Sunday, 13 December 2015

13.12.15 Jerez Takes in Emperador Takeover

275 million euros is a lot to spend on a mere whim. The Philippine magnate Andrew L Tan has become the focus of attention since he burst onto the Jerez scene with the purchase of the old Domecq business. Outwardly the bodegas are pleased, but inwardly they are worried as nobody knows what he has in mind and all indications are that he is here to stay.

Many feel that his arrival could be the spur needed to re-inject vitality to the brandy business. Some of the bigger firms were thinking of removing their principal brands from the DO – which gives the brandy its nobility - so they could be sold cheaply as “spirt drinks”. The two bodegas which opened Pandora’s Box: Osborne with Veterano and González Byass with Soberano, have the most to lose.

Tan’s interest in Jerez brandy and in particular Fundador stems from way back. It is the national drink in the Philippines and Fundador is the brand leader. Tan visited Jerez 30 years ago to study how it was made. Later on the self-made millionaire established a commercial relationship with González Byass which he recently strengthened with a strategic alliance for brandy production. Those who know the workings of GB are convinced that the firm would have had serious difficulties staying at the top without Mr Tan and not without reason. He is their biggest customer and even before their joint venture was spending 100 million euros, equivalent to half their turnover.

The González family, who were aware of the progress of the negotiations to buy Domecq, had a meeting days earlier with Mr Tan, who assured them that their joint venture was not at risk, at least for the moment. Nevertheless the family is convinced that the magnate will, sooner or later, break the agreement to concentrate his efforts on Domecq.

Osborne is also on the alert. The firm has represented both the good and the bad in the brandy sector over recent years and has changed from being primarily a Sherry producer to a spirits producer with a large number of brands, some previously bought from Domecq. Osborne was the first to remove Veterano from the DO and at the same time reinforced their faith in Jerez brandy by buying up any well-known brand they could get their hands on. They felt that they had everything under control until the sudden appearance of Andrew Tan which might completely disrupt their plans. For now the Osborne brandies are dominant in the domestic and German markets, a position which Tan would be in a position to compete with if his objective, as the brandy sector believes, were to invest in Fundador and recover its prestige.

Those who have followed Tan’s career say that he is a patient man, one who believes in the longer term. The test will be when the apprentice became the master. Thirty years after his first visit to Jerez his Emperador brandy is the second best-selling alcoholic drink in the world with annual sales of 40 million 9 litre cases – almost 30 times the total annual sales of Brandy de Jerez and 10 times the combined sales of Jerez brandy and Sherry. Only time will tell whether Tan will be the spur so badly needed for Jerez brandy. If so the old Fundador slogan could be revived: “El coñac – ahora brandy – que está como nunca.” (The Cognac – now called brandy – is as good as ever.) This refers to the fact that for a long time Jerez brandy was known as Cognac - or "coñac" , until the term was outlawed.

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