FTC Challenges Pernod-V&S Deal
The world’s second largest beverage conglomerate hits a stumbling block after picking up key vodka market share, but agrees to federal government pressures.
July 18, 2008
Pernod Richard, the French liquor and wine conglomerate, has been challenged by the US Federal Trade Commission over its acquisition of Swedish spirits company V&S Vin & Sprit for being anti-competitive.
In a statement sent out Friday, the FTC said the deal “would be anticompetitive and in violation of U.S. antitrust laws because it would effectively combine the two most popular brands of ‘super-premium’ vodka sold nationwide, Absolut and Stolichnaya.”
“To eliminate the anticompetitive effects of the proposed transaction, the FTC will require Pernod to end its distribution agreement with the owners of Stolichnaya, Spirits International BV (SPI), within six months of acquiring V&S and the Absolut brand,” the statement said. “This requirement is contained in a consent order agreed to by Pernod.”
The FTC’s agreement with Pernod also prohibits it from using sensitive information it might get through its new subsidiary about shared brands through joint ventures in Future Brands LLC for its wholly-owned products.
Pernod’s acquisition of V&S earlier this year was a largely debt-based transaction, and the $9 billion price tag that the company ate was more than analysts’ projection of the value of the company. Still, it kept a valuable property out of the hands of UK drinks king Diageo plc, with which Pernod competes.
The challenge to a merger based on exclusivity of premium vodka ownership may be difficult to prove now, as opposed to even just a few years ago for the industry. Other high-end brands, including Grey Goose and Belvedere have gained share in the marketplace and exclusive products continue to be introduced to the market, like French import Ciroc, coming from Diageo, to which Pernod is second in market share worldwide.
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