March 05, 2014

EMP signs deal to distribute Diageo products

Emperador Inc (EMP) yesterday disclosed that it has signed a cooperation agreement with Diageo under which it will distribute the products of the latter. EMP bought about two years ago the production plant of Diageo in the Phils. Digeo produces such brands asJohnnie Walker, Crown Royal, J&B, Windsor, Buchanan's and Bushmills whiskies, Smirnoff, Ciroc and Ketel One vodkas, Baileys, Captain Morgan, Jose Cuervo, Tanqueray and Guinness.

Our take: The intention to explore potential deals with Diageo has been well-flagged by the company when it acquired the latter’s plant. The deal should allow EMP to leverage its distribution capability while augmenting its market power through higher volumes.

We do not see any threat of competitive rivalry in the arrangement as the two companies cater to very different markets. With the Diageo’s brands catering to the mid- or high-income segment, the deal should even make it easier for EMP to gain a foothold in the premium liquor market. – WealthSec