Welcome to Issue #33 of The Quench Report, the newsletter that raises a glass and delivers the latest and greatest in Beverage Alcohol and the broader Beverage category.

What’s on tap for today:

• 🍀 Deep Dive - Some Different Angles on the Pernod Ricard / Brown-Forman Potential Merger

• 🔥 Hot Jobs Worth Applying To

🍀 SOME DIFFERENT ANGLES ON THE PERNOD RICARD / BROWN-FORMAN POTENTIAL MERGER

Late last week came news of a potential blockbuster, Pernod Ricard and Brown-Forman in merger talks. Plenty of commentary has already covered the competitive dynamics, U.S. market implications, and the estimated $450M in synergies. This week we're going deeper on two angles that we feel haven't gotten enough attention.

WHERE DOES THIS POTENTIAL DEAL RANK IN HISTORY?

Context matters. If this deal closes at the reported ~$12B, it would rank as the 4th largest spirits deal in history, behind the Guinness/Grand Met combination in 1997 (~$17B, or $35B in today's dollars), Pernod's own acquisition of Allied Domecq in 2005 ($15B / $25B today), and Suntory's purchase of Beam in 2014 ($14B / $19B today). Check out the largest deals in history below 👇️ 

A quick note on the numbers: figures represent the estimated cost for the larger entity to acquire the smaller one. The Guinness/Grand Metropolitan figure is inherently approximate as both companies were sprawling, diversified conglomerates at the time (Grand Met alone actually owned Burger King and Häagen-Dazs, among many other businesses), making a clean apples-to-apples comparison between deals impossible. That said, few would argue it wasn't the single largest and most consequential deal in spirits history as it created Diageo.

As for the current deal, while Pernod/Brown-Forman ranks 4th on raw dollar value, we'd argue it's actually the 3rd most impactful deal ever made in spirits (if it happens). The Suntory/Beam combination was transformative for Suntory’s exposure to the U.S. market, but its combined strategic footprint was much narrower. A combined Pernod/Brown-Forman touches nearly every major category, price point, and market on the planet. The dollar figure understates the disruption.

THE SECOND LEVEL EFFECTS - WHICH BRANDS MIGHT BECOME AVAILABLE?

The headline coverage focuses on what the combined entity looks like. The more interesting question for emerging brand founders, investors, and distributors is: what comes off the shelf?

When mega-mergers or acquisitions happen, three things typically shake loose brands:

1. Regulatory divestitures - brands forced out due to antitrust concerns. These two portfolios fit together remarkably well with minimal category overlap. That said, the bar is lower now given new U.S. merger guidelines - it will be interesting to see what happens here on that front. Some really nice brands might be forced out.
   

2. Financial divestitures - brands sold to help fund or de-lever the deal. There could be some of this, but we don’t expect a lot.
   

3. Orphan brands - and this is where it gets interesting. A combined entity of this scale sets a new materiality threshold. Brands that had dedicated resources, field support, and strategic attention inside either company individually may simply not register at the new scale. They don't get sold because they're bad, they get sold because they're invisible at the new size.
   
   We think Category 3 is where a lot of action will be. Looking across both companies' combined portfolios, we think the following brands could be worth watching: Check it out below 👇️

🎯 THE BIG TAKEAWAYS

• We feel this deal has the potential to get done. The portfolio fit is strong, the synergy math is credible, and the regulatory risk feels manageable for a deal of this scale and size.
  

• The 4th largest deal in spirits history deserves more respect than it's getting. At ~$12B, this reshapes the global competitive landscape in a meaningful way, and creates a combined entity with substantial synergies, distribution leverage, and shelf presence.
  

• The orphan brand opportunity is real and it's potentially coming. Founders, investors, and strategic acquirers should be building their watch lists now. Some interesting brands might become available soon. That's a very different kind of deal to pursue. Some of these have real equity, real distribution, and real consumer bases. In the right hands several could be genuinely compelling opportunities.

THIS WEEK’S HOT JOBS IN BEVERAGES

These roles came to us via ThirstyTalent.ai. Want your open role featured? Email: [email protected] 👇️ 

• VP Procurement - Pernod Ricard - NY, NY

• Project Mgr, Business Intelligence - Red Bull - Santa Monica, CA

• Director, Brand Management Spirits - Gallo - Dallas or Modesto

• Director, Chain Merchandising California - SGWS - California

• Sr. Data Marketing Analyst - Monster - Corona, CA

• Finance Manager Chains - Pernod Ricard - NY, NY

• Division VP Chains and Control States - Pernod Ricard - NY, NY

THANKS FOR READING

The Quench Report is a free weekly newsletter from Thirsty Insights, a beverage alcohol consulting company that serves top clients in data, strategy, insights, and analytics.

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