Campari, the Italian spirits group which last week was linked to an aborted takeover bid for parts of the Eckes spirits business, has instead formed a joint venture in Spain with sherry producer Gonzalez Byass.
The joint venture, which does not as yet have a name, will begin operations at the beginning of April 2003, and will be 70 per cent owned by the Spanish firm. Campari will hold the remaining 30 per cent.
The new company will be responsible for the marketing and distribution in Spain of all the brands owned by the two companies, and sales for the first year are expected to top 1.8 million cases - worth some €65 million.
Alan Cordery, Gonzalez Byass' general manager, said: "We are delighted to join forces with Campari in order to improve our strategic position medium-long term. We look forward to a productive and exciting relationship with Campari."
These sentiments were shared by Paolo Perego, Campari's regional director: "This represents an excellent opportunity to develop and enhance Campari's business within the strategic Spanish market."
Campari, whose main brands in Spain include Campari, CampariSoda, Skyy Vodka, the Cinzano vermouth range, Cinzano Bitter Soda and Cynar, has been actively expanding its business in the last few months, with several product launches in the ready-to-drink category in Italy, Switzerland and South Africa.
The company did not say whether these new products - Campari Mixx and Cinzano Five - would be launched in Spain, where the RTD sector is in its infancy, with a couple of products from Diageo (J&B Twist and Smirnoff Ice) leading the way. However, the Gonzalez Byass distribution network could be the ideal platform from which to launch these new brands in Spain, getting in at the early stages of that market segment's growth.
Campari's move in Spain also follows recent distribution agreements in Australia (with Foster's unit, CUB) and in the UK travel retail sector (with Morrison Bowmore).
The rationale behind the deal for Gonzalez Byass is perhaps less clear cut, since it will be using its existing marketing and distribution network in Spain and not as such extending its presence. It will, however, add Campari's strong brands to its own (which include Tío Pepe sherry and Soberano brandy, both market leaders in their segments, Rioja wine Beronia and Castell de Vilarnau cava), creating substantial economies of scale and increasing the bargaining power with wholesalers and retailers.
Deals of this sort are becoming increasingly common in the rapidly-consolidating alcoholic drinks sector, where medium-sized companies such as Campari or Gonzalez Byass can gain a great deal of leverage from joining forces while at the same time retaining their independence. In a world where the major players have increasing distribution and marketing budgets, their smaller rivals will increasingly have to co-operate with each other in order to compete on anything like a level playing field.