Mumm and Perrier-Jouët Champagnes: Allied Domecq unveils grand plans to make its marque
After its audacious snatch of G.H.Mumm and Perrier-Jouët Champagnes from the Seagram auction, Allied Domecq's wine division is now adapting to its new role as a Champagne House. Grahame Cox, ADSW (UK)'s marketing director and Peter Ayling, ADSW (UK)'s business development director, talk to Elliot Lane on the future of the grand marque, the Grand Prix and how the Argentine wine business is ready to topple its Chilean cousin.
Every second Sunday during the summer months, one billion people will be thinking of G.H.Mumm Champagne. As yet another jubilant Formula One driver drenches his fellow rivals with a magnum of the 200 year-old brand, two Allied Domecq executives will also have broad smiles on their faces.
For Grahame Cox, ADSW (UK)'s marketing director, and Peter Ayling, ADSW (UK)'s business development director, are standing on the winner's podium after the company audaciously snatched Mumm and the Perrier-Jouët Champagne brands from the Seagram portfolio back in December 2000 (/features_detail.asp?art=344)
"The deal surprised not only the industry and the City but some of us in the organisation," explains Cox. "While everything was going on around the Seagram sale, suddenly this deal appeared, which looked a very astute move, to that overall auction. We came in and cherry-picked two great pieces of business. But then as a major spirits and wine company, we are used to the machinations of handovers and how to deal with these transitional phases."
One aspect which has made the takeover easier since Allied took control on March 28th, is that the company bought the whole operation outright. "It makes the continuity more appropriate. The guys who worked with Seagram now work for us, and at a reasonably early stage, we sat down with these guys and discussed some of our perceptions of the brands."
There seems to be little resentment between the two groups - with Cox describing the negotiations as "a very grown up affair" - with the gritty talks surrounding just the price and the amount of Champagne stock Seagram would sell to Allied.
"The deal surprised not only the industry and the City but some of us in the organisation"
This was Ayling's responsibility, as he is in charge of the integration. "There were agreements outstanding which I had to deal with when negotiating with the Seagram management. I handled the integration side of the deal, mostly concerning the amount paid for the outstanding stock, while Grahame was involved in dealing with how the marketing of the brands was going."
Naturally he refused to tell just-drinks.com how much stock had been bought and the amount paid though from the general state of the market, which is suffering a post-Millennium glut, it seems likely it was a fair few cases.
Champagne lovers have never had it so good in the UK, with prices slashed and promotions offering amazing (or from the industry's perspective ludicrous) deals with upto 50% off premium and mid-range brands. As just-drinks.com reported last week, the UK grocer Asda is selling Mumm non-vintage at £12.49 ($18.05), a £7 reduction from its usual £19.49 ($28.17) rrp.
All the promotions running at the moment were agreed by Seagram, Ayling said, and will continue for some time yet. Industry observers believe Seagram initiated many of the deals as a spoiling tactic to scupper Allied's short-term margins. Ayling refutes this: "The deals on the market are not just P-J or Mumm - it is a very good time to buy Champagne. All the major brands have price promotions at the moment with the run-up to Easter and the Season beginning. 20% off six bottles or a couple of pounds off a bottle is the same as we've been seeing for the past two to three years. There just happens to be better deals because there is more Champagne around than normal."
Cox agrees and said it was too early to say whether Allied would retain the price points circulating the retail market. "Everybody is doing it at the moment. Total alcohol consumption is flat in the UK, so to survive, you have to be practical - promote and adapt. The grocers want value and it is up to us to promote cleverly so it adds value to the whole range. If we were to compete and promote solely against our Champagne competitors would be stupid, because it reduces the value for everyone. What we need to do is promote cleverly so it brings more people to the category."
With the two Champagnes combined annual sales in excess of 100,000 cases, and the UK the second largest market for Mumm and the third biggest for Perrier-Jouët , there is scope to take them further. The majority of drinkers are AB demographic from the southeast but Cox hopes to broaden the boundaries to the north of England though admits with a smile, "Scotland and Wales are going to be a challenge."
"All the signs indicate that the sparkling wine consumer is looking to trade up to more premium wines"
Allied's strategy, which it has used successfully in the spirits business, is to encourage consumers to trade up to the premium sector, he explains. Of the overall alcoholic consumption of the UK consumer, 16% drink sparkling wine. All Allied's efforts will be focussed on shifting their palette.
"The market went a bit weird during the millennium period but this year has turned around again to 1999 levels. What all the signs indicate is that the sparkling wine consumer is looking to trade up to more premium wines," said Cox.
Amalgamating the positive elements of selling spirits with the traditional approach to wine promotion is how he hopes to achieve it. Heritage and authenticity are the buzzwords.
"They are absolutely fundamental when building this particular area. If all you have is pure marketing ploy the consumers will see through it. Our view of wine business is having a credible basis of where the product comes from and the form the product takes - rooted in traditional methods. Once you get beyond the £5 ($7.22) a bottle, it is fundamental."
What has been lacking is a concerted effort to promote the real qualities of Mumm and how it has developed under the tutelage of one of the youngest chef de cave in the industry, Dominique Demarville - "a man born in the bottle" quips a jealous Cox. Critics have been disparaging about Mumm's taste for years, with one cruel wine writer dubbing it the "cooking Champagne" some years ago.
At just 33 though Demarville has stamped his mark on the grand marque and is an asset Allied want to savour.
Cox explains how he has turned round Mumm's fortunes: "The quality of the grapes has improved ten-fold and the House is buying in the best grapes in the region. As we have such high quality grape, Dominique keeps the dosage levels extremely low. When I tried it you could taste the dry, crisp lively character and when you take comparative tastings it is true."
He also matures the Champagne in the bottle longer. Usually Champagne matures for 18 months, but Demarville matures the wine upto 2.5 to 3 years. He has also changed the way the House works - Mumm now uses 25% of its grapes from its own 350ha vineyard which is a "higher ratio than many other Houses" said Cox, plus all pressing is now in-house so they can control the quality.
Demarville is one part of Allied's major advertising and promotional push in the coming months. He will be at the LIWTF 2001 to meet the industry and will host tasting events in the future. A new advertising campaign rolled out in the US and now going international will bolster Mumm's profile. Under the tagline "maxiMUMM", print advertisements will show exploding bottles and F1 images to reinforce the Champagnes younger, more vibrant image.
Both Ayling and Cox are adamant though that the mystique and cachet surrounding the brands will remain. Perrier-Jouët distinctive art nouveau Belle Epoque bottle will be left untouched and Allied is committed to the design awards Seagram set up in conjunction with UK retailer Selfridges.
Wines with Attitude
The LIWTF will also see the "re-introduction" of Allied's wine portfolio which has been neglected in recent years. In terms of marketing, that is. Allied is producing some exceptional wines such as the Californian Atlas Peak range and the new star pupil, the Argentine Balbi range.
In the past 12 months, the whole industry emphasis has moved away from spirits consolidation to premium wine and Allied's corporate plan is to carry on acquiring. The New Zealand debacle with Lion Nathan over Montana Wines is still unresolved but Argentina and California are investment areas of the future.
"Our wine portfolio, personified by the Argentine brand Balbi, and the in US, Clos du Bois range, covers the most exciting growth regions in the sector. These are premium/super-premium areas," said Ayling. "They are regarded for their high quality and there is a brand recognition for those travelling in the US and abroad to seek out these brands. With the Sangiovese Atlas Peak brand, which is a joint venture we started 15 years ago with the Italian wine producer Antinori, we get the Tuscan credentials and the US buzz which is understood by the UK consumer, so Atlas Peak has a great story around it - heritage we can exploit."
The New World is where the major corporates will continue to seek out new opportunities.
He hopes to bring a number of super-premium brands into the UK market over the £10 ($14.45) price point, placed in the top restaurants and Atlas Peak may be the right one. "This is the market focus for the Atlas Peak brand, where there is scope for the £12 ($17.34) - £15 ($21.68) bottle." Later this year, Allied's Calloway range which fits around the £6.99 ($10.10) to £7.99 ($11.54) price point will be introduced in the UK.
While Chilean wine growth stagnates, Argentine wines are cutting into its market share and within five years, Ayling believes, the region's wine volume and sales will be as big as its Latin American cousin.
"The bulk of Argentine wine fits around the £4.49 ($6.48) - £4.99 ($7.21) mark. Everybody is around that price so the next move would be to attack the Chilean wine market at around the £5.49 ($7.93) - £6.99 ($10.10) level. This means progressing its (Balbi's) quality to where the Chileans are today.
"Balbi's Reserve range has been developed over the past 18 months to try and push the consumer up from the £4.49 ($6.48) - £5.49 ($7.93) to the £6.99 ($10.10) end of the scale. When consumers start paying that kind of price, that's when the brand will begin to gain its kudos," said Ayling.
He also said the 2001 vintage has been exceptionally good and the Balbi winemaker Pedro Yanez has begun "experimenting with the wine to produce a consistent quality worthy of the £6.99 ($10.10) price tag."
After the fascination two years ago by winemakers and institutional investors in the Languedoc region, the New World is where the major corporates will continue to seek out new opportunities. Diageo's CEO Paul Walsh said a few months ago that the drinks giant would continue to buy more premium wines but without using "too much capital investment" namely not acquiring vineyards, only brands. Allied, however, still wants to grow its core winemaking capabilities.
"Allied is buying more vineyards in Argentina and in California but land prices are rising dramatically which may curtail growth," said Ayling.
Whatever Philip Bowman's next move maybe, Cox and Ayling know they have a great challenge ahead of them. Cox sums it up: "We are open for business as a spirits and wine division, and but we are now a Champagne House too." Ayling chips in: "With Mumm and P-J we get critical mass - then you are seen as a serious wine player and that was our objective.
The Champagne Consumer
Champagne Drinkers are...
And show a significant Southern bias
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