07 - Growth Story - Dugas
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The spirit of growth

Equistone identified Dugas as a premium high-growth business with some classic value creation opportunities. With the right blend of skills and support, the team can taste success, writes Stuart Rock.

IT TAKES TIME and skill to craft a premium rum or whisky. Quality base ingredients must be distilled and then aged with care and expertise. Only after several years will those efforts be rewarded and the quality recognised. The same principles could be said to apply to creating value in a private equity investment.

When in 2017 Equistone acquired a majority stake in Dugas, a leading French wholesale distributor of premium spirits, the deal had excellent ingredients.

Operating in the premium spirits markets, with more than a 50% share in the premium rum segment, Dugas was in a very attractive space. “It is not often that you see double-digit growth in a market that is solely focused on France,” says Equistone’s Julie Lorin.

Dugas was more than a distributor; it was a brand partner, sourcing its products directly from distilleries around the world and supporting them with brand, placement and distribution services. And the company had a nose for undiscovered gems and knew how to make them grow. For instance, the Venezuelan Diplomático rum was unknown to France; today it is the brand’s biggest market, introducing malts to France such as Macallan and Ardbeg. It also had exclusive distribution agreements in place and national reach through a diversified, multi-channel network of customers, including thousands of wine merchants, wholesalers and retailers.

The Equistone team was familiar with the market from its successful investment in spirits bottling manufacturer Allied Glass and were confident about the strong underlying growth trends. But there were also distinct challenges.

It is not often that you see double-digit growth in a market that is solely focused on France.
Julie Lorin, Equistone Partner
Founder and Chairman, François-Xavier Dugas.

Passing the leadership baton

Dugas had been the creation of the entrepreneur François-Xavier Dugas. A real pioneer and innovator in the French drinks industry, he had started the business in 1980, sold it in 2003 and had been very active in the business since buying it back in 2013.

In 2017, Dugas had revenues of €57m and €10m EBITDA. The business had grown fast since François-Xavier Dugas had regained control, but the pace of growth was outstripping its systems and management capacity.

“The decisive factor was that François-Xavier was willing to appoint a successor,” says Equistone’s Stanislas Gaillard. “He was the cornerstone of all decision-making in the company, but he had recognised that the measures required to continue his company’s growth required someone to work alongside him.”

President of Dugas, Tom van Lambaart.

The Equistone team believed the right candidate must be someone whom the founder would positively choose to be the successor. It is very important for the incoming CEO to be respectful of what has been achieved to date.

In September 2020, Tom van Lambaart was appointed Deputy Managing Director and has since stepped up to be President – with François-Xavier Dugas becoming chairman of the supervisory board.

A seasoned drinks industry executive, van Lambaart had previously been managing director in France for Bacardi, the world’s largest privately held, family-owned spirits company, and chief operating officer at Grand Marnier. “His experience of working in a family-owned group was very helpful,” says Stanislas Gaillard. van Lambaart soon gained the confidence of the founder and the management team – “the chemistry has been very good,” adds Stanislas – and he has been “close to the action,” helping Dugas gain new distribution contracts from large drinks corporations.

Becoming a platform for growth

Value creation has focused on several key areas: helping the business develop into new markets and territories through acquisitions; improving operational systems as well as financial controls; creating a digital presence; and supporting the development of the Dugas brand as it expands its presence among retail chains.

Prior to Equistone’s involvement, Dugas had not made an acquisition. The first step was to purchase Rhums de Ced at the end of 2018. It was a modest first step, but an important one to get right. Rhums de Ced was operating in the same geography and markets, duplicating the Dugas model. After an eighteen-month transition period, Rhums de Ced was fully integrated. The process had been as smooth as its range of infused rums. Rhums de Ced also provided Dugas with something extra – its proprietary brand.

In early 2020, Dugas expanded its presence into Belgium having acquired another founder-led drinks distributor, La Maison du Rhum. In 2021, Dugas partnered with a local player to enable Dugas’ entry into Luxembourg.

This is a strong equity story, as Dugas is evolving from being a purely French distributor into a European leader.
CLOCKWISE: Equistone’s Julie Lorin, Stanislas Gaillard, Edouard Fillon and Valérian Fleury.

Today, it is investigating other acquisitions in Europe and the management are confident, because of their successful experiences to date. “This is a strong equity story,” says Julie, “as Dugas is evolving from being a purely French distributor into a European leader.” There is a wider lesson that she draws as an investor: “if the company has a strong position and management team, don’t hesitate to push for acquisitions.”

The company’s logistical and financial operations have also been improved. “These aspects are critical to value creation even if they do not create immediately quantifiable value alone,” says Stanislas.

“At the start, we did not fully expect the time it would take to help the management achieve the necessary structure to support its growth pace,” says Equistone’s Edouard Fillon, “but we have been successful.”

Another major area for investment has been digital. Although the premium spirits market has not been disrupted by digitalisation, Equistone and the Dugas management were keen to anticipate potential future change.

An online store for individual customers called dugasclubexpert.fr was launched in 2019, making all of Dugas’ products visible and available. The idea is to combine the convenience of e-commerce with the passion and expertise of the specialist retailers. “It has been important to make this a partnership,” says Stanislas. And, by building its digital presence, Dugas can become a gateway through which premium brands can directly access premium customers.

The results have been striking. In the past couple of years, sales and volumes have more than doubled, with EBITDA rising at a similar pace – a figure set to double in the medium term.

A positive chemistry between Equistone and the management has developed, says Stanislas. “We are seen as a partner, not just a board member with certain rights. The management team is very keen to hear our views and feedback about their initiatives; we encourage them to test new ideas. As a result, the company is performing strongly and successfully generating new projects.”

So this five-year-old investment is developing well. Skilfully blended, it’s showing great balance and depth of character and will clearly appeal to the premium buyer. Just like a fine rum, in fact.” 

A full version of this article appeared in PLATFORM 07, Summer 2022