After 90 years in the hands of the Swedish sate, Absolut vodka is about to be offered up for sale with its parent company V&S Vin & Sprit AB.
updated 3/5/2007 7:17:15 PM ET 2007-03-06T00:17:15

Thanks in part to its renowned advertising campaign, a vodka distilled in the southern Swedish town of Ahus has become the world's No. 3 premium spirit and one of the country's most recognizable brands.

So would the owner — the Swedish government — consider selling the crown jewel of Scandinavian liquor to a foreign buyer?


After 90 years in state hands, Absolut vodka is about to be offered up for sale with its parent company V&S Vin & Sprit AB, along with five other companies in which the state holds significant stakes. The government is to seek parliamentary approval for the V&S sale on Friday.

With an estimated price tag of $5.7 billion, potential buyers include market leader Diageo PLC, Pernod Ricard SA and Fortune Brands, which already has a distribution deal with V&S.

"It's the best price that counts," Swedish Financial Markets Minister Mats Odell told The Associated Press.

The state sellout of banking group Nordea AB, telecom TeliaSonera AB, Nordic bourse operator OMX AB, real estate company Vasakronan AB and mortgage lender SBAB to help pay off the country's debt represents the biggest ideological shift since the center-right coalition government ousted the long-ruling Social Democrats in October.

The sale of V&S is especially sensitive, since the company founded in 1917 has been closely linked with the state's efforts to control alcohol consumption in Sweden. The government has held a monopoly on retail sales of alcohol since the 1850s and Sweden was able to preserve that even after joining the European Union, citing reasons of public health.

"We don't think that the state should run businesses on a competitive market," Odell said. "The state shouldn't make, sell or distribute vodka."

Critics say rushing to find buyers for V&S could leave the liquor maker in the hands of a profit-hungry company with no sense of social responsibility.

"Odell must show that another owner would be more restrictive, but I think it will be the opposite where a new owner will be more aggressive," said Thomas Ostros, industry minister in the previous Social Democratic government. "The state, as an owner, has developed one of the most successful brands that Sweden has. That's nothing to be ashamed about."

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Selling V&S, however, might help dilute allegations about double standards in Sweden's nanny-state attitude on drinking. The Social Democrats were often criticized for promoting a restrictive alcohol policy at home, including bans on alcohol advertising in domestic media, while supporting multimillion dollar campaigns to market Absolut internationally since 1979.

Artists and designers such as Andy Warhol, Jean-Paul Gaultier and Gianni Versace have lent their talent to the bottle-focused ads that have appeared on billboards and magazines worldwide. Rock star Lenny Kravitz wrote a song specifically for an Absolut campaign.

With its range of flavors from peach to blackcurrant, Absolut is established as a luxury vodka _ a long journey from the first drops distilled from water and winter-wheat by Swedish entrepreneur Lars Olsson Smith in 1879.

V&S' product range includes other brands, such as Cruzan rum, Plymouth gin, a handful of Scandinavian aquavits and bitters and hundreds of wines. Absolut is believed to represent roughly half of the company's sales — $1.48 billion in 2006.

The biggest single market is the U.S., where Absolut is the top imported vodka. It's also growing quickly Brazil, Canada, Britain and Germany.

V&S Chief Executive Bengt Baron said a fair price for the company would be $5 billion to $6.4 billion. He declined to speculate on potential buyers.

"We want a long-term owner that shares our view of the future, which we are very optimistic about," Baron said.

Pierre Pringuet, chief executive of Pernod Ricard, has made no secret of his interest in V&S. But analysts say Fortune Brands is the prime candidate because of its distribution deal. V&S also holds a 10 percent stake in Jim Beam, the bourbon brand owned by Fortune Brands.

Absolut would also be an attractive addition to the company because "vodka, rum and gin categories are relatively weak for Fortune Brands," JP Morgan said in a research note.

Fortune Brands spokesman Clarkson Hine declined to comment on the V&S sale, but said the company was "extremely proud" of its partnership with V&S.

"We work very well together, our distribution joint ventures benefit both partners, and our close relationship has helped further build our respective brands," he wrote in an e-mail.

In any case, the new owner of V&S is likely to be an international liquor giant.

That did not concern bartender Daniel Lundberg, as he mixed a drink with Absolut's new pear flavor in a Stockholm hotel. Lundberg, 22, predicted a new owner would safeguard Absolut's Swedish identity.

"I don't think the brand will change just because it changes hands," he said. "It will still say 'Country of Sweden' on the bottle."

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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