Bacardi to acquire premium tequila-maker Patron for $5.1 billion
What's the story
With demand for high-end tequila growing across the world, alcohol giant Bacardi announced yesterday that it would be buying premium tequila-maker Patron Spirits International AG for a deal worth $5.1 billion.
The acquisition is the first one under Indian-born CEO Mahesh Madhavan, who was appointed as Bacardi CEO by the family which owns it in October 2017.
Here's more.
Historical
Bacardi's 156-year-long journey
Bacardi was founded in 1862 by Don Facundo Bacardi Massó in Cuba. Initially founded as a rum-making company, Bacardi now owns over 200 brands and labels, employs over 6,000 people, and is the world's largest privately-held, family-owned spirits company.
Tequila demand
The world has seen a growing demand for tequila lately
According to recent data by alcoholic beverage research firm IWSR, the global market for alcoholic drinks shrank by 1.3% in 2016.
Yet, demand for tequila saw a 5.2% increase in the same year.
Similarly, a recent market report by the UK's Wine and Spirits Trading Association (WTSA) said that annual tequila sales had increased by 5% in the UK in 2016.
Quote
Patron acquisition will increase scale globally
"Adding Patron to the Bacardi portfolio creates a tremendous opportunity for the brand outside of the United States as Bacardi's international distribution network will help grow Patron around the world, increasing scale in the U.S. and globally," said Bacardi CEO Mahesh Madhavan.
Tequila consumption
How tequila consumption has changed of late
The WTSA said that the rising demand for tequila, which saw an average annual growth rate of 6% since 2002, also corresponded with a recent boom in gin brands and gin cocktails.
The WTSA further added that tequila too was being consumed in a different way now - instead of the traditional shots, people now prefer "high quality, cocktail combinations and sophisticated sipping products."
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Where the Patron acquisition puts Bacardi
Research firm IWSR added that Bacardi's acquisition of Patron would make the company the top spirits maker in the super-premium segment of the US market, and the second largest spirits company in the US market by value.
Market competition
Alcoholic beverages giant compete for tequila market domination
Given the spurt in demand for tequila, alcoholic beverages multinationals are strengthening their positions in the market.
Last year, British alcoholic beverage giant Diageo plc acquired George Clooney's tequila company, Casamigos, for $1 billion.
Bacardi, on the other hand, already owns premium tequila brands like Cazadores and Corzo, and is looking to further strengthen their position through the acquisition of Patron.