Updating your portfolio: build, buy or partner?

Our client was a market leader in gin, but it had a gap in its portfolio: it didn’t have a brand to meet the growing demand for exotically flavoured craft gins.

It needed to innovate, and that presented a strategic choice: should it build, buy or partner?

Having explored its options, the company decided to purchase a small, premium brand who made their gin from potatoes. Several factors shaped the firm’s decision.

Hitting the jackpot

Firstly, uncertainty. It is quite easy to launch a spirit brand. The barriers to entry are low. But it’s difficult to create something that actually takes off. Just a handful of the UK’s hundreds of high-end gins manage to sell significant volumes.

It takes around five years to build a brand to the level our client needed. The company would need to place bets on a number of new gin products in the hope of eventually hitting the jackpot. Conversely, buying a more established brand would both eliminate uncertainty and save time.

Secondly, a small brand like the one acquired has a significant competitive advantage: as a family business distilling a field-to-bottle liquor, it has a compelling backstory that a large multinational cannot match. 

And the deal was mutually beneficial. Beyond a certain point, small brands cannot afford the significant outlays needed to achieve scale. Our client, by contrast, could call on its large sales team and relationships with distributors to quickly raise the profile of its newly acquired brand.

Partnership vs acquisition

For all of these reasons, our client operates a division whose role is to scout the market for similar opportunities. Once the right partner is identified, the question arises of how best to execute the deal.

In the case of the gin company, the best way forward was a full acquisition. In other cases the value of the partnership may be split, with the ownership shares reflecting the bargaining power of each party and how risks are allocated in the contract.


You can find more details on our innovation framework in this article.