Pernod Ricard, France’s largest spirits maker, is busy raiding America’s liquor cabinet.
In 2019, the purveyor of Absolut vodka and Jameson Irish whiskey has bought Jefferson’s Bourbon, Firestone & Robertson Distilling, and a majority share of Rabbit Hole Distillery, all bets on America’s whiskey boom. This comes on top of recent new vodka distillery openings in New York and Los Angeles and the purchase of a big stake in whiskey maker Smooth Ambler.
Pernod Ricard has spent over $500 million on acquisitions in the U.S. market alone the past few years. The liquor giant is making these investment stateside because the nation is the largest market for liquor sales. But Pernod’s foothold there is actually below its global market share.
“We look at U.S. whiskey as a priority,” says Guillaume Thomas, chief financial officer of Pernod Ricard’s U.S. business. “The category is huge in the U.S. We didn’t have a huge market share, but it is an attractive category.”
Deals thus far have focused on buzzy, crafty brands that aren’t that large yet but command higher prices. U.S. whiskey has been on a years-long winning streak, and most of Pernod’s largest rivals already had a major foothold. Diageo owns Bulleit, Campari has Wild Turkey, and Suntory bought Beam.
“They are looking to buy founder-led but high-end premium assets,” says Ed Mundy, Jefferies analyst. “I think it is a very sensible approach.”
Pernod Ricard’s dealmaking has been accelerated compared with most rivals, albeit amid a muddled backdrop. The company’s sales are rising globally, but demand has been merely stable in the U.S. There’s also pressure from activist investor Elliott Management, which got into the stock a year ago. Since then, Pernod has sought to lift margins, boost investments in the U.S. and China, and buy back about $1 billion in shares.
What’s interesting about Pernod Ricard’s recent streak of deals is that the company has 13 brands it considers “international strategic brands.” These brands, which include Absolut and Malibu rum, are ultimately the biggest sales drives for the business. But none are American-made whiskeys, a fairly large hole Pernod Ricard is addressing by buying Rabbit Hole and Firestone, which makes the TX premium brand.
There are few big bourbon brands that Pernod Ricard could even try to buy. Beam, owner of Maker’s Mark and Jim Beam, sold to Suntory in 2014 for $13.6 billion. Jack Daniel’s and Woodford Reserve maker Brown-Forman is family controlled, and the owners see little incentive to sell.
For now, bolt-on acquisitions will have to do. And that comes as volume for U.S. craft spirits climbed over 25% in 2018 from the prior year, capturing nearly 4% of the total market, according to data by the American Craft Spirits Association. Though craft’s share within liquor is underpenetrated compared with beer, it posts heady double-digit growth while craft beer has stagnated.
“Just investing in a bourbon in a market that has become so incredibly crowded isn’t enough,” says Jeff Agdern, senior vice president of new brand ventures at Pernod Ricard. He hopes that when Pernod buys a new brand, founders will stay on to help run the business.
West Virginia–based Smooth Ambler sold a majority stake to Pernod Ricard at the end of 2016 after talking to some venture capitalists about a deal, but quickly realizing that their goal would have been to ramp up case volume and flip the brand to a giant like Pernod. Smooth Ambler instead cut out the middleman.
“With Pernod, it felt secure. They felt like family,” says Smooth Ambler founder John Little, who still runs the business.
The biggest boost the brand has gotten since it made the deal has been becoming more important to distributors. Generally, when a distributor wants to move the sales needle quickly, it will do so with a large case order for Absolut or Jameson. Brands like Smooth Ambler never get that call on their own. But that can change with Pernod’s persuasion.
“Smooth Ambler needs to be financially significant to our distributors,” says Little.
Each brand Pernod buys has its own unique opportunities and challenges. TX, for example, generates over 90% of sales from the home market in Texas. It can capture more market share there, but Pernod could also angle to take it to more states and lean in on that Texas-made proposition. That’s a potential nod to star vodka brand Tito’s, which broadly boasts on the bottle that it is Austin-made.
But with over 2,000 craft distilleries in the U.S. today, standing out can be a challenge. Pernod Ricard says it fields 700 calls each year from all over the U.S. to talk to spirits entrepreneurs. Some brands are sold nationally, others in just one or two markets, and a few haven’t sold a case yet. Some leads even come from Pernod Ricard CEO Alex Ricard.
Future investments aren’t just limited to American whiskey. Tequila’s fast growth is appealing, as is Irish whiskey, where Jameson is the top dog, but there could be room for more upstarts. “We basically take calls with anyone who wants to present their brand to us,” says Agdern.
More must-read stories from Fortune:
—The Italian prison where inmates learn winemaking
—Michelob was really early to this whole marketing ‘beer as wellness’ trend
—Behind the scenes at the largest beer competition in the world
—This Los Angeles company wants to balance your chakras with cocktails
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.