Diageo and Pernod clinch Seagram brands

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The protracted sale of Seagram's glittering liquor portfolio finally came to an end this week as a joint bid tabled by Diageo and Pernod Ricard was accepted by Vivendi Universal, Seagram's new parent company.

The $8.2bn deal strengthens Diageo subsidiary United Distillers and Vintners' (UDV) position as the world's leading liquor supplier, while giving Pernod Ricard the opportunity to challenge Allied Domecq for second place. And it gives the French company a big boost to its duty-free business.
 
Diageo gains Crown Royal Canadian whisky, Seagram's Californian wines and Captain Morgan rum. It may face a legal battle for the latter as rival company Allied Domecq (which belatedly dropped out of the Seagram race) claims it has pre-emptive rights to the brand through an agreement with Puerto Rican rum producer Destileria Serralles. However, Diageo was careful to ensure that Seagram would indemnify it in the event that Captain Morgan is snatched by Allied.

Pernod Ricard, meanwhile, will reinforce its Scotch whisky portfolio with the acquisition of Chivas Regal and The Glenlivet, as well as Seagram's gin and  Martell Cognac. Martell's fate is uncertain, as Pernod Ricard is already Cognac-laden, with Bisquit and Renault in its portfolio. 

The duty-free liquor industry will be transformed by the Seagram sale. UDV Global Duty Free, which already controlled one-fifth of the market, now stands to increase its share to over 25%, and World Brands Duty Free (WBDF)-the travel-retail arm of Pernod Ricard-will take its place among the top three suppliers. The acquisition of Chivas Regal in particular will give WBDF powerful muscle in duty-free, as the premium Scotch sells 694,000 nine-litre cases in the channel and is second only to Johnnie Walker, according to Global Drinks Record. Seagram has had the most consistent approach to duty-free of all the majors drinks companies during the past decade and Pernod Ricard and UDV both stand to benefit as a result.

Crown Royal will give UDV Global Duty Free a valuable foothold in North America, but much will depend on the legal strength of Allied Domecq's claim on Captain Morgan.