Pernod says no to Cuervo but declares interest in craft spirits

By Ron Emler February 19, 2013
the drinks business
Pernod Ricard is not about to do a deal with the Beckman family and take Jose Cuervo, the world's best selling tequila, into its portfolio, but its next foray in the mergers and acquisition market could be in the craft spirits sector.

Pierre Pringuet hinted that the dynamic craft spirits sector, especially in the US, was attractive.

Deputy chairman and chief executive Pierre Pringuet said in London yesterday that he had been surprised by reports from Paris last week that he wanted Jose Cuervo to fill the tequila gap in his portfolio. "I was asked if it [Cuervo] is a desirable brand - and it is - but there are no on-going discussions about it," he said.

Diageo, which distributes Cuervo until a distribution agreement with the Beckman's runs out in the summer, wanted to buy the brand but walked away from it late last year when the Beckmans declined to sell. A Beckman subsidiary will take over distribution in the dominant US market.

Pringuet reaffirmed that Pernod Ricard too does not wish to enter distribution agreements for brands it does not own. "Distribution on its own is not enough," he said. And while he confirmed that the French group would not be making a "transformational" acquisition within the next couple of years, he said that "tactical" purchases were an option.

He hinted that the dynamic craft spirits sector, especially in the US, was attractive and said: "You may see some activity in that sector quite soon."

Craft spirits, which sell at premium and super-premium prices, have attracted much attention and growing consumer interest in the US. But finding a company or brand with the right growth potential will not be easy, although Pringuet hinted that he may soon be about to announce that he has done so.

"It's all about size. Is there a specific recipe with distinctive packaging that makes a product stand out from major brands?" he said. The key question for Pernod Ricard was whether any craft product had the potential to be developed into a significant part of the Pernod Ricard portfolio, first in its home market and later globally. "All brands started small," he said.