Cognac Maker Martell Merges Its World Sales Arm With British Firm

PARIS — France’s oldest major Cognac producer, Martell, and British hotel and liquor company Grand Metropolitan announced a merger of their international beverage distribution networks Friday, just a month after Champagne house Moet-Hennessy and Guinness forged a similar link.

Under the agreement, Grand Metropolitan has also taken a 10% stake in Martell through share purchases on the stock market in recent weeks. Analysts estimated that the stake cost about $50 million.

But the Martell family, which founded the Cognac house in 1715, is retaining control of the company with 57% of the voting rights.

“This accord is the result of a policy aimed at reinforcing our international distribution network, a policy which has already led us to set up distribution companies in a number of countries, notably in Southeast Asia,” Martell President Rene Firino Martell said in a statement.

Martell finance director Jack Drounau said the accord would begin immediately worldwide with the exception of the United States and Britain, where short-term distribution contracts would be allowed to run their course.

The accord is between Martell and Grand Metropolitan’s spirits subsidiary International Distillers & Vintners, which apart from whiskey also markets brands such as Gilbey’s Gin, Smirnoff Vodka and Bailey’s Irish Cream liquor.

Martell, which sells about 2 million cases of Cognac and Armagnac a year, has between 17% and 18% of the world Cognac market and 15% of the lucrative U.S. Cognac market.

Grand Metropolitan is much larger, with total group sales of about $4.1 billion in the six months ending in March and worldwide annual beverage sales of about 80 million cases.

“Martell have been looking for some time for an adequate partner,” said Marc Girault, investment analyst for the Paris brokerage firm Fauchier-Magnan Durant des Aulnois.

Girault said Grand Metropolitan would almost certainly seek to increase its holdings in Martell in the long term and could be viewed by the Martell family as “the potential white knight were there to be any unwelcome bids.”

The announcement marks a further move towards the diversification of the French beverage and luxury goods sector.