Drinks M&A recovery set to continue in 2025

The Covid-19 pandemic, supply-chain upheaval and the economic turbulence caused by Russia’s invasion of Ukraine have all dampened deal-making in the global drinks industry in recent years. However, so far in 2024, there have been clear signs of an upturn in activity – and the expectations are that will continue in 2025. 

According to the deals database of GlobalData, Just Drinks’ parent, there were 244 acquisitions announced in the drinks industry between the start of 2024 and 10 November. That compared to 222 deals over the corresponding period of the previous year. 

“Over the last couple of years, it’s been a difficult market in general for M&A,” Javier Chiquero, vice president in the consumer group at investment bank Houlihan Lokey, says. “It looks like we are through some of that, so hopefully a more stable macro environment will be helpful also for increased M&A.” 

In 2024, the drinks industry has seen corporate activity continue to be shaped by factors including consumers’ interest in health, the desire among some majors (particularly but not exclusively in spirits) to declutter their cabinets and, in the opposite direction, the tactical bets placed by players in different categories to diversify their product sets.

Houlihan Lokey is working on “some very interesting” deals for “better-for-you” beverages, Chiquero tells Just Drinks. He expects that area of the market to continue to be an important aspect of M&A in soft drinks. 

“The better-for-you trend is probably one of the strongest that we’re seeing in the soft drinks category,” Chiquero explains. “There are some really interesting brands out there, whether it is looking at hydration or more of the gut-health type of products. Those are still very small but it is one of the areas where I would expect to see more and more brands coming up, and where we will see a lot of attrition until we find the winners.”

As Chiquero points out, drinking ‘better’ also encapsulates the macro trend recasting the entire beverage-alcohol side of the market. Hardly a day goes by without a drinks-industry executive uttering the now ubiquitous phrase that consumers are drinking ‘less but better’. In western (historically the largest) markets, demand for alcohol has, in general, plateaued and, in some segments, is in decline. 

Brewers, distillers and wine makers have sought, with varying degrees of success, to build their more upmarket (and pricier) offerings as a buffer against stagnant overall demand.  

The ‘premiumisation’ of consumption and of product portfolios has been a driver of M&A activity, both in terms of acquisitions and disposals. The recent pressures on consumer spending seen across markets have called into question whether premiumisation will continue to drive demand. However, this year, even if there hasn’t been a flurry of deals for brands deemed ‘premium’ and above, we have seen a number of major players offload assets in a bid to focus on existing brands they believe can tap into demand for pricier fare. 

“It makes sense to look at your portfolio and try to get rid of your brands that are not earning a lot per litre towards brands that are earning a lot,” Francois Sonneville, senior beverages analyst at Netherlands-based financial-services group Rabobank, says. 

While the likes of Diageo (Pampero, Safari) and Pernod Ricard (Red Heart, Minttu and, notably, a clutch of wine brands) have continued to offload assets, perhaps the most eye-catching deal of this type seen so far in 2024 has been Edrington’s sale of The Famous Grouse Scotch whisky to Glenfiddich owner William Grant & Sons.

“This decision is driven by our strategy to focus on our core strengths and the growth opportunities in the ultra-premium spirits category,” Edrington CEO Scott McCroskie said at the time. “We consider this the right moment for Edrington to exit the blended Scotch category and focus on our core portfolio of ultra-premium spirit brands.” 

Despite the premiumisation trend having lost some momentum in the last couple of years, there is a belief among industry watchers that it will return to the fore. 

“The whole premiumisation thing’s gone into reverse to some extent on products like alcohol,” Mark Lynch, partner and founder at M&A advisory firm Oghma Partners, says. “I think it will come back again because that’s how you drive value ultimately.” 

Chiquero adds: “I’ll very much stand behind that [idea]. People want to consume something that they know is probably not the best for them but it’s good quality and tastes good. There’s a bit of feelgood behind some of those. That’s probably something that we will see more and more in the spirits industry.”

There are, however, willing buyers for the brands cast aside by the likes of Diageo, Pernod Ricard or, in beer, Molson Coors. 

Gruppo Montenegro snapped up Pampero rum from Diageo, which also sold liqueur brand Safari to Portuguese drinks company Casa Redondo.  

South Africa’s KWV was the buyer of Pernod’s local South African rum brand Red Heart. The owners of Australia’s Accolade Wines were the new home for Pernod wine brands like Jacob’s Creek, while Denmark’s Royal Unibrew continued to diversify (spot another M&A trend) its portfolio with the purchase of a clutch of the French giant’s brands in the Nordic markets, including Finnish liqueur Minttu and Swedish punch brand Cederlunds Torr.

And, in beer, Canadian cannabis and drinks group Tilray Brands continued its bet on US craft beer with a move for four breweries owned by Molson Coors (more on Molson Coors later). 

For Chiquero, a brand might still have “a reason to be” even if it’s no longer deemed desirable by a company like Diageo. “It doesn’t mean they’re not fantastic brands. They’re just not at the scale that they would like to spend the time on,” he says. “For Gruppo Montenegro, who bought Pampero, that’s a fantastic brand with a fantastic scale, with a lot of presence in Italy, where they are headquartered.” 

Some of the major groups, he adds, simply want to focus on their “crown jewels”. 

“I think there will be some of those transactions going forward. In the spirits category, we will see that rationalisation to keep some of the high-end brands going, [with] some of the larger groups putting more focus on them … and at the same time ensuring that management time is spent on those, as opposed to some of the smaller ones.” And, as we’ve seen in recent weeks, Campari, one of the better-performing spirits groups of recent years, also looks set to be ready to offload some of its smaller brands as part of a series of efforts to support its growth. 

Away from disposals, perhaps the most notable acquisitions across the industry in 2024 include Carlsberg’s move for UK-based soft-drinks group Britvic and, last month, Keurig Dr Pepper’s decision to pounce for US energy-drinks business Ghost. 

The size of the Britvic deal – which valued the Robinsons maker at £3.3bn ($4.25bn) – has broadly been seen by M&A watchers and some in the industry has something of an outlier.

Speaking to Just Drinks in September, Asahi Group Holdings president and CEO Atsushi Katsuki said he saw Carlsberg’s decision to buy Britvic as similar to the Japanese group’s strategy of looking beyond beer but suggested there aren’t large deals the Peroni maker could conduct. “If you’re asking me whether there are any sizeable, large-scale opportunities, the answer is not at the moment. There’s nothing right in front of us,” he said.

Nevertheless, while the scope of the Carlsberg/Britvic transaction means the deal may be seen as unusual in those terms, it can be viewed as another example of a drinks major looking to broaden its portfolio to try to bolster its growth prospects. Many of those moves continue to take the form of minority investments (Gallo/Montucky Cold Snacks, say, or Heineken/Stëlz) but Keurig’s decision to buy Ghost for what could amount to be more than $1bn caught the eye this year.

Molson Coors, meanwhile, added to the belief that energy drinks will be a lively area for M&A with its deal this month to turn its minority shareholding in another US firm, Zoa, into a majority stake. 

“If you look at some categories that are still attractive, I think energy drinks, sports drinks, people are still looking at doing deals,” Sonneville says. 

There is a belief, however, that the energy-drinks market is evolving, with some consumers not simply looking for an energy boost but for other benefits. “People are looking for new products that fit a new lifestyle,” Sonneville says. 

At Houlihan Lokey, Chiquero expects more deals to be done in the energy-drinks category as the wider health-and-wellness trend has an impact. 

“It’s a very attractive category. It’s probably one where you have an abundance of brands at the moment, so there might be some consolidation, there might be some winners and losers,” he says. “I think the better-for-you trend will probably hit that category a bit harder than other categories. We will probably see a bit more of a split between the energy drinks and the hydration better-for-you category but I think the energy-drinks category is here to stay, to be honest.”

One area where some of the larger drinks companies are placing bets is in no-and-low alcohol. Recent weeks has seen Diageo (already the owner of non-alcoholic spirit brand Seedlip) snap up US non-alcoholic spirits business Ritual Zero Proof and LVMH invest in French non-alc sparkling wine maker French Bloom. Earlier in the year, Oettinger, the Germany-based brewer and soft-drinks maker, acquired non-alcoholic functional beer brand JoyBräu, while Asahi took part in a Series A funding round at US non-alcoholic drinks retailer The Zero Proof. 

However, deals in what remains an emerging area of the market have been few and far between. Given the number of brands entering the fast-growing (but still nascent) category, might more outright acquisitions be carried out? The churn seen in the retail aisles of the more developed markets like the UK might make it hard for a drinks major to choose the right brand to buy. 

Oghma Partners’ Lynch believes a fledgling non-alc brand doesn’t have to be “that big” to be attractive to a potential buyer. “If you’re growing fast enough, I think if you can get to £20m or something, you’re going to start to get people to pay attention if you’re growing at 30% or 40% per annum and if it’s got potential to spread internationally,” he says. “What were the turnovers of Grey Goose or Sipsmiths? They probably weren’t that big when they got sold.” 

Chiquero has a similar take. If the growing demand for non-alcoholic alternatives continues, he believes it is likely the category will see more M&A. Larger players, Chiquero says, can use deals as a quicker way to gain a foothold in a particular product segment, even if, of course, non-alc has been an area that’s seen a number of ‘zero’ line extensions of established brands. 

“If this trend explodes and goes faster than it’s gone so far, we will probably see more M&A, regardless of the size,” he says. “If things continue as they’ve been up until now, slowly but surely, no-alcoholic or low-alcohol brands slowly gaining share, I think it might take a few more years and players will want to see them gaining sufficient scale before they undertake some M&A.  

“I’m probably more confident in the former if I’m completely honest. I think we’ll probably see a bit more M&A activity if brands are attractive enough but, obviously, that’s a crystal-ball prediction.”