Jim Beam buy helps Japan's Suntory latch onto U.S. bourbon craze

Tue Mar 18, 2014 6:15pm EDT
 
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By Diane Bartz

WASHINGTON (Reuters) - If anyone should find it odd that a Japanese distillery was planning to merge with a U.S. bourbon brand steeped in the history of the American South, the answer could be found on a cocktail menu.

Suntory Pacific Ltd SUNTYA.UL won U.S. antitrust approval this month to buy Jim Beam, the No. 4 premium spirits company in the world, just as the liquor known as "America's whiskey" is enjoying a surge in U.S. interest -- and sales.

Prices for bourbon, a type of whiskey distilled from at least 51 percent corn, have risen faster than inflation in the United States for years. Analysts believe prices will increase from 3 percent to 10 percent annually over the next three to five years.

This is partially because bourbon, which by law must be produced in the United States, must be aged typically for two to nine years but sometimes for longer. That makes a sudden ramping up of production impossible even if demand rises.

Higher corn prices in recent years raised production costs, although the impact varied depending on how companies sourced their supplies. Jim Beam's website says its bourbon is made of "at least 51 percent" corn, mixed with yeast and smaller amounts of barley, malt and rye.

Beverage industry analysts said Suntory's $16 billion deal for Beam Inc. BEAM.N won't by itself make pricing worse.

COCKTAIL CRAZE

American consumers have lately regained interest in cocktails, translating to sales for spirits such as bourbon.   Continued...

 
Bottles of Suntory Holding's Yamazaki (R) and Hakushu (2nd R) whiskies are displayed with Beam Inc's Jim Beam (L) and Maker's Mark bourbon at the entrance of Suntory World Headquarters in Tokyo January 14, 2014. REUTERS/Issei Kato