Each week, Just Drinks’ editors select a deal that illustrates the themes driving change in our sector. The deal may not always be the largest in value, or the highest profile, but it will tell us where the leading companies are focusing their efforts, and why.
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The deal
Stock Spirits, the Poland-based distiller, has agreed a deal for the purchase of Borco-Marken-Import Matthiesen, a German spirits business based in Hamburg.
The planned transaction will give Stock Spirits a foothold in the German market and see it take on its first Tequila brand, Sierra Tequila.
Why it matters
Stock Spirits appears to be flying in the face of conventional spirits wisdom, stocking up (if you’ll pardon the pun) on volume rather than value-led brands. Last month, the company signed “an agreement in principle” to acquire Pernod Ricard’s Clan Campbell whisky brand, and now it has moved for Germany’s Borco, a business that has as its largest brand by volume and value Sierra Tequila (that’s the one with the little sombrero hats on).
Sierra Tequila is a (relatively) big brand; available in 90 countries worldwide. Its volumes grew in Germany and in “most global export markets over the last few years”, a Borco spokesperson tells Just Drinks, without providing figures. The brand is near-ubiquitous in Germany, where it held 96% of the market share for Tequila in 2022, but also has a healthy presence in Scandinavian countries Denmark and Sweden. According to GlobalData, Tequila and mezcal are predicted to grow by at a CAGR of 2.16% between 2022 and 2027 in Germany and the chance to grab hold of the country’s number one brand will certainly have been at the forefront of the strategic rationale for this deal.
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By GlobalDataWith a retail price of €14.99 ($16.75) per 70cl bottle, Sierra Tequila isn’t premium by any stretch but the brand hasn’t been afraid to innovate in pursuit of new, younger consumers, releasing a lower-abv expression in June and running an influencer-led digital campaign in Germany last year.
“I think Stock Spirits’ plan here is to hedge their bets on alcoholic beverages being ‘recession-proof’, as it is often claimed,” says GlobalData’s spirits analyst David Harris. “In general, during difficult economic times, consumers cut out middle-market brands and either select discount brands to save money while maintaining consumption levels, or choose premium brands with which to treat themselves.
“However, the results of this trend are not developing equally, with premium significantly outperforming discount brands in western Europe (though both are outperforming mainstream brands). With this flourishing premium market, I suspect that Stock Spirits has, likely correctly, decided that it would be too difficult and/or pricey to purchase major premium brands and has gone for discount acquisitions as a result.”
Much like the Clan Campbell deal, this acquisition gives the private-equity-backed Stock Spirits an overnight presence in a country outside of its core markets of Poland, the Czech Republic and Italy, and a base from which it can look to cross-sell its other brands. Expansion internationally was set out as an area for strategic improvement by CVC Capital Partners upon acquiring Stock Spirits in 2021, and Krzysztof Krawczyk, a partner at the London-based firm, made positive noises about the “strong progress” being made with recent M&A moves.
“Borco’s brands, in particular Sierra Tequila, have a great international potential, which we want to develop, and it’s an important addition to Stock’s geographic footprint,” Krawczyk said in a release announcing the deal.
Germany is a dynamic spirits market, with sales predicted to be worth nearly $19bn by 2027 according to GlobalData. Borco’s strong distribution network in the country will be beneficial to Stock Spirits and was cited as a key attraction of the deal.
“Sierra Tequila is a notable brand but it’s unlikely that Borco alone has the resources to further tap into the exciting German spirits market,” Harris adds. “This deal will provide funds and resources to Borco at a time when interest in Tequila in the country is rising.”
One potential concern, however, may be the threat of competition to Sierra Tequila from private-label spirits, particularly in discount supermarkets, which have grown in popularity as consumers’ disposable income is squeezed. “The growing trend of all retailers launching private-label spirits will be a major obstacle for Stock Spirits and Borco to overcome,” muses Harris.
The details
Financial details of the transaction were not disclosed and the deal remains subject to approval from German and Austrian regulatory bodies.
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