When news broke on Aug. 17 that spirits giant Diageo had acquired a company called Davos Brands, the focus was on Aviation gin, the jewel of the Davos portfolio, which is backed by actor Ryan Reynolds. But sharp-witted whisky lovers may also have remembered that Davos has a partnership with Texas’ Balcones Distilling—and wondered what would happen to it.
The good news is that, for now, Balcones’ prospects seem secure, as Davos has no ownership stake in Balcones itself. “The agreement that we have with Davos, which kicked off on Jan. 1, is simply a sales support agreement,” Balcones chairman Greg Allen tells Whisky Advocate. “We did not sell them any equity, and therefore, when Diageo purchased them, Diageo didn’t purchase any equity. So the post-Davos-Diageo deal, from our point of view, is really no different than [before], because Diageo and Davos have told us that Davos is going to operate independently from Diageo.” But Allen believes the deal could have consequences—positive ones, in fact—for Balcones down the road.
Plowing forward with expansion
Balcones announced its partnership with Davos in November 2019, noting plans to expand its distribution to all 50 states in 2020. The distillery had just ended allocation of its whiskeys for the first time in five years, following the 2016 opening of a new $33 million distillery with an annual capacity of about 2.9 million bottles. “When we opened the new distillery, we were able to more than double our distilling, but we haven’t had access to aged product in those quantities until recently,” Allen explains. “We brought Davos on to help with the national expansion in specific markets.”
Thus far, Allen is happy with how things are going. “We had a textbook start with them—got everything going immediately, worked on a grand plan together—and then, like the rest of the world, things changed dramatically in mid-March” due to COVID-19. Despite the headwinds, national expansion remains in sight. “We’re in 36 states right now, and plan to open up four additional states between now and the end of the year,” Allen adds. “While [the pandemic] delayed us a little bit, we’re not really off-track for [achieving] distribution across the country.” Balcones’ sales are well up too, according to Allen.
Given the growth—and since the acquisition “doesn’t have any near-term impact” on Balcones’ relationship with Davos—the plan is to plow forward with expansion. “From our point of view, it’s business as usual,” Allen says, noting that “potentially, some additional opportunities could bubble up from” the presence of Diageo. “Davos—and therefore, indirectly, Balcones—has access to opportunities and relationships that Diageo may be able to help us with. Nobody’s made any promises, but I wouldn’t be surprised if additional good things come from the bridge that we now have through Davos.” Diageo, for its part, has stated that the agreement with Davos is subject to review.
Balcones has long been the object of speculation about potentially being acquired, but Allen won’t confirm whether the company itself is open to this possibility, saying only that it isn’t currently in any talks. “We’re just trying to keep our head down and build the business,” he says. “But as far as this particular deal [with Davos and Diageo], it’s all good.”