When tentatively formed in 1999, Maxxium, was given an 18-month proviso on its life span, but last month's Absolut deal has propelled it into the big time. Now further partners and even a full merger are possibilities. Chris Brook-Carter interviews CEO Roland Van Bommel.

Left: Roland van Bommel, Chief Executive of Maxxium
Centre: Andreas Berggren, Absolut - Vice President Europe & Africa, Asia Pacific
Right: Rolf Cassergren, Chief Financial Officer, V&S

Go to the Maxxium website. Before the screen even finishes downloading, the first thing that flashes before your eyes in bold red lettering is "Maxxium To Distribute Absolut". The significance of the deal to the three original partners of this distribution company, Jim Beam Brands (JJB), Remy Cointreau and Highland Distillers cannot be overstated - and they want to make sure you know about it.

"We are now definitely one of the major players in the industry," says Maxxium CEO Roland Van Bommel. "And I see us developing into one of the top three companies in terms of distribution," he continues.

In fact the deal already places Maxxium at number three in terms of retail value, with annual sales around the $40bn mark. This is at about the same level as Pernod Ricard and just ahead of Allied Domecq. (Diageo leads the race with close to $100bn worth of sales). In addition Maxxium is the world's leading company for retail value per case at $190.

"We started the company in August 1999 by combining the distribution assets of Highland Distillers, JBB and Remy Cointreau. We expect to have a turnover of 1.5bn Euros in the fiscal year 2000-2001. And, our projection for next year is up to 1.8bn Euros, including Absolut and other Vin & Sprit (V&S) products," says Van Bommel.

Marilyn Monroe & Piper-Heidsieck Champagne
"We have significantly grown the core brands of our shareholders in the 18 months. We are tracking about 15% growth compared to last year," he adds.

Not bad for a company that was set up with uncertain plans about its lifespan. But the Absolut deal and arrival of V&S as a fourth partner in the network seems to indicate that Maxxium is here to stay.

Absolut puts Maxxium firmly on the map, filling as it does an obvious hole in the white spirits department and giving the company the clout that only a blockbuster brand can do. Unsurprisingly there are few plans to make changes to the product's strategy. "At this particular time we will focus on integrating the brand and then it is up to Absolut to make the changes they want," says Van Bommel. "I don't think any changes will be substantial simply because the brand is doing extremely well in the markets covered by Maxxium - it's a brand that's flying."

Despite this, the arrival of the vodka has represented, and will continue to represent, a serious challenge. Negotiations began some eight months ago, according to Van Bommel, and, in his words, have amounted to a marathon. And now there is the small matter of integrating such large sales into the network.

"We are in the last quarter of our fiscal year and we intend to take on Absolut in the next 30-45 days in all our 38 companies in the 60 markets where we operate. It is an enormous challenge, but obviously we have been preparing ourselves for this for some time. With any transfer you are better to do it as quickly as possible. The news is now out and everyone is prepared to hit that timeframe," explains Van Bommel.

The next year of business will focus on the smooth transition of V&S, and in particular Absolut, into the company. V&S becomes a fourth equal partner in Maxxium with an investment of 107m Euros, on top of a newly acquired 10% stake in JBB for $375m. "Obviously with V&S as the fourth shareholder we will spend time in the next 12 months to integrate, to be absolutely sure we can continue the significant growth Absolut has had, particularly in the Canadian and Western European markets," says Van Bommel.

Part of this growth will include the entry of Maxxium into several markets that it doesn't currently operate in. "With the addition of Absolut we are looking at two or three markets today which we can get into because Absolut has a significant presence there. Together with our total portfolio it would make sense to enter those markets." These extensions of the Maxxium reach, Van Bommel confirms, are primarily in Eastern Europe.

"The Maxxium vehicle is geared towards potentially more shareholders"
But Absolut does not represent the be all and end all of the company's ambitions. In an industry so dominated by consolidation, Maxxium has also left its door open for further joint ventures and acquisitions. "The Maxxium vehicle is geared towards potentially more shareholders," reveals Van Bommel. "We are talking about a situation in the industry of relatively rapid consolidation. If you take into account the low growth in the overall spirits market in the next 12-24 months, I think there will be more pressure on consolidation and an increase in the speed of consolidation in the next two years.

"Maxxium provides shareholders with the means to remain independent but at the same time to have cost effective distribution and a clear route to market. So there is no doubt there are possibilities at some point in time to extend the shareholder base."

Van Bommel says the pressures of consolidation will not hit the regional player with brands in two or three markets. "I guess the problem will arise if you are a mid-sized player with, lets say, a global reach with some of your brands. It will become more and more difficult to find quality distribution at an acceptable cost." And, it is from this pool of companies that the opportunity to add new partners to the Maxxium network will arise.

Other Maxxium brands
In the meantime Van Bommel's rhetoric suggests the current partners are on the look out for acquisitions themselves. Although Maxxium itself cannot buy, "we are strictly 300% focused on sales, marketing and distribution," the company's strengths offer its shareholders an ideal framework from which to acquire.

"Maxxium gives the opportunity to launch new brands or acquire and on the same day have a route to market. It is not always too difficult to acquire a brand, but to have cost effective distribution becomes more and more of an issue," he reiterates

Van Bommel will not be drawn on which categories Maxxium partners are looking at, saying only that, "there are obviously discussions going on and the entry of V&S and Absolut has put us on the map. I can't say anything at the moment but I expect other companies and brands will be knocking at our door."

But he does confirm that Maxxium's owners have been looking at the Seagram spin-offs. However, disappointingly for Pernod, he echoes earlier comments to just-drinks from Remy and JBB (who said it might only be interested in Sandemans Port) that an acquisition from this stable looked unlikely. "I don't think they [the Maxxium shareholders] are extremely excited by what is on the block. I don't think that one of my shareholders will buy from that portfolio," Van Bommel says.

Left: Roland van Bommel, Chief Executive of Maxxium
Right: Rolf Cassergren, Chief Financial Officer, V&S
The partners of Maxxium were once tipped as the most likely acquirers of the Seagram spin-offs, but Van Bommel's inference is that these brands are now too small and unsuccessful for the company's portfolio. Indeed, the likes of Four Roses Bourbon and Passport Scotch look lost among a list of brands that now includes, Jim Beam (the world's biggest Bourbon) Absolut (the world's fastest growing vodka), The Famous Grouse (Scotland's best-selling Scotch), and Cointreau.

Maxxium has been transformed in 18 months from a short-term solution to the threat of Diageo into a multi-billion dollar business that covers 75% of the world's top 30 spirits markets. Tellingly its success is evident in Van Bommel's refusal to rule out that, so well have the shareholders worked together, they could end up merging themselves.

"We are 18 months down the road so it is still early days. Basically it is difficult to predict, but we are talking about a consolidating industry so certainly it is a possibility," he concludes. The Absolut deal may have put the company on the map, but a merger like that would see the map torn up and redrawn altogether.