Pernod in high spirits after Absolut triumph

Pernod is joining forces with Absolut. Now there's a cocktail that could give you a serious headache...

by
Last Updated: 06 Nov 2012

French giant Pernod Ricard said today it has agreed to pay the Swedish government about €6bn in cash to buy Vin & Sprit, the maker of Absolut vodka. Given that V&S has a turnover of less than €1bn per year, it just goes to show how much money there is to be made from something like vodka – made for pennies but marketed as a premium brand around the world.

Pernod said in a statement today that as a result of buying Absolut – the world’s fourth biggest-selling spirit behind Smirnoff, Bacardi and Johnnie Walker – it was now ‘the world's co-leader in the wine and spirit industry’. And clearly it’s very excited about the prospect. ‘Absolut is an iconic brand whose importance goes beyond the world of wines and spirits,’ it added. We’re not quite sure what this means exactly (world peace? global warming? civil liberties?) but we’ll take their word for it.

Pernod was certainly determined to get its hands on Absolut. Apparently it fought off competition from Jim Beam owner Fortune Brands (which was already distributing Absolut in the US, its biggest market), not to mention Bacardi and a private Swedish consortium. Drinks giant Diageo was also sniffing around, but it decided to go off and buy 50% of Dutch brand Ketel One for $900m instead.

However, it hasn’t come cheap. Pernod has had to go to six banks to get its hands on enough cash to do the deal, and is paying more than 20 times V&S’s pre-tax profits last year – so it’s a pretty hefty price tag. Good news if you’re the Swedish government (which is on a cash-raising privatisation push) but not so good if you’re a Pernod shareholder – the stock dropped another 4% when the deal was announced as investors worried that the French company had overpaid.

There have been a few occasions when MT has woken up to find a booze bill lurking in our pocket that's slightly higher than we remembered it being. Let’s just hope Pernod doesn’t end up feeling similarly rough tomorrow morning...

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