RI Pernod Ricard

   By Joshua Kirby 
 

Pernod Ricard said Tuesday that it reached a deal to buy a Canadian maker of canned cocktails, a rapidly growing category in the global drinks market, adding to the distiller's North America-focused expansion strategy.

The group, which counts Absolut vodka, Martell cognac and Jameson whiskey among its brands, will take a 90% stake in Ace Beverage Group. The Ontario-based company produces the Cottage Springs line of ready-to-drink cocktails and mixed drinks, including vodka water and tequila soda.

The acquisition, via Pernod Ricard's majority-owned Canadian subsidiary Corby Spirit and Wine, gives ABG an enterprise value of 165 million Canadian dollars ($123.4 million), Pernod Ricard said. It has the option to reach 100% ownership in ABG via two call options exercisable in 2025 and 2028.

The group already makes RTDs using products including a pine colada made with Malibu coconut rum with and Jameson with ginger and lime. Canned drinks are a way of introducing customers to its products, Chief Executive Alexandre Ricard told The Wall Street Journal in an interview earlier this year.

"People really expect some of these big brands to have ready-to-serves ready for them," Ricard said. "It recruits into the brand."

Globally, RTD products should rise by some $11.6 billion in value between last year and 2026, according to data from drinks-research firm the IWSR. Consumers are increasingly choosing them over other options like beer, citing taste and convenience, according to the IWSR.

RTDs had a 5% share of the U.S. drinks market last year, according to data from Uber-owned drinks-delivery business Drizly.

The acquisition will boost the group's exposure to the market in Canada, said Fredrik Syren, the group's director of RTDs and convenience.

"With ABG, Corby becomes a key player in the Canadian RTD market, giving the scale and synergies needed in this category," Syren said.

Pernod Ricard's acquisition strategy has focused in recent years on North America, where it has bought up brands oriented to a growing thirst for pricier drinks. At the end of last year, the group bought Codigo 1530, maker of premium tequilas and mezcals, and upped its stake in premium group Sovereign Brands in the U.S. This year, it added to its flavored-whiskey portfolio with the acquisition of Skrewball, maker of peanut-butter whiskey.

Drinks sales have boomed in North America since the beginning of the pandemic, spurred first by a boom in cocktails at home and sustained by a return to bars when lockdowns ended. That cycle is coming to an end, with sales momentum slowing, but structural drivers remain very encouraging, analysts at Jefferies said in a recent note.

Premium spirits are an affordable luxury, the analysts said, making them more resilient than some other consumer goods to a slowdown in spending as a worsening economy takes its toll.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

(END) Dow Jones Newswires

June 13, 2023 04:09 ET (08:09 GMT)

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