Fortune Brands, Inc. (NYSE:FO) is a conglomerate with three major businesses - home hardware, distilled spirits, and sports equipment. Fortune's portfolio includes several widely recognized brands, including Moen faucets, Jim Beam bourbon, and Titleist golf equipment. The company earned $6.7 billion in revenue and $247 million in revenue in 2009.
Fortune is very vulnerable to the effects of a struggling global economy. The Home and Hardware business, the firm's largest, is particularly vulnerable to housing slowdowns, and has been hit significantly by last year's subprime crisis. The Spirits sector faces rising commodities costs, but global demand has trended towards the premium and super-premium drinks that Fortune produces (and away from cheaper spirits and beer), improving that sector's short term outlook. Golf, the firm's smallest segment, has benefited from the growing popularity of the game abroad despite heavy regulations by governing bodies (the USGA) which limited product innovation.
All three of Fortune Brands' units compete with large consumer products firms (for instance, Black & Decker (BDK) in Home and Hardware, Brown-Forman (BF) in Spirits, and Nike (NKE) in Golf. Fortune's brands are often #1 or #2 in their markets, and the company regularly supplements its portfolio with strategic acquisitions. The diversity of its holdings also protects it, to a degree, against downturns in any particular market - but all three of its core businesses depend on consumers' discretionary income to build revenues.
Fortune Brands is a holding company for its three businesses: Home and Security, Spirits, and Golf. Home and Security is the largest segment, accounting for 45% of revenue; Spirits is the second largest with 37%; and Golf, the smallest, accounted for 18%. The company has grown its two smaller businesses over the past few years to minimize dependence on home improvement and construction products - a few years ago, Home and Hardware comprised over 60% of sales.
Fortune Brands competes with large, multinational consumer goods companies in each of its three segments. In all three businesses, the firm relies on selective acquisitions for growth. The company prides itself on restraint in choosing acquisitions, passing up overvalued opportunities. For instance, the firm recently passed up the chance to acquire the Absolut Vodka brand, which ultimately went to competitor Pernod Ricard. The other key aspect of Fortune's strategy is a focus on brands that are #1 and #2 in their markets - such brands account for 90% of total annual revenues.
Fortune believes that its holding company structure is also a competitive strength. The diversification such a structure provides can be a hedge against weakness in any particular market segment, as displayed most recently by the strength of the spirits and golf equipment businesses during the housing downturn. At the same time, the weak relation between the three businesses may dilute the company's focus and expertise, which has led to calls for the firm to split into three separate companies.