Diageo to pay up to $610M to buy Ryan Reynolds-backed Aviation Gin

Dive Brief:

  • Diageo will acquire Aviation American Gin and its parent company Davos Brands in a deal that could be worth $610 million, the company announced Monday morning. In addition to the super-premium gin brand partially owned by actor Ryan Reynolds, Diageo is also acquiring Astral Tequila, Sombra Mezcal and TYKU Sake. Reynolds will retain an ownership interest in Aviation American Gin.
  • The transaction price includes an initial payment of $335 million and further consideration of up to $275 million based on the performance of Aviation American Gin during a 10-year period. Diageo said this reflects the brand’s current growth trajectory and expected upside potential.
  • “The acquisition of Aviation American Gin and the Davos Brands portfolio is in line with our strategy to acquire high growth brands with attractive margins that support premiumisation,” Ivan Menezes, CEO of Diageo, said in a statement.

Dive Insight:

Diageo, which is best known for Guinness, Smirnoff and Captain Morgan, has been repositioning its portfolio in recent years to give it a bigger presence in the fast-growing and more financially lucrative alcohol space. In 2018, Diageo sold 19 lower-end brands in its portfolio, including Seagram’s whiskey, to Sazerac for $550 million. The addition of Aviation American Gin further underscores the value of premium brands for the world’s largest liquor maker

Diageo is no stranger to celebrity partnerships, having work extensively with rapper-turned-business mogul Sean Combs after they first joined forces in 2007, and he became the face of its Ciroc vodka. And in 2017, it purchased another celebrity-backed alcohol in Casamigos, the fastest-growing super-premium tequila brand in the U.S., for up to $1 billion. At the time of the purchase, Casamigos was partly owned and co-founded by actor George Clooney.

The addition of Aviation American Gin follows a similar playbook for Diageo in that the brand is growing quickly, and while Ryan Reynolds didn’t found the brand, he has an ownership stake acquired two years ago that made him the face of the brand. The fact that he is retaining some ownership following the deal is a positive for Diageo, which could continue to use his popularity to further market the brand in the United States. 

Diageo said Aviation American Gin grew volumes at over 100% in 2019, adding the highest number of cases and contributing 40% of super premium gin segment growth in the U.S.

Reuters, citing data from the Distilled Spirits Council, said distillers sold nearly 10 million 9-liter cases of gin in the United States in 2019, generating $918 million in revenue, a 3% increase from the prior year. Sales and volumes for distilled spirits have been surging for a decade, with millennials driving much of that growth — and super-premium gin was one of the beneficiaries.

The premiumization aspect is infiltrating nearly all facets of the food and beverage space, but few are being impacted as much as alcohol. Pernod Ricard announced last year it acquired the Malfy premium gin brand from Biggar & Leith for an undisclosed amount and Castle Brands for $223 million, adding to its portfolio Jefferson’s Bourbon, Brady’s Irish Cream and Clontarf Irish Whiskey.

Major beer companies such as Molson Coors and AB InBev have been active as well. AB InBev purchased the rest of Babe Wine, a canned beverage popular with millennials and Generation Z, that it didn’t already own through its ZX Ventures affiliate in 2019.

As alcohol consumers who grew up with many of the big-name brands get older, younger drinkers are not gravitating to those beverages as often, especially beer. The impetus is on big alcohol companies to still cater to those drinkers but expand their portfolios with products that target younger individuals who will increasingly make up a bigger core of their base.

For Diageo, the star-studded additions of Casamigos and now Aviation American Gin go a long way toward setting the company up for future growth by expanding its reach into a hot-growing category in greater demand with more consumers.

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