Diageo is the largest distiller—liquor maker—in the world but they have just announced the sale of a 19-brand portfolio to Sazerac. Apparently, this portfolio houses the manufacturers “value” liquors; the lower end segment brands in the US market. This segment contains popular (because they are affordable or kitschy) brands like Seagrams Canadian whiskey (the entire suite), Booth’s gin, and Goldschager cinnamon schnapps. Diageo claims that the brands have not been performing very well, so the sale aims to help escalate growth. Other brands noted in the sale include:
- Myers’ dark rum
- Parrot Bay rum
- Romana Sambuca
- John Begg
- Yukon Jack
- The Club
- Black Haus
Sazerac, of course, can trace its roots to the 1800s and, even as a small, independent, family-owned distillery, is celebrated for its brands. The most popular of these brands might be the bourbons Buffalo Trace and Pappy Van Winkle.
According to Diageo chief executive, Ivan Menezes, the sale is part of a clear strategy to deliver more consistent, efficient growth in order to develop more value creation for shareholders. This includes, then, a “disciplined approach” to resource and capital allocation which will ensure maximum return.
More importantly, though, the company states that shedding these brands will help the company to focus more on the areas where growth is occurring steadily. Diageo has found their premium brands are expanding at a more attractive rate.
And the numbers suggest the same: last year, US liquor sales reached a record $26.2 billion. Behind the boost: high-end brown liquor (scotch, whiskey) and tequila and vodkas, says industry group Distilled Spirits Council. The council advises that these higher volumes among the higher value brands reflect a more sophisticated or discerning preference for high-end and super-premium blended scotch and other whiskey products.
Now, Sazerac is a privately-held, US-based spirits maker; they are best known for the brand of whiskey known as Southern Comfort. They are reportedly paying $550 in cash for the 19-brand portfolio. But while Sazerac is going to scoop them up, it looks like Diageo will continue to make at least five of the brands under the Sazerac name for the next ten years. The remaining brands will transition within the next year.