Pernod Ricard to buy Italian premium gin brand Malfy

(source)

Dive Brief:

  • Pernod Ricard will acquire the Malfy premium gin brand from Biggar & Leith for an undisclosed amount. The France-based owner of Absolut Vodka, Chivas Regal blended Scotch whisky and Jameson Irish whiskey said the transaction will close soon.
  • Biggar & Leith, which is headquartered in New Jersey, launched the Malfy brand in 2016, according to the Shanken News Daily. There are four varieties of the gin — original, lemon, rose and orange — all of which are distilled in Italy and imported. 
  • Christian Porta, Pernod Ricard’s managing director of global business development, said in a release this acquisition follows its strategy of “investing in brands with strong potential in growing categories.”

Dive Insight:

Pernod Ricard may view this pending acquisition of Malfy gin as a way of drawing younger fans of premium spirits to the company and its extensive portfolio of products. As consumers turn away from beer and traditional spirits, alcohol companies have branched out to attract millennials and younger generations. Malfy could help Pernod boost its presence in the growing premium and flavored gin segment. 

Sales of distilled spirits have climbed in recent years, Beverage Dynamics reported, citing figures from the Distilled Spirits Council. Last year was the ninth straight year of record sales and volumes, the council noted, with volumes up 2.2% to 231 million cases compared to 2017. Millennials are driving much of that growth — and super-premium gin was one of the beneficiaries, with 2018 sales up 15.6%.

Pernod is taking advantage of that with M&A. Malfy complements Pernod’s stake in Canada’s Ungava gin brand last year and its majority stake in Monkey 47 Gin.

In the three years since its debut, Malfy has enjoyed higher consumer acceptance than many in its category, according to ​Biggar & Leith founder Elwyn Gladstone. He told the Shanken News Daily he expected to produce about 90,000 cases of the gin last year, with about a quarter of that coming to the U.S. He noted other gin brands had taken many years to get to 100,000 cases. He told The Hype Magazine the brand works because it’s different from other gins and features quality local ingredients sourced in Italy. 

There could be additional M&A activity coming from Pernod Ricard in the near future. Chairman and CEO Alexandre Ricard, grandson of the firm’s founder, indicated in January he’s open to change, including selling brands that no longer fit.

Pernod Ricard may have another reason for making these moves. Elliott Management Corp., a New York-based investor group led by billionaire Paul Singer, has been pushing the company for changes since it took a more than 2.5% stake last year. The hedge fund has criticized the spirits company for underperformance, saying its operating margins have lagged below rival Diageo by 5 percentage points. But the latest M&A push and product development could be working, since the company’s most recent earnings showed a 6.3% boost in organic growth for its year-to-date sales.

Given Malfy’s popularity, Pernod Ricard may have to pay a pretty penny for the brand. However, such acquisitions could help quiet this activist investor and boost the company’s sales among millennials — and consequently, its bottom line in coming years.

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