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Empire Strikes Back, Extending Partnership With Moët Hennessy USA In New York

July 26, 2016

Moët Hennessy USA has extended its alliance with Empire Merchants via a long-term contract for the New York market, giving Empire a boost six months after the distributor was dealt a severe blow with the loss of the Bacardi business.

The renewal comes nearly one year after Diageo renewed its own partnership with Empire, which remains New York’s leading spirits and wine distributor—although the newly-formed Southern Glazer’s is gradually closing the gap.

Diageo and Moët Hennessy USA generally work with the same distributor in most states, although there are exceptions—such as Illinois, where Diageo is aligned with Breakthru Beverage and Moët Hennessy USA is with Southern Glazer’s.

Earlier this year, Empire lost a significant part of its business when Bacardi named Southern Glazer’s as its exclusive distributor across the U.S. market (with the exception of the few states where the distributor doesn’t operate). While Bacardi’s biggest brands—including flagship Bacardi rum and Grey Goose vodka—have struggled in recent years, they remain some of the U.S. spirits market’s biggest cash generators.

It was a tough way to start 2016 for Empire, which was newly on its own after nearly a decade as part of Charmer Sunbelt Group. Charmer Sunbelt Group and Wirtz Beverage Group said in October 2015 that they would join forces to create Breakthru Beverage Group. At the time, many in the industry were surprised that Empire wasn’t included in the Breakthru deal, especially given the consolidation trend that has increasingly created massive regional players in the middle tier.

Empire remains a force in New York, with projected revenue of nearly $2 billion in 2016. Still, Southern Glazer’s is a strong second banana, at around $1.5 billion in the Empire State, and the addition of the Bacardi range has narrowed Empire’s advantage.

Southern Glazer’s (which officially began operations in recent weeks) is Moët Hennessy USA’s biggest distributor partner by far, handling well more than 50% of the supplier’s business in the market. Still, Moët Hennessy North America president and CEO Jim Clerkin told Shanken News Daily earlier this year that he doesn’t expect to follow Bacardi’s play of linking with one distributor across the U.S. “It’s unlikely that we’d want to be 100% dedicated, everywhere in the U.S.,” he said. “The most important thing for Moët Hennessy isn’t necessarily the distribution network. It’s about how we create desirability for our brands, regardless of which wholesaler we choose.”

Moët Hennessy USA’s portfolio—which is particularly desirable to distributors because of its high-end positioning—is currently thriving. On the spirits side, Hennessy Cognac was up by 18% in 2015, according to Impact Databank, and advanced by more than 30% in control states in the first half of 2016, according to NABCA. Meanwhile, the marketer’s Veuve Clicquot and Moët Chandon brands—which collectively dominate the U.S. Champagne market—enjoyed a 6.5% aggregate advance last year. Parent company LVMH reported earlier today that its spirits and wine business grew by 7% on a reported basis—and 9% organically—in the first half of the year, with its success in the U.S. driving progress.

Along with its new Empire pact, Moët Hennessy USA has also renewed with Breakthru Beverage Group in five other markets: Arizona (where Breakthru recently bought out former jv partner Glazer’s), Colorado, Delaware, Maryland and Washington D.C.  —Peter Zwiebach

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