Back on the market: could Brown-Forman still find its perfect match?

While Brown-Forman’s union with Pernod Ricard has been left at the altar, could wedded bliss still be on the cards for the Kentucky firm?

*This story was first published in the May issue of The Spirits Business magazine.

In March, Pernod Ricard and Brown‐Forman confirmed they were considering “a merger of equals”. But as we readied to go to press, the spirits companies confirmed they had failed to reach mutually agreeable terms.

However, in that month, analysts weighed in on the potential deal like guests deliberating an unexpected match at a wedding, with plenty of speculation as to what the joining together of these big players could mean for the global spirits industry.

This isn’t the first time we’ve seen two powerhouses come together in corporate matrimony. The 2014 acquisition of Beam by Suntory Holdings marked a turning point for the global spirits industry. The deal, valued at around US$16 billion, was driven by a clear mutual benefit: Maker’s Mark owner Beam brought a dominant position in Bourbon and an established distribution network to the table, while Hibiki owner Suntory contributed strength in Japanese whisky and access to Asian markets. The combination ended up birthing the world’s third‐largest premium spirits company, Beam Suntory (now called Suntory Global Spirits). It also highlighted the growing importance of distribution power, as larger players gained leverage with retailers and on‐trade partners.

A merger between Brown‐Forman and Pernod would likely have followed a similar strategic logic, but with greater complexity and higher stakes. Like Beam Suntory, it would have combined strong US whiskey assets with an extensive global distribution platform. But the portfolio overlap would have been greater, with risks of brand cannibalisation and potential divestitures. “The primary driver is the resolution of Pernod Ricard’s historical weakness in the American whiskey category,” says Filiberto Amati, partner at Warsaw‐based managing consultancy firm Amati & Associates. “While Pernod leads in Cognac and Irish whiskey, it lacks a high‐volume American pillar following the sale of Wild Turkey to Campari in 2009. Integrating Jack Daniel’s provides an immediate solution. It also opens up a joint opportunity to strengthen the RTD portfolio.”

Ben Tannenbaum, writer and vice‐president of brand partnerships at LineLeap, says while 200 million cases and 15 of the top 100 global spirits brands sounds great, “in practice, it becomes a rationalisation problem. When a mega‐merger triggers portfolio rationalisation, the conversation in the new organisation isn’t ‘who can find this brand?’ It’s ‘what does this brand do that nothing else in our portfolio already does?’. Brands that can’t answer that question clearly get rationalised out. The brands that make it through are the ones that own a specific moment so clearly that cutting them creates an obvious hole.” Amati warns that the combined entity would have faced scrutiny from competition authorities regarding Scotch and Tequila, as a merger would unite Pernod’s Olmeca with Brown‐Forman’s Herradura and El Jimador, “potentially creating a dominant Tequila pole that may require selective divestments to satisfy antitrust regulations”.

Amati says portfolio overlaps would also have come into play with Gin Mare, Malfy, Beefeater and Monkey 47, all of which would be competing for share of attention inside the stable.

Significant implications

But the broader implications could have been even more significant. Tannenbaum says that this wasn’t a growth story: “Both companies came into these talks off of restructures and workforce cuts. A combined entity gets distribution leverage and cost savings. And, candidly, a better shot against Diageo.” Such a deal would reinforce the dominance of these large global players and intensify competition with rivals. If Beam Suntory’s union was about expansion, a Brown‐Forman‐Pernod Ricard tie‐up could have become a marriage of power.

“We all know the headlines by now,” writes Iconic Spirits founder Jonny Gray in his Between the Boardroom and the Bar Substack. “Consumption is down; the post‐Covid premiumisation wave has slowed; China is still underperforming; Gen Z is drinking less – or not at all. And all big brands are responding to this,” he says, citing Campari Group’s restructure, sales pressures felt by Rémy Cointreau, and Diageo’s revolving door of leadership changes. All of this, he says, “represents the first real contraction the spirits industry has seen in 30 years, so it stands to reason that consolidation is coming. But this deal is different; it’s the first one that actually feels strategic, not just necessary.”

Gray, who previously worked as a senior brand ambassador at Pernod Ricard, says he lived through a couple of versions of the firm’s ‘Project Tomorrow’, “which felt like reactionary, austerity‐driven restructuring dressed up in corporate positive language at the time”. This feels different, he says. “The scale of this deal and the complexity involved feels like the complete opposite of that ‘cut costs to protect margins’ exercise. If these companies were taking a more conservative outlook, they’d be doubling down on their core markets to protect what they’ve already got, but this does the opposite. It’s a bet on globalisation, with Pernod Ricard strengthening further in the US, and Brown‐Forman gaining better access to emerging markets. It all implies something really important: that these big companies still believe there is long‐term growth in this industry, and they want to own more of it.”

In the first half of April, The Wall Street Journal reported that fellow Kentucky‐based Sazerac had begun circling Brown‐Forman in search of a liaison of its own – a move that threatened to extinguish any relationship with Pernod before it had the chance to evolve from ‘it’s complicated’ to ‘official’.

While it’s not known whether this deal is still on the table, with Sazerac yet to comment publicly about its interest in the Herradura owner, Tannenbaum notes that between the two, Pernod was “probably the better partner” for Brown‐Forman because the “strategic logic actually holds”. He explains: “Pernod brings something Brown‐Forman has structurally lacked: international distribution at scale. Jack Daniel’s is already global, but the rest of the Brown‐Forman portfolio hasn’t got there. Plugging Woodford Reserve into Pernod’s network is a real, executable synergy.”

He also recognises that, unlike with Pernod, this would not be a merger. “Sazerac’s track record is acquisitions. Southern Comfort, BuzzBallz, Dirty Shirley – they buy things,” he clarifies, estimating that Sazerac’s revenue is somewhere in the region of US$3bn‐US$5bn, putting it in the same neighbourhood as Brown‐Forman on top line. “But revenue comparability doesn’t make a ‘merger of equals’,” he says, noting Sazerac would be financing a transaction at a premium over Brown‐Forman’s US$12bn‐plus market cap, all of which points towards what would be an acquisition structure.

Powerful combination

However, one benefit for Brown‐Forman to consider with Sazerac’s alleged takeover proposal, which has been reported to be in the region of US$15bn, is the power a combination of Jack Daniel’s and Woodford Reserve would have with Buffalo Trace, Pappy van Winkle, Blanton’s and Eagle Rare in the market. This exceptional concentration of American whiskey brands “is pretty compelling from a category standpoint”, says Gray, “but it’d also be very US‐centric and heavily weighted toward a single category. I think the future is about diversification and relevance across multiple drinking occasions.”

He says while consumption and premiumisation are slowing, the exploration of a Brown‐Forman‐Pernod Ricard marriage suggests there is still a belief spirits have room to grow – just differently. “Consumers are becoming more selective, and this demonstrates an openness from both parties to embrace and evolve with that. It’s optimism with intent, and I love to see it.”

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