By The Way

Isn’t It Ironic?

It’s been said that the only constant is change. Those of you have spent a considerable amount of time in the beverage alcohol industry know that it’s certainly true in this business. This was brought home to me as this issue was being finalized and I opened my morning newspaper to find that Seagram had agreed to a merger with Vivendi, a French water/construction/media conglomerate. And unlike similar news in the past few years, in this case it was Seagram that was up for sale.

Under the direction of Samuel Bronfman, Seagram was one of the companies that emerged at the end of Prohibition and shaped the liquor industry today. A self-proclaimed “whiskey man,” this visionary created a new product category, American blended whiskey, with his 7 Crown brand. He also began running advertising urging the responsible consumption of his products in the 1930s, a tradition which Seagram continues to this day.

After he retired and turned the reins over to his son, Edgar, the company continued to grow and became an international spirits powerhouse with globally important brands like Crown Royal, Chivas Regal, Captain Morgan and Martell. When it came time for the third generation of the Bronfman family, in this case Edgar Jr., to assume the helm, the distilled spirits business was faced with continually declining volume. In looking to assure the company’s continued profitability, he began a series of acquisitions (MCA, with its movie, television and record businesses, and Polygram) that transformed Seagram into a major media company that just happened to derive one-third of its revenue from the manufacture and marketing of liquor.

Now mergers within the distilled spirits business have become increasingly common in the last dozen years. A glance through the 1988 edition of Wine & Spirits Industry Marketing lists companies like W.A. Taylor, Maidstone and Hiram Walker, which have been absorbed into Allied Domecq Spirits and Wine, or in the case of Heublein, Paddington, Carillon, Glenmore and Schenley into UDV North America, to name but a few examples.

But ironically, the Seagram merger has nothing to do with the liquor business. Never mind that Seagram has six of the top 20 distilled spirits brands with millions of cases in volume and more than $8 billion in annual revenue. It’s the company’s entertainment holdings that made it such an attractive target. When the merger is completed, Vivendi has announced its intention to divest itself of its holdings in the liquor business.

And I guess that will initiate a new round of the ever constant change. At least there’s something you can count on.

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