Coca-Cola HBC's announcement yesterday of the acquisition of Brown-Forman Finland, owner of Finlandia vodka, came as a major surprise as it is the first acquisition of the company in the «hard» drinks sector at an international level. It may have taken its first tentative step in the distribution of alcoholic beverages 16 years ago, but yesterday's move showed that it wants to go deeper into this category and at the level of global brand control.
The choice of the vodka category for the first move was not a coincidence as Coca Cola HBC's backbone is that of Eastern Europe where this particular drink is the number one drink in consumption. In particular, according to international data, Slovakia, Poland, Ukraine, Russia, Belarus, Belarus, Lithuania, Estonia, Latvia, Finland, Sweden, Norway, and Iceland make up the global "vodka zone". Of these, all but the last four are in the countries where Coca-Cola HBC operates.
Finlandia is a strong brand in the Central and Eastern European region where it sells 2.7 million 9 litre cases per year, with 60% of this being in countries where the Coca-Cola HBC group already operates. The group currently distributes Finlandia in 7 countries (Greece, Nigeria, Bulgaria, Bulgaria, Ukraine, Croatia, Serbia and Hungary) representing 12% of the brand's total volume.
The Eastern European spirits market is estimated to be valued at $63.45 billion in 2021 and is expected to grow by 4% annually over the next few years according to Globaldata. It is worth noting that Eastern Europe as a zone is the fourth largest consumer of spirits on the planet with vodka as mentioned above topping the preferences of its residents with a share of over 50%.
According to the same research, over 50% of alcoholic beverages in Eastern Europe are distributed through supermarkets and hypermarkets where Coca-Cola HBC is strong due to its portfolio of soft drinks, snacks and coffees. However, it is not included in the top five strongest players in this category and as stated in its 2022 annual report, alcoholic beverages accounted for only 3% of its sales volume. Jointly the growth prospects are significant.
According to IWSR, in terms of the standard vodka category, Finlandia is among the top three brands in the Czech Republic, Poland, Hungary, Slovakia, Lithuania, Bulgaria and Romania and is expected to strengthen Coca-Cola HBC's 24/7 portfolio and HoReCa presence in key markets. Based on the latest data in Q1 2023, Finlandia strengthened its shares across Central and Eastern Europe with key performances in Poland and the Czech Republic, while in the last year the brand has been growing organically, showing a 15% volume sales growth.
The relationship with beverages for the until then soft drinks group started in 2006 when for the Hungarian market alone it launched the distribution of Brown Forman beverages (Jack Daniels, Finlandia, El Jimador) this partnership has now expanded to 9 markets and the acquisition of Finnish vodka by Brown Forman will open up the horizons for most of the 23 markets where Coca-Cola HBC operates.
In terms of brand acquisitions in the alcohol space there were two moves in 2017 with Rezangyal a local fruit brandy in Hungary and MB Impex in Serbia which had two brands in its portfolio, Zlatni Pelin bitter liqueur and Zlatna brandy.
At the distribution level, in addition to Brown Forman's brands, there is cooperation with Edrington (Famous Grouse, Macallan, Brugal) for 14 countries, while for a similar number of countries there is cooperation since 2016 with Gruppo Campari (Campari, Aperol, Cinzano). With the latter, the cooperation will be completed at least in our country at the end of 2023 as the distribution will be taken over by the subsidiary created by the Italian group.
Coca-Cola HBC, which also has the distribution of several spirits at local levels, such as Ouzo Plomari in Greece, has made two more important acquisitions in the last two years. The first is the acquisition of 30% of Italian premium espresso company Caffe Vergnano in 2021 and 3 Cents in Greece in August 2022.
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