My take on booze / finance / M&A is back after having been paused in the time warp that is the pandemic. If you are new to this, welcome. Or goodbye, if you want to unsubscribe. 
 

Two Collabs

I wrote in 2019 about collaborations in the wider consumer space (Nike x Off-White etc) and wondered when those might happen in spirits on the front-end (a lot of liquid is already traded on the back-end). We are seeing early examples of this albeit with 'platforms'. In the past quarter, two announcements have caught my eye: the MH-Campari e-commerce JV and the decision by both Pernod and ABI to throw in their lot with Keurig aka Drinksworks. The latter, in particular, has some interesting game theory and network externality implications. 
 

1. Tannico

Fat value chains and US three-tier provide inertia to the status-quo: routes-to-market via established distributors. The pandemic has upended some of this but will likely not create wholesale DTC revolution (health warning: 50% of previous predictions in this newsletter have been wrong by a margin of 100%). A way of creating optionality whilst playing into the operating leverage effects of both booze and e-comm is to partner as MH and Campari have done in Tannico. Ideally, a few others would join this JV to create a viable alternative to Amazon and its seemingly unassailable lead in all other categories of consumer products.  

2. Drinksworks

This was interesting from a game theory and network externality perspective. Pernod joined Drinksworks after ABI already made its move to the same platform. Consumers will only plump for one kitchen-top drinks machine - if they do at all - and the longer the remaining brands wait, the higher the theoretical price Drinksworks/Keurig can extract for joining. At the moment, the balance of power probably still remains with potential new brands that want to join, but wait long enough and that will change.

Machines designed to create domestic conviviality - to borrow a tag line - also offer network externalities as I can foresee parties with 'bring your own [pods]' beginning to be part of the at-home occasion (it works if everyone has the same pod 'OS'). Whether that will be a meaningful part remains to be seen. But as a drinks brand I would not want my platform options being path-dependent on a competitor's prior decisions.

Uber & Drizly

I am not sure when if ever Uber will consistently make money. So while the deal to buy Drizly sets many Futurists' hearts aflutter, it says a lot more about Uber than it does about Dirzly. Uber is moving into logistics as flying cars and worldwide domination didn't work so well; Drizly has a great asset-lite marketplace model but one with little or no moat. Good for Drizly's shareholders but Uber's should be wondering about the commerciality of its core ride business and M&A premium for innovation.

On a personal note, I am again heading on a summer UK road trip. Hopefully, inspiration for Vol. IX will strike  sooner as a result of lots of on-trade visits.

And, oh, before I forget. Casamigos hit 1m 9L in <4 years. I will be dining out on my role in this deal for a long long time to come. 

backbar out.