Strategy Briefing

Spirits and Wine: Corporate Overview

Feb 2016

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Wine and particularly spirits have seen a period of consolidation. The briefing looks at what has taken place, particularly the recent Diageo wine and Brown-Forman’s liqueurs divestments. It also looks at the strategic health of many of the world’s biggest distillers and how M&A has benefited some but also how M&A is not necessary to grow. With limited opportunities to grow through M&A the latter will become particularly important for those companies that have remained too narrowly focused.

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Overview

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Gain competitive intelligence about market leaders. Track key industry trends, opportunities and threats. Inform your marketing, brand, strategy and market development, sales and supply functions.

A pick up in volume growth in wine and spirits offers opportunities

Both spirits and wine are expected to see faster growth over 2014-2019 than over 2009-2014, leaving growth opportunities for companies but they need to select options carefully.

Narrowly focused wine companies in fragmented landscape

The wine category still remains very fragmented compared to all other alcoholic drinks categories. Companies are still focused on a small number of markets, with M&A activity focusing on improving/premiumising their presence in core markets.

Treasury Wine Estates’s acquisition keeps narrow focus

The one acquisition that has affected the global top 10 wine ranking, Treasury Wine Estates’s purchase of most of Diageo’s wine portfolio does fits the template of wine acquisitions, by focusing on two of Treasury’s two key markets, the US and the UK.

Spirits sees considerable consolidation and boosts distillers’ growth

The spirits category has seen far more consolidation, most notably by Diageo with its purchase of United Spirits. This M&A activity has boosted growth, as Pernod Ricard has shown with its Absolut brand.

Diageo well placed to exploit growth

Following Diageo’s series of acquisitions, the company is well placed to exploit future growth, however it still suffers from a legacy of too narrow a focus on core markets and faces difficulties in some key emerging markets.

Dangers of narrow focus

Diageo’s sluggish performance is due to a historic narrow focus, however, it is well off compared to small rivals such as Suntory and Bacardi whose particularly narrow focus is limiting growth.

Organic growth opportunities

With opportunities for M&A in spirits limited, there are still a large number of opportunities for organic growth in spirits.

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Introduction

Scope

Key findings

Overview

Reducing head winds expected to boost wine global growth

Red wine key to growth

Changing spirits

Other spirits continue to drive volume growth

Wine

North American players lead

Tradition and discounting militate against consolidation

Narrow focus of global leaders

Treasury Wine Estates’s double aim with Diageo portfolio

Growing premiumisation encourages US producers upmarket

Exploiting fast growing niches: Rex Goliath

Organic growth strategy brings rewards: Viña Concha y Toro

Spirits

Diageo undisputed number one

Growing consolidation in spirits

Brown-Forman finding no comfort in liqueurs

Brown-Forman’s narrower category spread

Geographic Expansion of Jack Daniel’s enough for now

Diageo geographic shift through acquisition

Problems facing Diageo with United Spirits

Diageo’s price problem in India

Maturity hurts Diageo in the US

Unbalanced mature market focus

Suntory being outperformed in markets outside the US

Success of Absolut acquisition - building US portfolio

Success of Absolut acquisition: International growth

Bacardi stagnates with narrow focus

Tactical exploiting growth: Bacardi

Creating opportunities in mature markets: Diageo in Germany

Creating opportunities: William Grant developing brands

The value of China to leading cognac brands

Pernod starts to rebalance Martell’s global presence

Conclusion

Key still light grape wine growth markets

Paying a high price for spirits

Organic growth opportunities abound

Appendix

Methodology: Basics of the Value Share Model

Building value shares for spirits and RTDs/high-strength premixes

Spirits-specific methodology explained

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Megatrends

Strategy Briefing

Spirits and Wine: Corporate Overview

New Report Guarantee

About This Report

New Report Guarantee

Overview

Why buy this report?

A pick up in volume growth in wine and spirits offers opportunities

Narrowly focused wine companies in fragmented landscape

Treasury Wine Estates’s acquisition keeps narrow focus

Spirits sees considerable consolidation and boosts distillers’ growth

Diageo well placed to exploit growth

Dangers of narrow focus

Organic growth opportunities

Want to find out more about this report?

Table of Contents

Introduction

Scope

Key findings

Overview

Reducing head winds expected to boost wine global growth

Red wine key to growth

Changing spirits

Other spirits continue to drive volume growth

Wine

North American players lead

Tradition and discounting militate against consolidation

Narrow focus of global leaders

Treasury Wine Estates’s double aim with Diageo portfolio

Growing premiumisation encourages US producers upmarket

Exploiting fast growing niches: Rex Goliath

Organic growth strategy brings rewards: Viña Concha y Toro

Spirits

Diageo undisputed number one

Growing consolidation in spirits

Brown-Forman finding no comfort in liqueurs

Brown-Forman’s narrower category spread

Geographic Expansion of Jack Daniel’s enough for now

Diageo geographic shift through acquisition

Problems facing Diageo with United Spirits

Diageo’s price problem in India

Maturity hurts Diageo in the US

Unbalanced mature market focus

Suntory being outperformed in markets outside the US

Success of Absolut acquisition - building US portfolio

Success of Absolut acquisition: International growth

Bacardi stagnates with narrow focus

Tactical exploiting growth: Bacardi

Creating opportunities in mature markets: Diageo in Germany

Creating opportunities: William Grant developing brands

The value of China to leading cognac brands

Pernod starts to rebalance Martell’s global presence

Conclusion

Key still light grape wine growth markets

Paying a high price for spirits

Organic growth opportunities abound

Appendix

Methodology: Basics of the Value Share Model

Building value shares for spirits and RTDs/high-strength premixes

Spirits-specific methodology explained

Why buy this report?

Want to find out more about this report?

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