Fortune Brands Becomes Beam Inc., Sticks To Liquor

The world's top bourbon producer is tracing its roots to 1795, when Jacob Beam first put his bourbon in a barrel in Kentucky.

LOUISVILLE, Kentucky (AP) -- The world's top bourbon producer planned to uncork a new era Tuesday as a standalone liquor company bearing the time-tested name of its top-selling brand, Jim Beam.

Fortune Brands Inc., the world's fourth-largest premium spirits company, will change its name to Beam Inc. Its flagship Jim Beam brand traces its roots to 1795, when Jacob Beam first put his bourbon in a barrel in Kentucky.

"It was a very easy decision for us to make to call the company Beam," president and CEO Matthew Shattock said in a phone interview Monday. "It's our biggest brand. It's the name by which we are best known."

Fortune Brands split into three companies, keeping its renamed liquor business while shedding golf and home and security units. It sold Acushnet Co., maker of Titleist golf balls and FootJoy golf shoes, to Korean investors for $1.2 billion. The company spun off its home and security business, which includes Moen faucets and MasterBrand cabinets, to shareholders.

Fortune used the influx of cash from the golf sale to reduce debt and strengthen Beam's balance sheet.

Analyst Tim Ramey of D.A. Davidson & Co. sees the separation of such a divergent company as a smart move.

"The businesses are just so different and really attract different types of investors," he said. "It was just too much apples and oranges."

The company's roots run deep in Kentucky, where more than 850 people work for Beam. Bourbon accounts for about a third of the company's overall sales, and every drop of bourbon is made in Kentucky. Jim Beam is the world's top-selling bourbon.

"Kentucky is absolutely the heart of our business," Shattock said.

The split will result in a liquor company that's more nimble and focused, said Shattock, who led Beam Global Spirits & Wine when it was the spirits subsidiary of Fortune Brands.

"As a standalone business, we will be able to make decisions based upon allocating capital within the portfolio of spirits rather than across the portfolio of Fortune Brands as a whole," he said.

The new spirits-only company will be headquartered in Deerfield, Illinois, where Fortune was based, and inherits a brand lineup that has grown rapidly. Fortune Brands added 11 of its top 14 brands in the past six years.

The company, with a total workforce of 3,200, also has boosted spending on marketing, a trend that will continue, Shattock said.

"Our first priority and opportunity is to grow our existing portfolio of brands in markets around the world," he said.

The company will tap acquisition opportunities when "they make sense for our business," Shattock said.

"We do start life as an independent company with a strong balance sheet and a strong capital structure, which gives us the opportunity to look at high-return acquisitions," he said.

The spirits business generated 2010 revenue of $2.7 billion and also includes brands such as Sauza tequila, Maker's Mark bourbon, Canadian Club whiskey, Courvoisier cognac and Effen vodka.

The company will also stress new products spun off core brands, tapping into an industrywide trend toward flavored spirits.

Last year, Maker's Mark introduced its first new product -- Maker's 46 -- a close cousin of the original but with a different aging method in the final weeks. Jim Beam recently rolled out a new high-end product called JimBeam Devil's Cut, featuring liquid whiskey extracted from the aging-barrel wood itself that is blended with six-year-old Jim Beam bourbon. Effen vodka recently launched a cucumber product.

Beam's launch comes at a time when U.S. liquor sales at bars and restaurants -- known in the industry as on-premise -- are rebounding, Shattock said. That key segment took a nosedive during the recession as fewer people ventured out to drink.

"The absolute level of sales are not there, but we are encouraged by some of the signs we have seen over the past six months," he said.

The U.S. accounts for about half of Beam's overall business. The company sees growth prospects in emerging markets in India, Southeast Asia, Latin America and Eastern Europe, but the domestic market will remain its key territory.

"The U.S. is the biggest and most profitable spirits market in the world, and it will contribute the most growth incrementally in sales and profit in the years ahead," Shattock said.

More in Supply Chain