Byron Trott's Firm Orders a Double, Adds Whiskey to Tequila Bet

By Liz Hoffman 

The investment firm run by Byron D. Trott is buying a minority stake in WhistlePig, a distiller of high-end whiskeys, the latest sign of the spirit's grip on American's tastes and wallets.

BDT Capital Partners is making a bet that consumers will continue to pay up for craft cocktails. A bottle of WhistlePig's special edition Boss Hog V -- named for Mauve, one of two pigs that once lived on its Vermont farm -- sells for $550. Last year, BDT bought a controlling interest in Casa Dragones tequila, whose premium bottles can set shoppers back $280.

Overall alcohol consumption is falling, but when they do reach for a drink, Americans are increasingly shelling out for premium and small-batch spirits over everyday brands, much as craft beers have eaten into national brands' market share.

"Tastes have changed, and these brands have legs if you do it right," Mr. Trott said in an interview.

Diageo PLC bought George Clooney's Casamigos tequila brand for up to $1 billion in 2017, and has since sold dozens of lower-shelf brands, including cinnamon schnapps Goldshclager and Popov vodka, in a pivot toward premium liquor. The company's finance chief summed up the move: "People are not drinking more, they are drinking better."

Mr. Trott spent 27 years at Goldman Sachs Group Inc. founding his eponymous firm in 2009. At Goldman, he had earned the loyalty of Warren Buffett, advising on Berkshire Hathaway's biggest deals and helping to secure the billionaire's 2008 investment into Goldman.

BDT, which now has 175 employees, follows the old merchant-banking model marrying advice and investment, once practiced by firms such as Shearson and First Boston but mostly abandoned by today's megabanks. He courts family-owned and privately held companies, advising them on deals and raising money from their founders.

BDT is investing its second fund, a $6 billion pool raised in 2016, and raising a third that is expected to be larger. The firm has stakes in 14 companies, including fashion brand Tory Burch LLC and the coffee empire assembled through acquisitions by European firm JAB.

WhistlePig was founded in 2008 by Wilco Faessen, then a Lehman Brothers banker to beverage companies, and Raj Bhakta, who had unsuccessfully run for Congress on the back of an appearance on the reality TV show "The Apprentice." After organizing a bid for a struggling Vermont vodka distillery, the pair found quality rye whiskey from Canada and blended, bottled and started selling in 2010.

"We heard from the snobs," Mr. Faessen said in an interview, "and ignored them." Today WhistlePig blends rye purchased elsewhere and distills its own crop, earning what Mr. Bhakta said was a grudging respect from "the good old boys in Kentucky."

BDT is buying out Mr. Bhakta, who left the firm in 2017 after a dispute with his co-founders about whether to sell the firm in its entirety. The company hired bankers to sound out investors the same year, but the process ended without a signed deal. Mr. Trott -- who, like his most famous client, Mr. Buffett, doesn't participate in auctions -- had watched from the sidelines and began speaking with the parties last year. Both he and Mr. Bhakta declined to discuss financial terms of the transaction.

WhistlePig CEO Jeff Kozak credited BDT's longer-term investing horizon. "Whiskey is not a business you can run by the quarter," he said.

Mr. Trott said he expects to add some WhistlePig to his Chicago office, which already stocks Kind granola bars and Dove chocolates, both BDT clients.

Write to Liz Hoffman at [e-mail]

(END) Dow Jones Newswires

January 17, 2019 11:07 ET (16:07 GMT)

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