Bourbon has become an increasingly popular investment target for private equity firms and investment banks in recent years. The global bourbon market is projected to grow at a CAGR of 5.8% from 2022 to 2030. With strong growth potential and high profit margins, investing in bourbon presents lucrative opportunities. Many factors are driving interests from private equities and bankers, including the bourbon renaissance in the US, rising global demand, and consolidation of major bourbon brands. Notable deals include Sycamore Partner’s acquisition of Chateau Ste. Michelle, Pernod Ricard’s investment in Skrewball, Suntory’s acquisition of Beam, and Carlyle Group’s takeover of Accolade Wines. Beyond financial returns, bourbon investments also enable investors to tap into an alluring cultural phenomenon and lifestyle. However, risks such as changing consumer trends and heavy regulations need to be considered.
Bourbon market has been experiencing a renaissance and shows strong growth potential
The bourbon market, especially in the US, has gone through a renaissance in recent years. Driven by premiumization and craft spirits trend, bourbon has shifted from an old-fashioned drink to a modern cultural symbol embraced by millennials and women. Total US bourbon sales have tripled since 2000. At a projected CAGR of 5.8%, the global bourbon whiskey market is expected to grow from $9.6 billion in 2022 to $14.1 billion in 2030. Developing markets such as Asia-Pacific and Latin America also present untapped opportunities.
Profitability and branding power of bourbon appeal to private equity investors
Bourbon offers attractive profit margins, which appeals to investors seeking high return potential. Gross margins for bourbon can range from 50% to 70%. Premium and super-premium bourbon products can command even higher margins. Many established bourbon brands also come with strong branding power and customer loyalty, offering investors steady cash flows and cross-marketing opportunities across liquor categories.
Consolidation among major bourbon brands drives M&A activities from investment banks
The bourbon sector has seen active consolidation in recent years, with acquisitions aimed at expanding distribution networks, acquiring craft brands, and consolidating production assets. Major deals involving investment banks include Suntory’s $16 billion acquisition of Beam in 2014 and Campari Group’s $759 million takeover of Wild Turkey in 2009. Investment banks help bourbon companies evaluate targets, conduct due diligence, negotiate deals, and arrange financing.
Private equity firms increasingly attracted to bourbon’s growth prospects
Private equity firms such as Sycamore Partners, Carlyle Group, and KKR have ramped up investments in bourbon brands, drawn by the sector’s strong growth trends. Notable deals include Sycamore acquiring Chateau Ste. Michelle’s wines business for $1.2 billion in 2021, Carlyle Group buying Accolade Wines from Champ Private Equity for $1 billion in 2016, and KKR being part of the investor group that acquired Maker’s Mark bourbon in 2021.
In recent years, bourbon has emerged as an attractive sector for investments from private equity firms and investment banks. Driven by shifting consumer trends, global growth prospects, high profitability and strong branding power, bourbon represents lucrative investment opportunities. However, risks ranging from changing tastes to onerous regulations need to be properly evaluated.