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William Grant’s acquisition of Drambuie- the Scotch based liqueur- for an undisclosed price, is strategically sound, giving the company entry into the burgeoning flavoured whisky/whisky flavoured liqueurs arena through a brand of uniquely strong heritage in the category. It also fits in with the company’s increased focus on the resurgent segment underscored with the recent appointment of a Head of Whisky Innovation.
With only 0.7% of global sales in other liqueurs in 2013, Drambuie is a small brand, but has huge potential due to the rise in popularity of flavoured whiskies and whisky based liqueurs, led by the bourbon category. The brand’s small size and the fact that it is essentially an one brand company with small resources limits that potential even in its biggest markets the US, Canada and the UK.
As a much larger company with strong distribution in all of Drambuie’s three largest markets -alongside many others- William Grant should be able to grow and develop the brand relatively easily, especially considering its strong track record. William Grant’s has successfully grown brands such as Sailor Jerry and Hendrick’s with a strong on-trade focus, but also an ability to effectively portray these brands as premium in a quirky and irreverent way. With the strong cues of heritage and craftsmanship already present in the case of Drambuie, William Grant’s already has the solid foundations from which to embark on that journey.
There is the potential caveat of how much it has paid. However, in terms of the amount, even if it is around or higher than the £100 million rumoured asking price (c.x30 operating profit of Drambuie) it is affordable. At the end of fiscal 2012 the company had no long term debt and shareholder funds of £870 million. It is also in line with the multiplies paid by other companies for small premium focused companies. Additionally the synergies (William Grant has a ready supply of the main ingredient) and upside mentioned above make it even more justifiable.
This looks like a strong move by William Grant and while no doubt it will meet challenges, particularly as it is not experienced in developing liqueur brands, the brand offers a very good fit both in geographic and category terms and hence a great chance to grow the company – and the category- overall.