Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Japan Takes on 'All-American' Jim Beam Brands


How will Suntory's buyout of Beam Inc. affect the global spirits market?

Has Bill Murray just become the Dennis Rodman of bourbon?

If so, the actor's national betrayal is purely unintentional. Suntory Holdings Ltd., the Japanese food and beverage company that Murray shilled for in 2003's Lost in Translation, announced Jan. 13 that it will purchase American whiskey maker Beam Inc. (NYSE:BEAM). The $16 billion transaction, which has many drink aficionados crying "sellout!" into their hand-cut tumblers, will create the third largest premium-spirits business in the world. Beam, producer of Jim Beam and Maker's Mark bourbons, as well as Courvoisier cognac and other well-known liquor brands, will be absorbed into Suntory's portfolio of spirits, beer, nonalcoholic beverages, and restaurants.

Suntory's rationale for the buyout seems straightforward enough: It's looking to expand its global presence and break out of a dwindling, aging Japanese market. Other Japanese companies have been doing exactly that over the past several years - two examples from 2013 include SoftBank's (OTCMKTS:SFTBY) acquisition of Sprint (NYSE:S) and Shuanghui International Holdings' purchase of Smithfield Foods (NYSE:SFD).

It also seems to make synergistic sense. Exports of US whiskeys grew to about $1 billion in 2013 (more than double what it was 10 years ago), according to the Associated Press, and Suntory's own whiskeys have been making inroads in the US market. "We're basically in the middle of a global whiskey renaissance," Frank Coleman, a spokesman for the Distilled Spirits Council, told the AP. Plus, the companies' signature products are different enough from each other that they won't be in direct competition.

But while Japanese consumers may already be somewhat acclimated to Americans infiltrating their beverage supply (thanks, Tommy Lee Jones, Leonardo DiCaprio, and Sammy Davis, Jr.!), news of the sale has been a hard-to-swallow development for Bluegrass loyalists. Reminiscent of InBev's (NYSE:BUD) 2008 takeover of Anheuser-Busch, comments on the Jim Beam Facebook (NASDAQ:FB) page include such descriptors as "disappointing," "horrible business decision," and "turncoat"; one epicure points out that "bourbon does not pair with sushi." Former Blue Collar Comedy Tour comic Ron White told TMZ, "It's a goddamn shame. There's not too many things American these days…hot dogs, maybe, and bourbon." Others are already defecting, recommending more "patriotic" bourbons in Beam's stead.

Besides the obvious emotional impact, there are other concerns. Industry watchers are wondering how the merger will affect Beam's management style and protocol. Suntory is a privately held, family-owned business that has been around since 1899, and that family (currently made up of 18 members descended from the company's founder) has a reputation for being somewhat territorial. The company has also never managed a global brand and has only one non-Japanese director out of 34, which could potentially cause issues in understanding its newly expanded demographic.

But Suntory has preexisting ties to Beam: It already distributes Beam's products in Japan, and Beam distributes Suntory products in Asian markets. Suntory has given every indication it has no immediate plans to make significant changes to management, which will continue to be helmed by Beam President and CEO Matt Shattock. "It's business as usual," Beam spokesman Clarkson Hine told the AP.

And what of the much-feared dilution of an American spirits institution? Writing for the New Yorker's Currency blog, Vauhini Vara points out that deals like this trigger "a cultural anxiety about the decline of American influence." However, she adds, "What's less clear is whether foreign ownership actually changes these brands' iconic status, or really anything substantive about what they represent."

Besides, we already live in a world where an increasing number of "all-American" companies are being scooped up by international conglomerates. If you're going to swear off Jim Beam, you might as well also rip the Firestone tires off your car, stop making 7-Eleven coffee runs, and refuse to ever buy a Popsicle from the Good Humor truck ever again.

Even some of the most die-hard Kentuckians are going with the grain. "[The] announcement is further proof that Kentucky Bourbon is a growing and global force in the spirits marketplace," said Eric Gregory, president of the Kentucky Distillers' Association, in a company statement. "The Commonwealth has long-standing ties to Japan with more than 150 Japanese companies doing business in the Bluegrass. … We're excited that Suntory has chosen to invest in Kentucky … [and] we look forward to working with them to continue the Bourbon renaissance." And, if we're going to get technical on a local level, Beam's whiskeys are made in Kentucky, but the company is headquartered in Deerfield, Illinois.

Both Suntory and Beam anticipate annual net sales in excess of $4.3 billion after the transaction is finalized (expected in the second quarter of 2014, after being approved by Beam stockholders). Following the buyout announcement, Beam's shares shot up more than 24% and are currently trading for more than $83 per share. The sale represents a 25% premium over Beam's January 10, 2014 closing price, as well as a multiple of more than 20 times Beam's 12-month EBITDA ending September 30, 2013.

So far it sounds like a financial shot worth taking. For everyone else worried about the fate of their beloved bourbon, take Bill Murray's advice and relax. Let's see what happens.

Jenn Gidman is an editor and writer who has whipped content into shape for MSN, AOL,, Reader's Digest, and Scholastic. She prefers craft beer over bourbon. You can find her on Twitter at @jenngidman.
< Previous
  • 1
Next >
No positions in stocks mentioned.
Featured Videos