The deal comes amid a prolonged slump for Southern Comfort. The sweet, whiskey-flavored liquor has struggled as bigger whiskey brands have added flavors and pushed into its category with products such as Brown-Forman’s Jack Daniel’s Tennessee Honey and Diageo PLC’s Crown Royal Regal Apple.
Southern Comfort was also hurt by Sazerac’s Fireball Cinnamon Whisky, which has unseated it as the flavored whiskey shot of choice at many bars.
Tuaca is an Italian liqueur with tastes of vanilla and orange that Brown Forman acquired in 2002.
Sales volumes of Southern Comfort fell 7% in the six months ended Oct. 31, after declining 4% to 2.2 million nine-liter cases in the year ended April 30. By contrast, sales volumes of Brown-Forman’s Jack Daniel’s family of brands rose 7% to 21.3 million nine-liter cases for the year.Brown-Forman, which acquired Southern Comfort in 1979, began shopping the brand last year. The sale fits into the company’s strategy of divesting itself of challenged brands and noncore brands such as the wine business it sold in 2007. It has focused on Jack Daniel’s and Woodford Reserve, which have grown in recent years behind a surge in American whiskey sales.
The sale to New Orleans-based Sazerac is expected to close March 1. Brown-Forman said it would provide more details about what it plans to do with cash generated from the sale during its earnings conference call later that month.
In acquiring Southern Comfort, privately-held Sazerac is picking up a well-known global brand. It believes it can revive Southern Comfort sales as it continues to expand sales of Fireball, which has become one of the world’s fastest-growing brands. Sales volume for Fireball soared to 4.6 million nine-liter cases in the U.S. last year from just 100,000 cases in 2010, according to industry tracker Impact Databank. Sazerac also makes bourbons, such as Buffalo Trace and Eagle Rare.
American whiskey sales have jumped in the U.S. in recent years as drinkers increasingly choose brown spirits over clear, flavorless liquor, such as vodka. Bourbon and Tennessee whiskey sales in the U.S. have grown about 7% annually since 2012, and exports rose to $1.5 billion in 2014 from around $800 million in 2005, according to the Distilled Spirits Council of the U.S.
Brown-Forman tried to shore up Southern Comfort as consumers shifted to more traditional whiskey and flavored variations of well-known brands such as Jack Daniel’s and Crown Royal. It poured marketing dollars into Southern Comfort last year even as it looked for a buyer. It released a video and song “ShottaSoCo” featuring actor Danny McBride that Brown-Forman Chief Executive Paul Varga said was a top-10 viral effort, according to Spotify.
“That’s evidence that the brand continues to get support and we continue to try to put our best foot forward in a really competitive environment for it,” Mr. Varga said during an earnings call with analysts in December.
Sazerac President Mark Brown said Brown-Forman had “done an excellent job of building” the brand. He added, “We are looking forward to many more years of successful brand building.”
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