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Published:  23 July, 2008

By Ron Emler

Bacardi has strengthened its position in the global spirits market by paying around $1 billion for Grey Goose vodka. It has bought the brand from Sidney Frank Importing Co, a US independent, which has built the brand into one of the best-selling super-premium' vodkas in the US. Grey Goose has become one of the fastest-growing brands in the US since its launch in 1997. Its sales volumes are growing by more than 20% a year, and it retails for between $27 and $28 a bottle. The deal will lift Bacardi's share of the US spirits market from its present estimated 8%. The group has a marketing partnership with Brown-Forman, with which it combined in a failed bid for the Seagram brands in 2001. The acquisition fills a strategic hole in Bacardi's portfolio. Despite owning Eristoff and Turi, Bacardi has been seeking a major vodka brand since it began diversifying beyond rum into scotch (Dewar's) and gin (Bombay Sapphire). There have long been market rumours of an interest in Absolut, the Swedish state-controlled brand, which is produced under licence in Cognac. Bacardi bought Grey Goose, it said, because it did not come encumbered with other weaker spirits brands. The plan is to roll out the brand beyond the US, although super-premium vodkas have only a small market elsewhere. Market rumours suggest that Diageo showed interest in Grey Goose just before the deal was concluded. Diageo owns Smirnoff, the world's best-selling vodka, and directly competes with Grey Goose via its Croc super-premium line. Grey Goose will boost Bacardi in two ways. First it will bolster the company's performance. The privately owned group suffered a 21% drop in net profits in its latest fiscal year, due largely to stock reductions and restructuring charges. Cashflow from operations rose by 18%. Grey Goose is currently distributed in the UK by Cellar Trends.