Coca-Cola HBC has recently announced an agreement to acquire the renowned Finlandia vodka brand from Brown-Forman, a leading player in the spirits industry.
The Coca-Cola bottler, which also distributes Brown-Forman products in nine markets, is to pay $220m for Finlandia and Brown-Forman Finland, the subsidiary housing the brand.
In 2004, Brown-Forman acquired full ownership of Finlandia after purchasing the remaining shares from the Finnish state-owned company Altia. Prior to the transaction, Brown-Forman already held 80% of the business.
Created in 1970, some 2.7m nine-litre cases of Finlandia are sold each year, according to data released by Coca-Cola HBC. The brand’s prospective new owner said 60% of Finlandia’s sales are generated in its markets, which include the Russian Federation, Armenia, Bosnia & Herzegovina, Romania, Bulgaria and Serbia.
Coca-Cola’s CEO, Zoran Bogdanovic, expressed his enthusiasm for the agreement, referring to it as an exceptional and locally significant prospect that will bolster the expansion of their on-premise operations in a broader range of markets.
He added, “The proven complementarity of our premium spirits business with our strong NARTD [non-alcoholic ready-to-drink] portfolio enables us to offer solutions for a broad range of 24/7 consumption occasions, particularly socialising moments. We view this as an attractive investment and a natural evolution of our role as one of Finlandia’s distribution partners, further attesting to the strength of our time-tested and wide-ranging partnership with Brown-Forman.”
Nordic wine and spirits house Anora distills and bottles Finlandia. It also distributes the vodka in Finland, Sweden and Norway. Anora CEO Pekka Tennilä said the company “looks forward to continuing and deepening the strategic partnership with Coca-Cola HBC”.
In March, Brown-Forman incurred a non-cash impairment charge amounting to $96 million concerning the Finlandia vodka brand. The company stated that the impairment was attributed to increased interest rates and input costs, along with the adverse effects resulting from Russia’s invasion of Ukraine.
At the time, Brown-Forman CEO Lawson Whitting said, “Obviously, Russia and then not only Russia but also the countries that touch it all around there are all very, very weak and so it’s just been a tough situation.
“As you all know, it is a regional brand for us. It’s not really even sold in much of the world at this point in time anymore. It is an important brand in certain countries, particularly in eastern Europe. The suspension of the business in Russia was the biggest single factor that made it so difficult, but we’re going to continue trying to improve the performance of the brand and continue to fight through what is a very difficult situation.”
In a client communication, analysts from AllianceBernstein characterized Finlandia’s recent performance as “lackluster” and highlighted its contribution of 2% to Brown-Forman’s overall net sales.
The analysts pointed out that within the past five years, Brown-Forman has experienced a decline in absolute dollar terms specifically within the vodka category, making it the only category where net sales have decreased.
“Net, the divestment improves Brown-Forman’s top-line growth outlook from both a volume and mix perspective,” the analysts added.
In a statement, Whiting said, “We believe Coca-Cola HBC is well-suited to support Finlandia’s future stages of development.”
In August 2020, Coca-Cola HBC announced the cessation of production and sales of The Coca-Cola Company’s brands in Russia. Nevertheless, the company specified its commitment to manufacturing and distributing the local brands Dobry, Rich, and Moya Semya in the region, operating under the name Multon Partners.
