Beam Suntory eyes ABD stake to reboot India biz

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Beam Suntory — maker of Jim Beam, Laphroaig and Yamazaki — plans to reboot its Indian strategy. The world’s third-largest drinks giant is holding preliminary discussions to buy into the Kishore Chhabria-controlled Allied Blenders and Distillers(ABD) to aggressively push its iconic portfolio of bourbon, scotch, Irish and Japanese whiskies in the country, people directly aware of the matter said.
Beam Suntory, a subsidiary of Japanese food and beverage conglomerate Suntory Holdings, is seeking a strong local partner to gain ground in a market where global rivals Diageo and Pernod Ricard hold sway. Beam Suntory was born out of the last big consolidation move in the global drinks industry when Suntory acquired US-based Beam for $16 billion in 2014.

The talks are centred around Beam Suntory striking a minority investment deal and a commercial partnership with ABD, giving the latter distribution of its portfolio and bottling rights for a few select brands. “Both sides have had a few rounds of meetings, including one in Mumbai last week. These discussions are still in early stages,” sources privy to the developments said on the condition of anonymity. ABD is the only top-three domestic liquor company that has Indian ownership.

Any deal-making will be beset with multiple concerns, primarily about compliance standards, as liquor MNCs have faced the heat of foreign regulators about trading practices in India. “What Beam would expect on compliance matters would be tough to meet for any local partner,” sources added. State governments decide on taxation on alcoholic beverages and several of them manage the wholesale and retail trade, exposing the companies to local political interventions and demands. Spokespersons for both Beam Suntory and ABD declined to comment on market speculation. Suntory, prior to its takeover of Beam, has had unsuccessful talks to buy a large stake in another Indian distiller Radico Khaitan.

Beam Suntory has remained a fringe player in the Indian market, which is touted as the largest mass market for whiskies. The company’s biggest bet in the country remains Teacher’s scotch, which sells under half a million cases (of 9 litres each) annually. More recently, it started local bottling of Jim Beam bourbon, giving the brand more visibility in top metros.

Diageo, which acquired United Spirits, has direct sales topping 90 million cases. Pernod Ricard has a highly profitable Indian operation, selling more than 45 million cases of premium whiskies.

ABD, through its flagship whisky Officer’s Choice, is the third-largest distiller by volume with annual depletion of more than 36 million cases. The Chhabria family owns 99% stake with the company’s vice-chairman and industry veteran holding about 1%. Chhabria has talked about taking the company for a stock market listing with an expected market valuation topping $1 billion. How any stake sale to Suntory, if it happens, would impact the future direction of the company would also be closely watched.

Foreign companies buying into Indian distillers have been rare with just two deals being struck in the last 10 years — Diageo’s acquisition of United Spirits in 2012, and US-based Sazerac’s share purchase in Indian single malt maker John Distilleries in October last year.

 

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