Scotch whisky rocked by Pernod Ricard Brown-Forman talks

Should it go through, it would mark the biggest consolidation in the Scotch whisky industry since Japanese food and drink giant Suntory acquired Beam for nearly £10 billion in 2014. That deal saw Suntory, which had already made a major move into the Scotch whisky industry when it acquired Morrison Bowmore outright in 1994, add brands such as Teacher’s, Laphroaig, and Ardmore to a stable including the Auchentoshan, Bowmore, and Glen Garioch single malts.

A proposed merger of Pernod Ricard and Brown-Forman would bring a host of premium Scotch whisky, bourbon and other brands under a single roof, with Chivas contributing power brands The Glenlivet, Chivas Regal, Ballantine’s, and Royal Salute to the party, and Brown-Forman adding single malts The Glendronach, BenRiach, and Glenglassaugh. Brown-Forman acquired the latter three brands with its £285 million acquisition of The BenRiach Distillery Company from Billy Walker and fellow investors in 2016.

Given the well-documented travails of the industry in recent years, which have seen some distillers scale back production and cut jobs as demand has tailed off in key markets, some degree of consolidation has perhaps been expected. Especially when it is also believed that the spirits industry is feeling the effects of young people drinking less, and from some people reducing their alcohol consumption as a result of taking weight-loss drugs.

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Many distillers have been on the defensive in recent years after a Covid-era surge in sales faded dramatically, leaving companies with excess stock in key markets. The fall in demand has come amid a host of macroeconomic and geopolitical headwinds, including Trump tariffs, which have depressed demand for Scotch whisky in major markets such as the US and China. Those challenges have been writ large in the results of major players including Pernod Ricard and Diageo, with the latter slashing its dividend in half last month as it warned sales for the full year would come in below expectations.

Matters will not have been helped by oil and gas prices surging in light of the conflict in the Middle East. That is surely only going to add to the cost pressures distillers are facing as well as dent consumer confidence further if hostilities lead to a sustained increase in inflation.

In such circumstances, it is natural for companies to look for ways to trim costs and very often efficiencies are envisaged through the pursuit of mergers and acquisitions. But even then there was something that took the breath away about the news that Pernod Ricard and Brown-Forman have been exploring a combination, with one industry source expressing the view to The Herald that news of the talks had very much come out of the blue.

Moreover, with only limited information about the prospective deal in the public domain so far, there are many questions that have still to be answered.

While the public statements confirming the talks have suggested this would be a “merger of equals”, it is worth contemplating which of the two has the most to gain, and which will ultimately be in control of the combined entity.

One source suggested Pernod Ricard would emerge as the dominant partner, which is perhaps understandable given the respective sizes of the two companies. Pernod Ricard, which has around 19,500 employees worldwide, turned over nearly €11 billion in 2025, while Brown-Forman employs about 5,000 people and turned over around $4bn in the same year.

Then there will be issues over boardroom influence to be ironed out. As Russ Mould, investment director of stockbroker AJ Bell, noted, a merger will involve reaching an accord that satisfies the founding families of both companies who remain major shareholders in their respective businesses.

The proposed deal has perhaps been billed as a “merger of equals” because Brown-Forman brings Jack Daniel’s, the second-biggest US whiskey brand in the world behind Jim Beam, to the table, which would massively ramp up Pernod Ricard’s presence in that bourbon segment.

But it is not only from a bourbon perspective that the deal will be attractive to Pernod Ricard. By adding The Glendronach, BenRiach, and Glenglassaugh to its ranks, the already impressive Chivas whisky portfolio – which also includes The Glenlivet , Aberlour, and Scapa single malts - would be given even greater sheen.

Beyond the strength of the combined portfolio, bosses at both companies will be looking closely at how much in annual savings can be achieved by bringing the two businesses together, which would appear to be a crucial factor given the cost pressures facing the industry. But while savings can help the bottom line (and in some cases a chief executive’s bonus potential) they can often result in jobs being cut.

Brown-Forman employs in the region of 200 people in the UK, having inherited around 165 employees in Scotland when it acquired The BenRiach Distillery Company. That deal included a bottling plant and headquarters in Edinburgh and The Glendronach, BenRiach, and Glenglassaugh distilleries. Pernod Ricard’s Chivas operation employs around 1,600 people in Scotland, which includes several hundred at a bottling and warehousing operation in Dumbarton in addition to staff working at its various distilleries.

Naturally, it is to be hoped that, should the merger go through, the amount of rationalisation is kept to a minimum with as little an impact on jobs as possible.

One thing that does seem sure is that the industry will be in for some pretty significant change if Pernod Ricard and Brown-Forman do come together, with their proposed merger arguably sparking further deals as other companies look to make their own moves and cut back on costs at such a difficult time.