A Peek into Deutsch’s Acquisition Process

Dear Client:

Deutsch Family Wine & Spirits is largely a wine company but recently began expanding its spirits portfolio. Most recently, the company purchased Masterson’s and Bib & Tucker whiskey brands from 3 Badge Beverage. But how do they choose the right fit for their portfolio?

Deutsch chief strategy and growth officer Renato Reyes shared the company’s views on the overall spirits M&A landscape as well as what they look for in a brand during a panel at the American Craft Spirits Association convention last month.

DISTRIB CONSOLIDATION MAKES IT A BUYER’S MARKET. The top two wine and spirits distributors, Southern Glazer’s Wine & Spirits and Breakthru/RNDC, controlled more than 55% of the market in 2018. Consolidation at the middle tier has impacted suppliers’ M&A strategy.

“As distributors consolidate, it’s more and more important to make sure the whole portfolio is full of strong, healthy brands,” said Renato, adding that distributor consolidation benefits a company like Deutsch.

“People or brand owners are finding it difficult to get the attention of the distributor,” and as a result, “I’m finding a lot of people are more willing to enter into conversations with my company,” he said.

But that also means the company is being “more choiceful” about which brands to bring into the fold.

WHAT MAKES A HEALTHY BRAND? When asked what attracts Deutsch to brand opportunities, he said they look for a healthy brand from both a quantitative and qualitative perspective. On the qualitative side, Renato said Deutsch weighs whether or not the brand looks unique, has a great name and a loyal fan base and if it’s created an emotional connection with consumers.

Quantitatively, Deutsch evaluates turns (which Renato defined as the number of depletions a brand has in a point of distribution). Deutsch has “developed a robust database which allows us to understand whether or not our system can really plus up a brand that has high turns,” he said.  

DETERMINING VALUATION. Not everyone is George Clooney and can fetch $1 billion for a four-year-old company.

To determine valuation for a typical brand, “First I close my eyes if they’re too good looking,” he joked, adding Deutsch focuses on payback. For wine, the goal is to be able to pay back in 4-5 years and for spirits “we have a longer time horizon,” about 8-10 years.

IWSR: GLOBAL WINE MARKET TO HIT $207 BILLION BY 2022

Global wine consumption is expected to reach $207 billion from 2.7 billion nine-liter cases by 2022, according to recent IWSR data.

The US is–and will continue to be–the top wine market by value and volume. In 2017, the US wine market was worth $34.8 billion at 318 million cases. France is second by value at $16.7 billion, followed closely by China at $16.5 billion.

Premium priced wines ($10-$20) will be the top contributor to value growth for both still and sparkling wines, according to IWSR, with the US and China driving the trend.

Looking at sparkling wine, the category generated $28.9 billion from just over 260 million cases in 2017. By 2022, IWSR expects sparkling wine to reach nearly $33 billion in value and 281 million cases in volume, led by prosecco.

IWSR expects the US to drive imported sparkling wine growth over the next few years by adding a projected 4.6 million cases to total volumes.

WSD BRIEFS:

CONNACHT WHISKEY CO. LAUNCHES BALLYHOO. Ireland-based Connacht Whiskey Company has released Ballyhoo Irish Whiskey in time for St. Patrick’s Day. Ballyhoo is a sourced grain whiskey that is rested on site in port barrels for between three to six months before being bottled at 86 proof. The mash bill contains 93% corn and 7% malted barley. Ballyhoo is currently available in NY, NJ, PA, MD, DC, DE, MA, WI, WA, ID, UT, OR, CA, FL and IL for about $30 a 750 ml.

PRESTIGE BEVERAGE GROUPS RELEASES KINKY ALOHA COCKTAILS. Prestige Beverage’s Kinky Beverages has released a new Kinky cocktail to their lineup. The Kinky Aloha Cocktails are inspired by the success of the Aloha Liqueur. They are bottled at 10 proof and are available nationwide with a suggested retail price of $9 per 6-pack.

RYAN STEWART JOINS FOLEY FAMILY WINES. Foley Family Wines has appointed Ryan Stewart as director of international sales. In his new role, Ryan will be responsible for developing the Foley Family Wines export sales on a global basis. He joins the company from Delicato Family Vineyards where he worked as area sales director, Asia Pacific. “Considering his strong knowledge of global markets and relationships with key importer, distributor and retail partners around the world, I’m confident that Ryan will lead our important export business to new levels,” says chief Hugh Reimers.

Until tomorrow,
Sarah

“The best way out is always through.” – Robert Frost      

——- Sell Day Calendar ———
Today’s Sell Day: 9
Sell days this month: 21
Sell days this month last year: 21
This month ends on a: Fri.
This month last year ended on a: Fri.  
YTD sell days Over/Under: +1