Grand Met loses key US vodka deal: Swedish hopes for expansion of 'fad' vodka to wipe pounds 30m off operating profits next year

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The Independent Online
GRAND Metropolitan yesterday lost US distribution rights for Absolut vodka when the Swedish state company Vin & Spirit unexpectedly transferred the rights to Seagram of Canada. The move was seen as a big blow to Grand Met's drinks business and the shares fell 15p to 403p.

The company declined to say whether it would take legal action to retain Absolut, which it has built up into a leading super-premium brand.

IDV, the drinks arm of Grand Met, has been the sole distributor of Absolut in the US for 13 years, boosting American sales from virtually nothing to nearly 3 million cases a year. Worldwide sales of Absolut total 3.8 million cases.

Absolut is understood to have generated between pounds 25m and pounds 30m of IDV's operating profits of pounds 505m in the year to September 1992. The impact on Grand Met's profits, however, will not be felt until 1994/5, with the distribution contract staying in place until October next year.

In the 1992/3 year just ended, Grand Met's US distributing arm, Carillon Importing, sold almost 3 million cases of nine-litre bottles of Absolut, representing almost 65 per cent of imported vodka sales in the US. Michel Roux, chief executive of Carillon, said: 'We built this brand from case zero in 1979.' He refused to speculate about the reasons behind the decision by Vin & Spirit to switch US distributors.

Analysts in the US said Carillon deserved credit for creating the 'designer vodka' fad, but that problems had arisen in Grand Met's positioning of Absolut and its own vodka brand, Smirnoff, outside the US.

While the two are sold to distinct markets in the US, V&S had come to feel the two lines were in conflict elsewhere. More than 14 million cases of Smirnoff were sold last year, making it the second-biggest- selling spirits brand in the world behind Bacardi Rum.

By switching to Seagram, V&S hopes to achieve better penetration for the Absolut brand globally, analysts said. V&S's vice president, Curt Nycander, said the Seagram deal represented 'the next phase in the development of the brand'.

Seagram, based in Montreal, had been selected 'because of the compatibility and synergies between the two global corporations'.

Absolut represents some 50 per cent of Carillon's business. Mr Roux said: 'We have been in this business 30 years and we aren't going to stop taking orders tomorrow.' Carillon's portfolio also includes Grand Marnier liqueurs and Bombay Gin. For Seagram, the addition of Absolut fills a 'glaring hole' in its product line-up, said Irene Nattel, beverages analyst with BZW in Montreal.

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