[SPEAKER_00]: Well, you may have heard online, but four roses to still erase changing hands.
[SPEAKER_00]: Karen is selling the brand to Ernest and Gallo, and is one of the most significant bourbon ownership changes in years.
[SPEAKER_00]: And if you want to hear about it, then stick around.
[SPEAKER_00]: Get into the summary of this deal, what we know.
[SPEAKER_00]: Now, I'll keep in mind all this was information that was sourced online, and I'll try to cite my sources as I go so that you can check in on me.
[SPEAKER_00]: But Kieran, the Japanese beverage company is selling the four roses, bourbon brand, to E&J Gallo-Whiteery.
[SPEAKER_00]: And that's according to Reuters.
[SPEAKER_00]: Reported purchase price was approximately $775 million.
[SPEAKER_00]: And that does include an urn-out component that's tied to performance.
[SPEAKER_00]: So what a lot of people don't realize is that often when there's a transfer of ownership of this size, there's an upfront cash portion that goes to the seller.
[SPEAKER_00]: And then there's another portion that they do not get unless the brand continues to hit certain performance objectives.
[SPEAKER_00]: after the transfer of ownership.
[SPEAKER_00]: So the total of those two numbers was reportedly 775 million.
[SPEAKER_00]: The transaction is expected to close in 2026, but it does require regulatory approvals.
[SPEAKER_00]: That's also according to Reuters, but I don't think that's going to be an issue.
[SPEAKER_00]: But in terms of production, we don't expect production to leave Kentucky.
[SPEAKER_00]: It would be a catastrophic failure in idiotic for...
[SPEAKER_00]: the purchaser of that brand to remove them from Kentucky because a lot of the brand's value is rooted in its deep history at Kentucky given that they've operated there since the 1800s and even had one of the medicinal permits to operate through Prohibition.
[SPEAKER_00]: So pretty amazing historic brand.
[SPEAKER_00]: They've announced really no plans to change company operations or anything like that.
[SPEAKER_00]: So, for roses, as a company, according to public sources, generates roughly $70 million in adjusted annual earnings per year.
[SPEAKER_00]: So, if you're trying to do the math and all of that stuff, by the way, that number came from Financial Times via Yahoo Finance,
[SPEAKER_00]: That's going to be what they're basing the value of the company off of.
[SPEAKER_00]: And so the $775 million price tag implies a valuation multiple somewhere around 10 to 11 times earnings, which is actually a pretty healthy multiple considering the headwinds that the bourbon industry is facing.
[SPEAKER_00]: And, of course, we don't know what the final sales price is going to be because the performance objectives that have been put into the earnout.
[SPEAKER_00]: So, early reports suggested that Kurin initially targeted a valuation closer to $1 billion, but the final price reflects the current market conditions, right?
[SPEAKER_00]: Because,
[SPEAKER_00]: they might have gotten a billion dollars or more if they had sold, say, four years ago, right?
[SPEAKER_00]: But in the current market, there's, there's not as much appetite for risk in the, in the urban industry because of the headwinds.
[SPEAKER_00]: So then the question is, well, if it's profitable, why is curing selling?
[SPEAKER_00]: And,
[SPEAKER_00]: That was something that I had to get research because it didn't make any sense to me why they would sell a successful brand They had such a large international presence.
[SPEAKER_00]: So if you don't know Four roses was As I said they operated through prohibition so when prohibition ended they were the most popular bourbon brand in the United States
[SPEAKER_00]: But they were purchased by a Canadian bootlegger named Samuel Bompfman post-prohibition and he was a little bit jealous of it being the number one selling whiskey in the U.S. and he wanted his Canadian whiskey to be number one.
[SPEAKER_00]: So he just stopped selling his bourbon brand here, which forced it to grow internationally.
[SPEAKER_00]: So for roses has a really strong international presence.
[SPEAKER_00]: So it was a little bit surprising to me that international
[SPEAKER_00]: conglomerate like Kirin would decide to liquidate a profitable asset.
[SPEAKER_00]: But they have been reshaping their global portfolio towards higher growth, beverage and pharmaceutical segments, according to Kirin's investor disclosures.
[SPEAKER_00]: I guess when they saw the headwinds maybe they have opportunity to invest in maybe a pharmaceutical area or something that they believe is going to have higher growth.
[SPEAKER_00]: And since premium whisky growth is slowed and it's reducing your term upside maybe they just thought, hey we've got other things we could put this money into that would be more profitable for our investors.
[SPEAKER_00]: But even though there have been some headwinds, a 10 to 11x multiplier on earnings is a pretty high evaluation, looking at historical transactions like this.
[SPEAKER_00]: So even though demand has been cooling, they were still able to attract a pretty healthy price for the asset.
[SPEAKER_00]: and four roses does require long aging cycles and significant inventory carrying costs that don't really align with current capital priorities because they're trying to turn their capital a little bit faster according to their public disclosures.
[SPEAKER_00]: And so when you take into consideration that the valuation is still high, they have other areas that they can invest in that they believe are more profitable.
[SPEAKER_00]: And it's not really an alignment with their capital strategy.
[SPEAKER_00]: It makes sense that they would want to sell it.
[SPEAKER_00]: So then we have to ask why did ENJ Gallo buy it?
[SPEAKER_00]: Well, Gallo has been expanding aggressively beyond wine and spirits and ready to drink cocktails.
[SPEAKER_00]: And you can just look at Gallow's acquisition history and see that they're trying to diversify their portfolio outside of lines.
[SPEAKER_00]: And for Rose, this provides a global recognized premium bourbon brand with deep stocks of aged product that will be able to support them for years to come.
[SPEAKER_00]: Gallo is a privately held company, so their ownership supports the longer-term capital patience that's required in the bourbon industry and that's something that's pretty significant because when you think about what drives a publicly traded company, it's actually in opposition to what makes really good bourbon because publicly traded companies are judged every quarter
[SPEAKER_00]: But you can't judge a bourbon's success every quarter.
[SPEAKER_00]: You've got to be looking out six, eight, ten years.
[SPEAKER_00]: And Gallo has private ownership that has more patients for those long-term investments.
[SPEAKER_00]: And so they're actually a more suitable capital partner for a brand-like, like four roses, uh, than current is.
[SPEAKER_00]: Another thing is that the brand's existing distribution reduces execution risk, because they have a very developed distribution network that's international.
[SPEAKER_00]: And the alternative for company like E&J would be to try to build something like that.
[SPEAKER_00]: And compared to building a bourbon brand from scratch in this market, it's probably much more attractive to buy somebody who already has those things set up.
[SPEAKER_00]: And that would also be a motivator.
[SPEAKER_01]: You know how those companies have their own logo on a glass?
[SPEAKER_01]: Wouldn't that be cool if there was a website where you could go and put your own logo on your whiskey glass that you drink like at home?
[SPEAKER_00]: Yeah, but I would want a variety of glasses.
[SPEAKER_00]: So small drinking glasses, some large or neat glass, maybe like a rocks glass.
[SPEAKER_00]: And what about a tumbler?
[SPEAKER_00]: Like the Yeti tumbler?
[SPEAKER_00]: Yeah, that'd be dude.
[SPEAKER_00]: Like you can't get your logo on that, that'd be awesome.
[SPEAKER_01]: Yeah, like imagine like even like plastic glasses imagine you're like at the pool, right?
[SPEAKER_01]: And you've got like your own whiskey club or your own name or something like on your little plastic glass you're drinking out of at the pool.
[SPEAKER_00]: that would be awesome and like you know how sometimes when you're in a bottle sharing you've got to clean your glass out because you're going to take a real small pouring you know like a like a like if you get like a custom like lit free rag that'd be really good with your logo like right on it yeah and and not just that dude what if you know how you always get in samples yeah yeah so like you have your box it's like just a blank wooden box but what if on top of there you had like
[SPEAKER_01]: your own brand or something or yeah your logo on there logo that's like you know west's whiskey collection right or something you could even use that for charities too because like you could do like a sample box that you didn't like a charity raffle but you could custom match it that'd be cool what if this same website like all those things were there but you could also use it for the holidays coming up like oh yeah like like admin counterbox
[SPEAKER_01]: You can do that and I could get your like some of the special for you on it and give it to you as a gift.
[SPEAKER_00]: Yeah, as a gift for Christmas.
[SPEAKER_00]: That's really cool.
[SPEAKER_00]: There was a website.
[SPEAKER_00]: What if there was a website that had all of those things?
[SPEAKER_00]: And what if the company that did it could set up a custom website for you to pick any of those things?
[SPEAKER_01]: Oh, dude, that's like, what if there was a place like this?
[SPEAKER_00]: The likely impact on four rows of short-term is going to be minimal.
[SPEAKER_00]: I don't think we're going to see any operational changes.
[SPEAKER_00]: The limited edition releases are likely to continue and change.
[SPEAKER_00]: There will be a rest of P-Transparency as there always has been.
[SPEAKER_00]: The brand identity should be preserved.
[SPEAKER_00]: But the one thing that I am hoping for.
[SPEAKER_00]: and I didn't see anything like this and any of the reporting online.
[SPEAKER_00]: But one of the times that I was spending time with a master distiller of four roses and a private conversation, I asked him, what would be his dream to accomplish before he left for roses as a master distiller?
[SPEAKER_00]: And he said that he wants to bring back a ride with ski.
[SPEAKER_00]: And if you know anything about four roses, they don't have one right now, but they used to make ride with ski way back in the day.
[SPEAKER_00]: and he would like to bring back a rye whiskey.
[SPEAKER_00]: And unfortunately for the reasons I already mentioned, a company like Kieran was not willing to risk capital in that kind of a specialty project that may or may not work out in six, seven, eight years.
[SPEAKER_00]: But I'm hopeful.
[SPEAKER_00]: that ENJ does have the capital patience to fund that type of a project and I pray, pray, pray, that Brent gets his dream and that he gets to start distilling.
[SPEAKER_00]: So, Rywhiske to release before he leaves for roses.
[SPEAKER_00]: So, that might be a positive outcome.
[SPEAKER_00]: Another thing to consider is that ENJ is an American company.
[SPEAKER_00]: And it's not so surprising that for Russes being an iconic American brand, there were a lot of Americans consumers that didn't like the idea of a Japanese company owning an iconic American whiskey brand.
[SPEAKER_00]: And so I, for one, am grateful to have its ownership back in the hands of a US company.
[SPEAKER_00]: I think in the long run, Kieran did a great job, they allowed the distillery to reintroduce bourbon into the United States, because it had been shut down since the 1960s of selling here.
[SPEAKER_00]: And so there were some good things that came out of it, but I'm ready for the next chapter and I hope ENJ will make that be possible.
[SPEAKER_00]: So there's going to be a stronger US focus, probably, going forward with an American company owning it, with only selective international growth.
[SPEAKER_00]: volume growth constrained by industry realities means that they're going to have to capitalize wherever they can.
[SPEAKER_00]: And I think that there is a room to run here in the United States because they were once at the top of the mountain when it came to sales volume in the U.S.
[SPEAKER_00]: And they're only the fraction of the size is some of the major producers in Kentucky, so there's a lot of room to run here.
[SPEAKER_00]: And I think we're going to see that everything kind of goes on is it has been, but I hope that we're going to see some more experimental things.
[SPEAKER_00]: And that Brent's going to be given some a little bit more leash for him to run around and do some amazing things, because he's a brilliant chemist and I love his product and I think he could do great things.
[SPEAKER_00]: So as an industry overall, we're going to see more consolidation, you know, we're going to see more shutdowns, we're going to see asset buy out.
[SPEAKER_00]: We're going to see strong branch shift from conglomerate focus operators.
[SPEAKER_00]: and we're going to see speculative valuations give way to discipline pricing because you're not going to be able to sell it for your barrel product for $100 like you could in the past.
[SPEAKER_00]: And so this is all just an alignment with facing the industry headwinds and becoming more in alignment was what we now know.
[SPEAKER_00]: immediate future is when it comes to consumer demand and expectation.
[SPEAKER_00]: So I think this is smart.
[SPEAKER_00]: I think this is the discipline transaction on both sides for both curing and for Gallo.
[SPEAKER_00]: And I think overall it's going to be good for consumer.
[SPEAKER_00]: So hopefully, enjoy this content.
[SPEAKER_00]: We always give away a little bit of whiskey and what else would we give away besides for roses.
[SPEAKER_00]: So obviously for roses has their flagship for roses product here.
[SPEAKER_00]: We're going to give some of that away Then we have a little bump-up in proof and Some of the say quality and they're a select version of that and then we get into the barrel proof single barrel versions
[SPEAKER_00]: and I have a couple of those that I helped participate in selecting and so we're going to give away five one-out sample packs that includes all four of these bottles, two single barrels, the small batch select and the small batch.
[SPEAKER_00]: All you have to do to enter the win is like this video, subscribe to the channel, ring the bell, and fill out the web form in the video description on YouTube next to the words giveaway.
[SPEAKER_00]: It's going to get your basic contact information.
[SPEAKER_00]: We're going to run a randomizer, reach out to the winners, and send you your samples.
[SPEAKER_00]: And, you know, it's just a beautiful thing.
[SPEAKER_00]: Whiskey is about community and given back.
[SPEAKER_00]: So we're gonna give back to you.
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[SPEAKER_00]: The first way is Patreon.
[SPEAKER_00]: And everyone's names, you see on the screen right now.
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[SPEAKER_00]: But don't distress if that's not gonna fit into your budget or you're not willing to get that level commitment to begin with, we have Patreon levels
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[SPEAKER_00]: But a picture is an actually thing.
[SPEAKER_00]: We do have merch at birveneriltalk.com.
[SPEAKER_00]: It's whiskey merchandise made by whiskey people.
[SPEAKER_00]: Much of it is customizable because we have lasers.
[SPEAKER_00]: So, not only could you get some awesome urban real-time merch, but if you have a logo that means something special to you, you can have it put on our merchandise, and we'll go one further, if you run an organization that has members that might want to buy merch with your organizations logo on it, we will set up a custom website for your organization, we call it a pop-up site.
[SPEAKER_00]: and your members will be able to go and buy our merchandise with your logo on it and we direct shit to them.
[SPEAKER_00]: We've got a great revenue share program for that.
[SPEAKER_00]: So if you have any questions about that, we'd love to hear from you.
[SPEAKER_00]: And then of course the main way I support myself is through real estate because I'm a real estate agent in Dallas and the Houston metro areas.
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[SPEAKER_00]: If this year first time tuning in, we'd love to tell you why we do it.
[SPEAKER_00]: We do, yes, we love whiskey, but we love people and community more.
[SPEAKER_00]: And that's the purpose of whiskey in our view.
[SPEAKER_00]: We create this content because we want to help you to get connected to this hobby, so it'll get you connected to others.
[SPEAKER_00]: And that became a personal mission of mine when I lost my brother
[SPEAKER_00]: And so we ended up, you know, doing this because my brother, you know, he was missing some of those connections that I think we could form if we interact with one another.
[SPEAKER_00]: So we have the channel, but we ended up needing a form for people to meet each other and so we created a bourbon real-top community, which is a free Facebook based whiskey enthusiasts community that doesn't allow any troll behavior and everything's positive and they are vibes are good.
[SPEAKER_00]: So good.
[SPEAKER_00]: In fact, we started lipstick project.org.
[SPEAKER_00]: which is a suicide prevention and intervention nonprofit and it's all administered side of the whisking enthusiast community.
[SPEAKER_00]: And if you're involved in suicide prevention in any way with 501c3 or you know someone who is that needs financial support, you can go to www.loofstayproject.org and fill out our online web form to request a grant for your organization because we do have funds to put towards where they cause this.
[SPEAKER_00]: but throughout the journey we also learned valuable lesson from some of the negativity that we saw and that is if somebody can show hate to stranger online there's nothing that keeps us from showing love to stranger online and that's why we end every episode the same way and that's this if you woke up this morning and you're unsure whether or not anyone loved you just know that I love you and I'll see you next time.
[SPEAKER_00]: I'll be real talk.
[SPEAKER_00]: Cheers.