Cometh the hour, Cometh the Man
Kim Manley, the man behind Smirnoff Ice, caused more than a few ripples when he left the relative calm of Diageo to take up Allied Domecq's top marketing post a year ago. He talks to Chris Brook-Carter about plans to take his former employer head on and create a marketing-led company.
Kim Manley, Allied Domecq's chief marketing officer, looks relaxed when I meet him at Allied's London offices. Despite describing our interview as "the quiet after the storm," this is no mean feat given his task in the last few days.
The financial press and the city have not always been favourable to Allied in the 12 months since Manley joined from UDV, where he masterminded the success of Smirnoff Ice. And yesterday's full year results culminated in the Australian marketer presenting a new vision of Allied to a sceptical city as, at last, a marketing-led operation.
This is a company that at its interim results, only six months ago, was being lambasted by analysts and investors alike for a perceived lack of commitment and investment behind its brands. And yet here was Allied, now claiming to be run with some of the most advanced marketing principles at its very core.
"At the interims the A&P (advertising and promotional) expenditure was flat or showed a minor decline and the analysts jumped on that saying we weren't prepared to invest in our brands," explains Manley, still visibly irked by some of Allied's coverage at the time.
"But as we triedto illustrate there were two parts to it. One was we were putting programming into the second half - but for some reason that was met with disbelief - and the second was there was a shortage of Tequila. Sauza has been hit by almost 40% of its volumes and we knew there was little point in accelerating consumer demand hence we pulled back the level of A&P proportionate to the reduction in volumes."
If the message was misunderstood at the interims there were those at the full year who were, according to Manley, clearly not listening at all. Despite profit growth of 12% there were still doubts from the City over its wine investments and lack of scale. Meanwhile, reports in the press paid fleeting attention to the figures, preferring instead to focus on whether Allied would make a bid for Diageo's Malibu brand.
"Philip [Bowman, Allied's CEO] made a commitment that we would produce double digit growth. He said we would do that and we have delivered our second year of double digit growth, and of course that is forgotten, it's so ironic," says Manley. "If you had said we are issuing a profits warning and had failed to hit our targets, in some ways the market is more forgiving. We delivered on what we said we would do but they said 'well that doesn't make a good story, we will focus on something else'."
Given the size of the job confronting Manley when Bowman tempted him from Diageo, the city's scepticism that he has turned Allied around in just 12 months is perhaps understandable. But this is the man credited with the launch of Smirnoff Ice, and the same man who then walked away from the brand when sales exploded and marketing life got easy.
"Smirnoff had just kicked off in the UK and was about to go nuts in the US. I had done what I enjoyed doing, which was creating a bit of change and putting something on the agenda. I don't think my skill set is necessarily suited to then manage that for sustainability," admits Manley.
Bowman then offered him a new agenda "to fulfil the aspiration of making AD a marketing-led company."
He goes on: "For me it was the opportunity of going from a single brand to going to a multi-brand environment and do what I enjoy doing, which is fundamentally changing something. I don't need someone else's road map, I'd much rather be the person who creates the road map."
Such was the malaise at Allied when Manley joined that the first job confronting him was convincing those internally of his vision, let alone analysts and press. He believes that as UDV gained critical mass it created a perception of ruthless focus on some core brands. Allied in these years began to be seen as an aggressive number two, without the portfolio strengths of its larger rival.
Allied Domecq's Chief Marketing Officer
"That gets into an organisation and stifles it. The aspiration to be marketing led, like any belief system starts from within. Much of the transition has been to get people within the organisation to start to respect the assets we have. Then you can start acting on that and start talking with confidence."
There is no doubt Allied appears a happier and more vibrant organisation from the outside than it did two years ago and the structures Manley has put in place have also convinced an influx of marketing talent to join AD from some of the world's top brand companies.
Seventeen new marketers from the likes of Mars, Diageo, Warner Brothers and Coke have joined AD and are led by a new international marketing executive that has become the fundamental decision making body for all the company's advertising and promotion. Manley has established, with the help of the London Business School, a marketing language "universal to Allied Domecq" and an operating framework, which will be complete next year.
But while the framework is new to the Bristol-based team it, unsurprisingly perhaps, borrows heavily from Diageo, indeed Manley cannot hide a wry smile when he hints at the similarities.
"In terms of going forward it's very much about focus," he says. "For a long time Allied has been criticised for the breadth of its portfolio and lack of depth in investment. What we have done is restructure the business to identify those particular brand/market combinations that are capable of generating the highest value returns. This year we invested 61% of our A&P against 50% of our revenues, which is our eight key brands so it's pretty focussed."
By next March Allied will have completed five-year strategies for its ten largest markets and 12 largest trademarks while 55% of investments this year were focussed on 25 key brand/market combinations. In the future, further market investigation will result in 65% of A&P and 70% of revenues being associated with 20 brand/market combinations, the company believes.
Close followers of Allied's strategy will be quick to notice that the core brands have risen in number from four to eight, a consequence of a major review of the business, Manley says. Rather than just base its portfolio structure on scale alone, the new set-up takes into account a brand's ability to be in several markets and its ability to generate growth as well.
"Maker's Mark is not of the scale of Ballantine's. However, does Maker's Mark have the capacity to produce growth rates in volumes, launches in new markets and achieve a value premium in the Bourbon category equal to Ballantine's in Scotch - yes it does. Thus you apply the same practices to it," explains Manley.
Like Diageo, there is a tier of local leading brands, which sit below the core products. However, in a departure from the Diageo blueprint, and despite pressure from outside concerning the size of its portfolio, Allied has no plans to dispose of its tail - indeed quite the opposite.
"This industry has a tail," argues Manley. "Any player who says it can clean up its tail is kidding. The tail plays a valuable role, not in terms of presenting facts and figures to analysts [but] in terms of your discussions with suppliers. Having it provides you with a fruitful level [of discussion] with the on - and off-trade and one more level of satisfaction for the consumer."
He continues: "There is a management structure for our tail. Sure we won't be investing a big growth plan behind any of them at the moment, but as we get better at what we are doing we may include two or more into the core brands portfolio."
Improvements have already been made across the board, but Manley is particularly keen to stress the significant changes made in AD's innovation programme, unsurprising given his track record perhaps. "There is immense expectation from what I did with my previous employer," he admits.
There were 139 projects across the Allied operation when Manley began. The "world class" innovation process now in place whittled this down to seven by the second stage of assessment. Now only "four are really capturing the imagination." He won't divulge many details but reveals that "they are in higher volume drinking occasions for spirits and also in some of the higher value more limited consumption areas."
Manley talks at length about the RTD sector, which he believes will continue to grow and develop. "This is not a phenomenon or extraordinary to this business. An RTD product is simply a packaging variation of the original trademark, designed to make that drink more accessible to consumers in different occasions." Given his ongoing love affair with the sector it is fair to assume at least one if not all the "projects" will be in this area.
His reluctance to talk further on the future launches stems from a grudging respect for Diageo's power to produce an effective blocking strategy - "all part of the game" he admits. And he maintains a healthy regard for his former employer despite having swapped camps. But he is also unswerving in his conviction Allied can compete with the drinks behemoth.
"There is no question Diageo has tipped the scale in what is relative critical mass, Diageo is a sizeable force," Manley says. "But do we have enough critical mass to be a viable competitor, particularly in distribution and relative scale to customers? Yes we do."
The self-confessed creator rather than implementer may have the structures and people in place to carry out his vision but his job is still only part done. Questions remain over Allied's wine strategy and its lack of critical mass, particularly in the US and Manley must now win over Allied's critics in the city if his vision is to be judged a success.
Yet, Manley's confidence in the business, there is no doubt, is infectious. "There is now a genuine belief in the business we can do something extraordinary," he says. And his candour at the task in front is also refreshing, which will make him popular with the city and journalists alike.
He concludes: "People forget just how good you have to be, to be a successful marketer in the spirits industry. Other markets are always evolving [i.e. there is always something new to sell]. In spirits you are dealing with emotional equity, which is much more difficult as it relies on you understanding consumers' motivation. If you can't marketing is a waste of money."
New Portfolio Structure
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