. Move it if you need to.)

I read in a prominent article in today's Wall Street Journal that a possible merger of Pernod Ricard and Allied Domecq is being discussed. Both parties realize that they need to get bigger to have any chance to compete with Diageo.

Since WSJ Onine is a paid service, let's see if I can find another reference. Yes, here's a good one: Pernod said to consider Allied Domecq Deal

Tim

[ratcheer]

No comments? I'm wondering which bourbons these corporations produce. The only one I know off the top of my head is Wild Turkey, by Allied Domecq. To me, that is a pretty important one, though.

I have no idea whether Pernod has a hand in any bourbons, though.

Tim

[wrbriggs]

As long as they let Jimmy Russell continue to do his thing, I'll be happy. If the marketroids start coming up with ways to "improve" Wild Turkey (like they did with Jack Daniels at Brown-Forman), then I'll have a fit.

[OneCubeOnly]

The only one I know off the top of my head is Wild Turkey, by Allied Domecq.

Actually, you've got it backwards--WT is owned by Pernod Ricard (and appears to be their only bourbon).

I have no idea whether Pernod has a hand in any bourbons, though.

Again, Pernod owns WT. Allied Domecq owns Maker's Mark.

[ratcheer]

My point, exactly. I don't want some huge corporation messing up my Wild Turkey.

Tim

[ratcheer]

Oh, okay. Thanks.

Tim

[mobourbon]

Pernod Ricard is a big company and they leave WT up to Jimmy Russell. Doesn't Future Brands pretty much leave Jim Beam alone when it comes to production? If it ain't broke, don't fix it.

[TNbourbon]

Just as a point of interest, here are some the companies' respective brands --

Pernod Ricard

<ul type="square">[*]Wild Turkey

[*]Abelour and The Glenlivet

[*]Chivas Regal

[*]Bushmill's, Jameson and Powers Gold Irish whiskies

[*]Royal Canadian

[*]Jacob's Creek, Long Mountain and Sandeman Port wines

[*]Seagram's gin

[*]many others

Allied Domecq

<ul type="square">[*]Maker's Mark

[*]Laphroaig

[*]Ballantine's and Teacher's

[*]Canadian Club and Wiser's

[*]Pierre Jouet and Mumm champagnes, Cockburn's Port

[*]Clos du Bois and Hawke's Bay still wines

[*]Courvoisier, Kahlua, Malibu rum, Suaza, Stoli, Midori, Beefeater gin

[*]many others

[cowdery]

Pernod Ricard is a big company and they leave WT up to Jimmy Russell. Doesn't Future Brands pretty much leave Jim Beam alone when it comes to production? If it ain't broke, don't fix it.

Let me answer that with a little history. Jim Beam started as a family operation with Jacob Beam in the 18th century. It was family-owned and operated, with members of the Beam family making the whiskey, until prohibition. After prohibition, the Beam family no longer owned the company but the new owners--who were individuals, not a corporation--left the Beams in charge. The whiskey at the company's Clermont plant was made by brothers Carl and Earl Beam, then by Carl's son's, David and Baker. Whiskey at the company's Boston plant was made by Booker Noe, Jim Beam's grandson, who was trained by Carl Beam.

In 1967, the company was sold to what is today known as Fortune Brands. Today there is not a single member of the Beam family making whiskey at either of the company's Kentucky distilleries. Fred Noe, Booker's son, is a spokesperson.

In the late 90s, when Guinness merged with Grand Metropolitan to form Diageo, the company's announced business plan was to concentrate on its leading international brands and cut loose the brands that did not fit that description.

At the time of the merger, Grand Met had no bourbons except a U.S. distribution deal with Wild Turkey, then as now owned by Pernod Ricard. Guinness owned George Dickel, Old Fitzgerald, Old Charter, W.L. Weller, Rebel Yell and I.W.Harper. The company was also creating new bourbon brands (Rx), reviving old ones (James E. Pepper) and creating innovative niche products like the Rare Bourbons Collection.

Shortly after the merger was completed, Diageo sold all of its American whiskey brands except I.W. Harper and George Dickel, sold its main bourbon distillery, and effectively exited the American whiskey business.

Draw your own conclusions about the affect of mega-corporate ownership on bourbons.

[mobourbon]

Thanks for that history, Chuck. It explained alot. Do mega - corps have a say in how the bourbon is made?

[jeff]

I'm waiting for the government to seize control of all the distilleries. Then, we'll all be sitting around discussing how great our "Victory Bourbon" is. (Vague Orwell reference)

"All bourbons are equal, but some are more equal than others" (Clear Orwell reference)

[cowdery]

They have a say in whatever they want to have a say in. It's their company.

I don't think you can say anything absolute one way or the other. I certainly don't mean to suggest large corporate ownership is automatically bad nor certainly that it is automatically good. I think we've seen examples from many businesses, not just beverages, where the companies involved in these big mergers have a hard time operationizing them. In the case of American whiskey, so much of the industry's heritage has been lost already that I would hate to see more of it casually tossed away in the fallout from another big corporate pairing.

Of course, the other thing that happens is that space is created for smaller players, such as Sazerac and Heaven Hill. You can look at David Sherman, for example, and they are where Sazerac was not too many years ago. Imagine a scenario in which a David Sherman winds up with a Wild Turkey, for example, and it could be a very good thing.

[mike1]

I know that bigger is neither better nor worse,but my sense of fantasy is disturbed. I like to think of the old man in overalls making bourbon for me to enjoy and discuss, and not the company turning our a commodity determined by focus groups and marketers. I know it is childlike, and I know that someday there will be a wild turkey sugar-free with lime whiskey beverage.Itis just that fantasies die hard.

[bluesbassdad]

I feel as you do, but sometimes those fantasies can lead one astray. I wrote about a relevant experience here.

BTW, Bobby Ray did wear overalls -- and a JD Country Club hat; I bought one and wore it until it fell apart.

Yours truly,

Dave Morefield

[cowdery]

Happily, the basic integrity of American straight whiskey is protected by federal law. The forces that would have turned it into a manufactured product, with more style than substance, were beaten back a century ago.

[Gillman]

That's right, but also, had those laws not existed and bourbon become blandified (i.e., not bourbon), the American economy is dynamic, new companies would have arisen to fill the need. This happened with beer, and may still arise in whiskey in the form of the emerging microdistillers.

Finally, being big does not always mean ruining the product. Even within the confines of existing law, Brown Forman could have emptied Jack Daniel of most of its flavor had they wanted to, but they have chosen not to, quite wisely of course. At a certain point, I think the accountants lose interest in the product, they leave it to the distillers and lab dept. This is what in my view allowed Wild Turkey to remain what it is. They kept hands off in Paris, just as they probably do with their Cognac and Champagne properties. They aren't dumb. Au contraire.

Gary

[mobourbon]

Gary, that is my view exactly.

[jeff]

UPDATE

[tdelling]

What really surprises me with regard to "manufactured" drinks is Canadian

whiskey... unlike bourbon, the regulations for Canadian allow the addition of

flavor additives. Okay, I know the "regional style" of Canadians is to be

a little on the bland side, but why the heck hasn't someone really taken

advantage of the freedom to throw in additives? Flavor chemists are a really

really talented bunch... it only takes a few drops of the right chemicals to

give something all kinds of flavor, and so many of the things we consume

today have a dozen or more flavor additives in them (all at such small

amounts that labelling laws allow them to be noted collectively as "natural

and artificial flavors" with no more comment than that).

I don't really want the industry to go in this direction, but in theory, it's

entirely possible to make a killer whiskey by taking a bland, high-proof

distillate, aging it the minimum amount, and then dumping in flavorings. But

no one in Canada has really done it, and that really surprises me.

Tim Dellinger

[doubleblank]

I've watched the wine industry go through a large amount of consolidation in the past 10 years. First it was winery companies buying other wineries.....then brand managers (Constellation Brands, Diageo, etc) buying the winery companies. A couple of observations:

1) These brand managers know marketing and retailing. When they buy a top tier winery, they will make capital available to improve on-site facilities including the touring, gift shops and, most importantly, the production facilities. Each winery fits a niche in their product portfolio and they need to protect both the image and the product integrity of the winery to maintain the cache of the wine. In many cases, the wines get better after being purchased by a large "conglomerate".

2) On the other hand, many winery purchases become a "brand" to fit a niche in their portfolio and where that "brand's" wine is actually produced is irrelevant. In these cases, the accountants can get heavily involved looking for where that "brand" can be produced and distributed the most efficiently (ie Almaden and Inglenook).

Speaking for myself, I'm not too concerned about the consolidation going on in the the wine and spirits industry....it's mostly being done to extract efficiencies out of the retailing and distribution side of the business. Of course, if bourbon were to become completely insignificant on a world wide basis, then "Jim Beam" could become a "brand" and quality/history/etc concerns are less important. Of course, as Chuck said, laws protect how bourbon is made and if quality/variety becomes unimportant, this would open up opportunities for smaller companies to fill the quality void.

Randy

[Gillman]

Actually this has occurred. Tangle Ridge has vanilla, I believe, added, and sherry. The product leaflet refers to the additions. Quite a good product, especially on the rocks. Other whiskies here have flavouring added, you can taste sherry in some Canadian whiskies, rum perhaps in others. Some are clean and light (well, almost all are) but flavorings are certainly used by many of them although perhaps not all.

Gary