Suntory Holdings, the Japanese drinks group behind Jim Beam and Yamazaki, is looking to snap up high-end tequila and mescal brands to meet surging US demand for premium spirits at a time when lower-income consumers are drinking less.
“A polarisation is happening in the US market: one is toward the premium; the other one is less alcohol drinking,” Takeshi Niinami, Suntory’s chief executive, told the Financial Times.
“Standard” brands were finding consumers “getting more cautious about buying one more bottle, one more glass”, he said, but he predicted continued growth in more expensive brands.
Eight years after Suntory’s $16bn acquisition of Jim Beam, “I don’t think we’ll take that huge a risk again in the near future,” Niinami said. But he said it hoped to fill gaps in its US portfolio by finding “ultra premium” brands beyond its current line-up, which includes Sauza tequila, Courvoisier brandy and Roku gin.
“We need more categories like mescal and tequila,” he said, adding that it wanted to buy some brands while investing further in existing operations in Kentucky and Mexico. Such investments would be funded by cash generated by its US businesses, he said, noting the yen’s weakness against the dollar.
Suntory’s search for pricier brands comes after global rival Diageo snapped up several super-premium tequila and mezcal brands, including Don Julio, George Clooney-backed Casamigos, Mezcal Unión and the flavoured tequila line 21 Seeds.
Trevor Stirling, analyst at Bernstein, said that an obvious target would be the fast-growing Teremana brand backed by Dwayne “The Rock” Johnson, but a stake in that brand is owned by Jägermeister , meaning any other buyer would likely have to offer a significant premium.
Suntory would also probably be up against Pernod Ricard in the search for high-end tequila brands to buy, but could look at domestic Mexican premium brands ripe for expansion, Stirling added. “There are a lot of people out there looking for tequila [acquisitions],” he added.
The Japanese group announced a $400mn investment in Jim Beam’s Booker Noe distillery in Kentucky this summer, and Niinami said its priority would be to expand its existing distilleries where innovation could help its standing at the top end of the market.
“Even Jim Beam is getting premiumised,” he said: “Jim Beam used to be very good quality and it’s coming back.”
The group recently released an “east-meets-west” bourbon called Legent, made by Fred Noe, Jim Beam’s master distiller, and Shinji Fukuyo, the chief blender of Suntory’s Japanese whiskies.
It is also making a play for the lower end of the market, where consumers are looking for more affordable, lower alcohol options. It is pitching Jim Beam Classic Highball, a new canned bourbon and seltzer drink, as being “low in calories [and] large in refreshment”.
Beam Suntory moved its US headquarters this month from Chicago to New York, which Niinami said was a better draw for diverse global talent, and he predicted innovation and population growth would make the US “by far” the most attractive spirits market.
He also expressed optimism about the UK, despite its recent currency tumult. “Maybe it takes a year or two, depending on whether the war in Ukraine is going to be resolved or not, but the UK is resilient,” he said, adding that Suntory planned to put more resources into London.
“The only key area we feel concerned about is Japan,” Niinami said. Suntory was raising prices there to offset the effects of inflation, he said, but after years of deflation “people are not accustomed to seeing price increases”.