Brown-Forman sells Notable Three to Sazerac
By now, many people by now have already heard through the grapevine that one of the largest alcohol beverage companies in the world, Brown-Forman (NYSE: BY.B), has agreed to sell three of its iconic brands to Sazerac Company, Inc., which is privately owned by billionaire William Goldring and his family. Although the major market sale was leaked out earlier this year, the actual purchase deal is not expected to close until the end of this summer.
One of the most notable and recognizable brands that is included in the sale is Canadian Mist whisky, which was the company's first production outside the United States. Canadian Mist was added to Brown-Forman's portfolio in 1971, eventually boosting it to the number three top selling Canadian Whisky in the world. Prior to selling Canadian Mist, the Impact Databank numbers showed that sales were down in 2019 by 6.4%, down to 1 million cases. Quite often we look at profit and loss statistics, and we dismiss a number like 6.4% because we automatically assume that a big company like Brown-Forman is easily prepared to handle those dips in annual gross sales. Consider, however, that when dealing with production and distribution of Canadian Mist worldwide in quantities that are mind-boggling, it becomes easier to perceive the massive losses that implies for Brown-Forman. This may have been one of the determining factors, in addition to other primary agendas, that led to Canadian Mist being sold to Sazerac Company, Inc.
Along with Canadian Mist Whisky went the iconic brand Early Times Bourbon Whiskey, which was Brown-Forman's first acquired brand back in 1923. The brand Early Times is actually celebrating its 160th Anniversary. Since Early Times was created in 1860, they have engaged in more than simply whiskey. Recently they have dedicated much of their website and attention to both United States veterans and 'American Dogs', which they have a calendar for. The sale of Early Times came as somewhat of a surprise to most individuals until both companies released statements that clarified the purpose of the sale. "As we seek to deliver balanced geographic growth with competitive routes to consumers, we must have an agile and simplified organizational structure," said Lawson Whiting, President and Chief Executive Officer, Brown-Forman Corporation. When we peel away the political, legal and business sentence structure, we can identify the implication of changing primary focus to an alternate category within the liquor market. Lawson reinforced his statement by concurrently suggesting a adjustment to their inner business structure. Underlying motivators for the sale of Early Times might be analogous to Canadian Mist's decline in sales. Along with Canadian Mist, Early Times saw a 6.8% drop in sales, lowering it to roughly 426,000 cases.
As for Collingwood, not much has been said regarding the fate of Collingwood brand whiskey. As one of the lesser known brands of the three, Collingwood Distillery is set in Louisville, Kentucky. Coincidentally, the Canadian Mist factory is located in Collingwood, Canada. That could possibly cause some confusion - just a little clarification there. So the Collingwood brand will slide over to Sazerac as well. The fate of Collingwood is uncertain at this point, as no specific statements from either Brown-Forman or Sazerac have been issued declaring their future plans or projects for Collingwood. An implicative statement was issued by the President and CEO of Sazerac, Mark Brown, “We are delighted to acquire such iconic brands as well as the Canadian Mist distillery... Brown-Forman has done an excellent job building these brands over the years and we expect to invest in the brands and grow their sales in the coming years.” Regardless of the fact that he only mentioned Canadian Mist by name in his comment, the general innuendo relays Sazerac's interest in keeping all three brands and making them grow.
Lawson Whiting's comment was supported by Brown-Forman's comment when they said that the deal “reflects the continued evolution of the company’s portfolio strategy to focus on premium brands.” The transition of Brown-Forman's focus emphasizes their interest in essentially rebranding their entire product line. Modification to a simplified organization structure, while seeking to deliver balanced geographic growth with competitive routes to consumers, collectively suggests directing attention to products that generate more revenue, but are still competitive and accessible to consumers. Indeed, it's been evident that Brown-Forman has been putting more of their efforts into other brands which are considered mid-to-upper shelf products. Brown-Forman has actively managed the shape and contents of its portfolio over the last decade and a half through developing, acquiring, and divesting various businesses and brands. Now they intend on focusing on brands such as Woodford Reserve Bourbon, which surpassed a million cases in 2019. To further show dedication to their new goal, Brown-Forman also purchase Ford's Gin in 2019, which is considered to be a super-premium gin.
Lawson Whiting went on to say “Those four whiskey brands are all performing really well, albeit off of a small base. We have a dedicated emerging brands team working on those, focusing on the ultra-premium, heavy on-premise brands that need attention and dedication and aren’t sold right next to Jack Daniel’s Tennessee whiskey.” There could not be a more plain, clear statement from CEO Whiting concerning the company's intentions; Brown-Forman wants to move away from the bottom shelf and become identifiable with more premium liquor brands on the market.
Brown-Forman released a kind, departing goodbye to everyone, saying, "“We are thankful to all the people who have distilled, bottled, shipped, marketed, and distributed these brands with care over the years.” Lawson Whiting buttressed the historical significance of these brands by adding, “Early Times and Canadian Mist have been valued brands in our portfolio for many years, and they each have played significant roles in our company’s history.”
What It All Could Mean, and How It Could Affect You
The first thing to take notice of is that the amount of the sale from Brown-Forman to Sazerac has been kept from the public. Typically, this is done during the negotiation and finalization processes of corporate business deals while specific details are worked out. Often times, the purchase price can change, or terms or the sale can be adjusted or modified prior to completion of the purchase. For those who invest in Brown-Forman on the NYSE, this can be frustrating; having all the pertinent information regarding the fiscal and business aspects of a major corporate purchase provide an upper hand when choosing if, and when, to buy stocks in a company. However, there are some intuitive and logical facts and details associated with this sale that provide some future insight as to the direction that these three brands might be headed in. This deal with Sazerac mirrors a similar play from 2016 in which the company acquired the Southern Comfort and Tuaca brands from Brown-Forman for $544 million. Both brands are still notable brands on the global market, with Southern Comfort rated as the 50th most popular alcoholic beverage in the world by Taste Atlas, who rated the top 100 most popular spirits worldwide as of June 2020.
Under the premise that Sazerac Company, Inc. intends to keep all three brands on the market, and maintain production at the Canadian Mist distillery, then the general public might assume a positive consequence to the sale. Being such a well-known company with a reputation for quality and consistency in every product within their portfolio, chances are that the purchased brands will go in one of either two directions: either the brand will simply reside under the umbrella of the Sazerac name and continue on as it has without external influence from the new parent company, or it will be reformulated and remarketed by Sazerac after they have improved the product's quality or profile.
I briefly discussed the sale of these three whiskeys to Sazerac with a friend who works as a distribution representative for Young's Market in San Diego, California. His knowledge far supersedes my own, so I picked his brain for some insight on this business deal, and what it could mean for the consumer. He reminded me that companies sometimes purchase brands as a market strategy; whether it is to eliminate competition by discontinuing that brand, or adding to their portfolio to increase diversity in their product spread, or possibly to variegate the assortment of that liquor category. There are a multitude of reasons that a major company like Brown-Forman would let go of three iconic brands that they have held for so long in their anthology of classic spirits. Likewise, Sazerac would likely conceived some future plans for these brands prior to purchasing them. If the amount of the purchase hasn't been disclosed, then chances are it is a lofty sum!
My friend from Young's Market and I agree that Canadian Mist, Early Times and Collingwood are probably going to be around for a lot longer, and the quality, profile and production may only get better from this point forward. The release of Early Times' Bottled-In-Bond Bourbon Whiskey is highly anticipated, causing some mouths to water on social media sites. As for Canadian Mist, it still remains a tried and true product that can be found in most grocery, liquor and convenience stores throughout the United States. Considering its track record and potential for future sales and dynamic marketing campaigns, I'd bet my money on Sazerac hanging onto Canadian Mist (and likely redeveloping it).
As for Collingwood Whiskey...I cannot honestly speak to the future of this brand. I have researched and talked to professionals regarding Collingwood, yet I have found no one that has any information regarding the market, social or product implications resulting from the deal between Brown-Forman and Sazerac. If you are a fan of Collingwood Whiskey, I recommend keeping an eye on both the whiskey and the company. Seeing what happens with the company can give you a clue as to what might happen with the product you enjoy.