Glenboden M & A Originations

CEDC emerging as major spirits group in CEE after strategic distribution deal with Campari

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Origination Status exclusive import, distribution and marketing agreement signed, January 2007
Asset Campari brand portfolio (Campari, Cinzano, Skyy Vodka, Old Smuggler; Glen Grant)
Buyer distributor - Central European Distribution Corporation (USA)
Seller brand owner – Gruppo Campari (Italy)
Buyer Rationale broader high-margin premium portfolio
Seller Rationale greater penetration of growing market
NBs CEDC has rapidly grown to be one of the world’s largest producers of vodka
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In trying to identify future champions coming out of central Europe, CEDC is a company to watch. Starting as a niche distributor of imported alcoholic drinks, in the 1990s, it is now Poland’s largest vodka producer, is expanding aggressively in neighbouring countries, and claims to be the fourth largest producer of vodka worldwide. Anticipate ever –bolder acquisition leaps by this group, in key central and eastern European geographies, in the next year or two.

With 2006 sales estimated at up to $950 mln, CEDC’s top-line growth rate has averaged over 30% p.a. in the last five years, with an even higher operating profit growth rate. This impressive record is largely due to a recent spate of acquisition which is unique in the region.

With a strategy to make several deals each year, CEDC currently owns over a dozen distributors, two major producers (Polmos Białystok and Bols) and a number of brand licences. In order to strengthen its deal-making hand further, the company is planning a listing on the Warsaw Stock Exchange, in order to offer obdurate owners not only cash, but also public equity, for its acquisition targets.

It could be though, that future expansion will need to focus more on neighbouring countries. As a measure of just how big CEDC’s appetite has become, the Polish competition authorities recently blocked its proposed merger with the owner of ‘Żołądkowa Gorzka’, the leading flavoured vodka brand, on the not-unreasonable grounds that this would allow CEDC to control five of the top ten vodka brands in Poland, and to have a >40% market share.

Although operations are based in Warsaw, Poland, CEDC is listed on NASDAQ and its management are mostly westerners. Does that still make it a central European champion? Many would like to think so, especially since it is now the owner of Poland’s leading export vodka brand, Zubrowka, revered by connoisseurs around the world for its unique ‘bison grass’ theme and aroma.

This distribution agreement with Gruppo Campari adds to CEDC’s stable of premium imported brands, where it began its life. But who knows, maybe one day CEDC will be the global brand owner dealing out distribution agreements to smaller players around the world.

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