In 2009, Prince Charles in kilts presided over the opening of a newly expanded Glenlivet whisky distillery.
This facility would allow Pernod Ricard SA to expand production by 75 percent. A more apt “poster child”
for globalization could not be found than in this relationship. Glenlivet, a single-malt scotch whisky first distilled by George Smith in 1824, is a Scottish icon, but its current fortunes are directed by a decidedly French firm, Pernod Ricard SA.
Diageo PLC and Pernod Ricard SA jointly bid $8.15 billion for the wines and spirits portfolio of Seagram Company Ltd of Canada on December 19, 2000. Pernod Ricard invested $3.15 billion and Diageo PLC provided the remaining $5 billion. The two companies agreed before the bid to split the liquor portfolio of the purchase. Diageo PLC was not interested in Scotch whisky holdings, and Pernod Ricard SA was very interested. It would allow them to expand their liquor portfolios in areas of future interest. It was a unique opportunity.
Scotch whisky can be produced only in Scotland. No other whiskey (spelled with an “e”) can claim to be a Scotch whisky (spelled without an “e”); they are simply other forms of “whiskey.” This single investment provided a unique, sustainable, competitive advantage to the holder of these assets.
This purchase and division of spoils was highly fortuitous and a major strategic gambit by Pernod Ricard SA. Ten years after this strategic move, its strategic importance was evident in growing worldwide sales. A global interest in Scotch whisky was developing. The major Scotch whisky-importing countries were the United States, France, Spain, Singapore, Venezuela, South Korea, South Africa, and Germany.
This market amounted to $2.45 billion. In the United States spirits consumption (9-liter cases) was highly diversified, but Scotch whiskies were second in consumption. In fact, Vodka (Russian for “little water”)
was number one in market share with 30.9%, Scotch whisky 13.6%, rum 13.3%, American whiskey 10.7%, gin 6.0%, tequila 6.0% and others, 10.5%. The American competitor to Pernod Ricard SA and Diageo PLC is Constellation Brands Inc.
This market share scenario explains why Diageo PLC did not opt for the Scotch whiskies in the purchase of Seagram’s spirits assets. The British company concentrates on the vodka, American whiskey, and rum portion of the United States market. Even though Pernod Ricard SA appeared to pay the smaller portion of the purchase price and gained the iconic labels, it was not as if Diageo PLC did not have its own strategic plan and, in fact, exercised it.
Strategic positioning is very important in any industry. It should be a major consideration in any acquisition and merger. Sometimes it leads to strange results, as in this case where the major exporter of Scotch whisky is a now French firm.

QUESTIONS

1. How has the global market for alcoholic beverages changed over time?

2. Are “whisky” and “whiskey” legally defined or merely traditionally defined?

3. Why is it important to position and protect brands?