Allied deal could give Diageo a nasty hangover. Sonya Hook reports

In the biggest deal in the drinks industry since the break-up of Seagram five years ago, the second and third largest drinks groups in the world have joined forces to give global leader Diageo a run for its money.

Pernod Ricard and Fortune Brands’ £7.4bn takeover of UK drinks group Allied Domecq will reshape the industry, say analysts. But while many aspects of the deal have been as expected, including Pernod’s plans to divest of a number of brands, others have come as a surprise. The deal gives Pernod control of Beefeater gin, Ballantine’s (the world’s second most popular whisky after Johnnie Walker), and Allied’s liqueur business, which includes Midori, Kahlúa, Malibu and Tia Maria.

Fortune Brands, which was brought in by Pernod to avoid any competition concerns, hasn’t been left empty-handed. The owner of Jim Beam bourbon can now add Courvoisier brandy and Canadian Club whisky to its portfolio. Pernod is divesting both for competition reasons.

Fortune will also own local market leaders such as Teacher’s Scotch whisky, Cockburn’s port and Harvey’s sherry in the UK and a range of Spanish leading brands, as well as Pernod’s Larios gin in Spain, which Pernod probably chose to divest in order to avoid competition concerns now that it owns Allied’s Beefeater gin. Pernod is retaining Seagram’s gin for the time being.

However, Pernod has decided not to retain Maker’s Mark bourbon or Sauza tequila, both of which were thought by analysts to be brands Pernod could have grown as it did Chivas Regal, which it acquired when Seagram’s portfolio was carved up.

The sale of Larios also came as a surprise to analysts, as many believed Pernod would keep it to merge its sales force with Allied’s Ballantine’s whisky team. “Gin always looked likely to cause competition concerns, but many thought it likely the Beefeater gin brand would be sold,” said one.

Pernod, which already has a strong stable of whisky brands, particularly Irish, has also kept Allied’s Ballantine’s brand, although this may be put up for sale later. “There are issues in France and Spain with the Scotch whisky brands,” said Ian Shackleton of Lehman Brothers, who thought Ballantine’s would be picked up by Fortune Brands.

There are other issues. Earlier this week SPI, the owner of the Russian vodka label, threw a potential spanner into the works by announcing it would consider pulling out of its distribution agreement with Allied if a takeover were to go ahead. The agreement has a change of control clause, which allows SPI to seek another distributor if its partner is taken over. However, despite the noise from SPI, analysts are confident that Pernod will be able to negotiate new terms with SPI.

“Allied owned the trademark for Stolichnaya in the US, which it previously bought from PepsiCo, so if SPI was to switch distributors it would be very difficult for anyone to sell it in the US,” says Shackleton. “We think the announcement was a bit of a bargaining clause to arrange some sort of deal with Allied, but we believe SPI will leave its arrangements in place.”

Another surprise is the divestment of some of Allied’s wine brands. Many insiders predicted that Pernod would keep the whole portfolio. “Pernod’s Jacob’s Creek completes the Australian hole in Allied’s portfolio,” says one analyst. However, the wine business is to be split in two, with Pernod retaining its Spanish and New Zealand operations, which includes the leading wine producer Montana, and Fortune taking Allied’s Californian wine brands, including the Clos du Bois label.

Allied also owned substantial foodservice businesses within its portfolio, including Baskin Robbins ice cream and Dunkin’ Donuts. These were never of interest to the drinks groups and, as expected, Pernod has announced they will be put up for auction.

While parts of the industry can breathe a sigh of relief that an announcement has been made, many are still waiting to see how the integration of the companies progresses. Liz Aked, alcohol buyer for Spar, says: “I think Pernod needed a portfolio like that to sit against Diageo from a suppliers’ point of view. Logistically it makes things easier for us, but of course too much consolidation in the future would be a concern.”

It is likely to be weeks before the full picture emerges. Meanwhile, Bacardi and Constellation are already hovering in the wings to pick off any other brands that might be divested.

Mixing up the drinks table

Allied brands sold to Pernod:






Tia Maria


Perrier Jouët

Campo Viejo


Allied brands sold by Pernod to Fortune:

Canadian Club


Maker’s Mark


Teacher’s, Cockburn’s,





Larios (Pernod Ricard brand)




Clos du Bois


Other US wines

Existing Pernod brands:

Chivas Regal




Wild Turkey



Havana Club


Jacob’s Creek