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Top 10 biggest spirits stories of 2016

The Spirits Business looks back at the biggest stories to rock the spirits sector in 2016, taking in the Brexit vote, resignations, legal battles, acquisitions and more…

This is our selection of the most talked-about spirits stories of 2016

At the end of last year, billionaire businessman Donald Trump was voted president of the United States of America – a step which could have significant implications for the global spirits industry.

The UK too rocked the world with the Brexit vote – a move which key spirits firms labelled a “leap in the dark” for businesses.

However, not all news provoked national controversy. Scotch whisky’s global export volume bounced back in 2016, growing by 3.1% in H1, while American whiskey built a strong consumer following both domestically and globally.

Click through the following pages to discover our pick of the top 10 biggest spirits stories of 2016. If you think we’ve missed essential choices any out, let us know by leaving a comment below.

United Spirits dispute continues

One of the most tempestuous stories of 2016 has been the ongoing dispute between Diageo and the former chairman and non-executive director of its Indian drinks arm, United Spirits’s Vijay Mallya.

In February, the beleaguered businessman resigned from his own board after a vote of no confidence. The vote followed an independent inquiry into the firm’s accounts revealed transactions amounting to 12 billion rupees (£140 million) were “diverted” from the business to “overseas and Indian entities that appear to be affiliated or associated” with Mallya.

He secured a US$75m (£60m) severance package from Diageo, of which he received US$40m immediately, reportedly gifting the money to his children. United Spirits is seeking to recover US$182m worth of “improper transactions” made at the company while Mallya was chairman, but has said the tycoon would have “no personal liability” relating to findings of its first investigation.

Ireland and Scotland rally against minimum unit pricing

The introduction of minimum unit pricing (MUP) in Scotland and Ireland was a key talking point in 2016, and is set to have industry-wide implications if executed.

Last December, the Irish government approved a bill to make it illegal to sell or advertise booze at a price below €0.10 per gram of alcohol to target “harmful and hazardous” drinkers – a scheme that would affect one in seven drinkers. Meanwhile, a Scottish court ruled in favour of MUP last month, adding that the policy would bring “health benefits of one sort or another” to “at least part” of the population.

Spirits Europe and the Scotch Whisky Association (SWA) are readying to appeal, saying the decision is “probably illegal” under EU law. According to Nielsen data, the introduction of a set price of 50p per unit in Scotland will ramp up the cost of more than half of Scotland’s alcohol sales.

Stock Spirits battles activist investor over company ‘governance’

Central and eastern European producer Stock Spirits has been engaged in a battle with its largest investor, Western Gate Private Investments, this year. A shareholder revolt in April led to the resignation of CEO Chris Heath, prompted by concerns over Stock Spirits’s declining market share in Poland, an “under-performing” share price, and “spiralling” corporate costs.

The firm appointed Heineken Group’s Alberto Da Ponte and PepsiCo’s Randy Pankevicz as independent, non-executive directors, but later came under fire for failing to appoint them to any of its four board committees as part of a shake-up in October. Most recently, Western Gate criticised its “poor governance”.

‘Years of uncertainty’ after Brexit

The Brexit vote sent shockwaves through the industry and beyond in June, knocking the pound to its lowest level against the dollar in 20 years and prompting the London stock market to plunge by more than 8%. Before the vote, key spirits firms almost unanimously urged the UK to retain its EU membership, claiming Brexit would be a “leap in the dark” for businesses.

After the result rolled in, trade body Spirits Europe said the move would lead to “years of uncertainty” for the industry – not just in the UK and EU but around the world. In a meeting with Wine and Spirit Trade Association chief Miles Beale, Brexit minister David Jones said he is determined the drinks industry will “continue to flourish”.

Scotch whisky exports grow

Despite continued economic and political volatility in certain markets, Scotch whisky’s global export volume grew by 3.1% in H1 2016, according to the Scotch Whisky Association (SWA).

This is the first growth the category has seen since the first half of 2013, and is equivalent of 533 million 700ml bottles – up from 517m recorded in the first half of 2015. Though the customs value of shipments was down by 1% over the same period to £1.70bn, the SWA heralded the figures as “another clear sign of improvement” over the almost -3% dip seen in the first half of 2015.

Though blended Scotch whisky continues to dominate exports, with volumes increasing by 1% to 362m bottles, export values fell by 4% to £1.16bn – reflecting the growth of the single malt Scotch whisky market, which represents a quarter of total shipment value.

Sazerac on the acquisition trail

Though 2016 was nothing less than a transformational year for each major drinks group, none has undertaken more relentless activity than Sazerac. In less than 12 months, the Louisiana-based company confirmed its acquisition of eight spirits brands and businesses – the most significant being the purchase of Southern Comfort and Tuaca from Brown-Forman for US$542m.

Meanwhile, the firm continues its experimental Bourbon programme and is planning a US$200m expansion of its Buffalo Trace Distillery. This aggressive strategy looks set to continue, with the group’s president and CEO Mark Brown saying it is extremely likely the US-based spirits group will purchase overseas distilleries over the next 20-25 years.

Compass Box’s recipe for conflict

Independent whisky bottler Compass Box launched the Scotch Whisky Transparency campaign after being called out for breaking EU regulations in October 2015. The firm published and then removed the full recipes – details of the distilleries involved, the cask types, ages, and their proportions in the final blend – for
This is Not a Luxury Whisky and Flaming Heart, sparking heated debate.

The campaign called for producers to have the “freedom but not the obligation” to publish the age of all components included in their whiskies. In September, the firm announced that it had found a “legal workaround”.

Founder and whiskymaker John Glaser said: “The legal advice we received is clear: while we must not actively promote the ages of the components used in our blends, we can provide information when we are asked for it by interested consumers.”

Pernod and Bacardi in Cuba fight

Drinks goliaths Pernod Ricard and Bacardi locked horns over the US trademark for Havana Club rum in February in a legal battle that remains unresolved. After Pernod confirmed the trademark for its own Havana Club – owned by Cubaexport – had been officially renewed in the US until 2026, Bacardi asked a US district court to strike the trademark from the official register, claiming to have acquired the US rights to Havana Club from the brand’s founders, the Arechabala family, who fled Cuba during the revolution.

The Cuban government seized the family’s rum-making facilities and personal assets during the revolution, without compensation. A bill recently proposed by US lawmakers that would prohibit “funds to approve the licensing of a mark, trade name, or commercial name that was confiscated by the Cuban Government without express consent” could quash Pernod’s ambition to launch the brand in the US if passed.

Pernod’s bid has been further complicated by president-elect Donald Trump’s ambiguity over the future of US-Cuba relations.

American whiskey boom

The whiskeys of the US built a strong consumer following domestically and globally last year. Analyst Euromonitor expects global value sales to have climbed by 5.3% in 2016 to US$16.4 billion. This spend is forecast to blossom by another 4.8% on into 2017, signalling a category in vibrant health.

In 2016 Pernod Ricard, the world’s second-largest drinks group, splashed the cash via NBV Investments, a subsidiary of its North American arm, to secure a majority stake in West Virginia- based craft whiskey maker Smooth Ambler Spirits.

Rémy Cointreau recently announced its acquisition of Seattle-based Westland Distillery, while third-party spirits producer MGP Ingredients snapped up George Remus whiskey in November.

Donald Trump’s election victory

The world experienced one of the greatest political shocks in modern history at the end of last year – billionaire businessman Donald Trump was voted 45th president of the United States of America.

The president-elect’s promise of more protectionist trade policies and the abolition of major free-trade deals, combined with the economic turmoil that followed his election, could have significant implications for the global spirits industry, specifically Mexico’s national spirit.

The future of one Tequila brand could be affected more than any other – Jose Cuervo. Last autumn, the parent company of the world’s largest Tequila brand delayed its initial public offering (IPO) because of market volatility in the run-up to the vote.

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