How Likely Is a Brown-Forman, Pernod Ricard Merger?

 

A rolling billboard for Old Forester and other Brown-Forman
brands at the company headquarters and distillery
on Dixie Highway in Louisville (1936).

Today Bloomberg and Reuters, two generally reliable news sources, reported that Brown-Forman and Pernod Ricard are in talks about a merger of some sort. The reports are based on anonymous sources and neither company has confirmed anything, but the story is being widely reported with headlines like this one from the Lexington Herald-Leader. "Reports: Kentucky whiskey company Brown-Forman, Pernod Ricard in merger talks."

This pops up whenever there is upheaval in the distilled spirits industry. On paper, Brown-Forman looks like a great acquisition. It has one superior brand and a couple of pretty good ones, primarily in the American whiskey space. It's a well-run company, profitable, and not overloaded with debt. 

Pernod Ricard is the world's #2 distilled spirits company after Diageo, with annual gross sales of $12.3B. It owns Absolut Vodka, Jameson Irish Whiskey, Chivas Regal Scotch, Martell Cognac, Havana Club Rum, and a bunch of others. Though well-endowed with Scotch and Irish whiskey, it is light on American whiskey, although it owns a few craft producers such as Kentucky's Jefferson's and Rabbit Hole, West Virginia's Smooth Ambler, and Fort Worth's Firestone & Robertson, which produces the TX Whiskey brand.

Usually when these Brown-Forman merger rumors appear the finger is pointed at Bacardi, sometimes Diageo. 

Is Brown-Forman in play? Probably not, inasmuch as these rumors have always fizzled in the past. Although publicly traded, Brown-Forman is still controlled by the Brown family. They're generally happy with things the way they are. It would be very hard, perhaps impossible, for a determined suitor to force a sale.

I've always heard that the Brown family doesn't like the Bacardi family, which is why that tie-up always falters. I don't know how they feel about the Ricard family.

An observation: When I made the "Made and Bottled in Kentucky" documentary, I mentioned in the script that Brown-Forman was then "a three-billion dollar company." If I remember correctly, that was their gross sales for the previous year. That was 30+ years ago. Brown-Forman's gross sales for 2024 were $5.32B. Considering inflation, the company may actually be smaller today. That may tell you more about the distilled spirits business than it does about one particular company.

By contrast, Brown-Forman's principal rival in the American whiskey space, Suntory, is much bigger than Jim Beam Brands was 30 years ago, but they have grown by acquisitions more so than by growing their core business. Brown-Forman has bought some brands over the years, but I don't think they've bought a rival company since the 1950s, when they bought Jack Daniel's. 

Booze is a good business but it's not AI. There's not a lot of potential for growth. The market generally dislikes diversification so that leaves acquisition as the only path to growth, and the liquor business seems to be hard on its #2. When Diageo passed Seagram's as #1 at the end of the 20th century, Seagram's went out of business.

One peculiarity of the American whiskey business is that the four largest distillers, who together make about seventy percent of America's whiskey, are all closely held. Some of Brown-Forman's stock is publicly traded. The other three, Suntory, Sazerac, and Heaven Hill, are entirely family owned. In all three cases, the principal shareholder is a man in his 80s. 

Stay tuned.