Just the Answer - Geoff Ross, 42 Below
The New Zealand premium vodka 42 Below has blazed quite a trail over the past few years, even by the standards of this vibrant and growing category. With Bacardi poised to complete its acquisition of the brand, what better time to speak with 42 Below's charismatic chief executive Geoff Ross, who will remain at the helm following the takeover.
J-D: Can you tell us about the origins of 42 Below?
Ross: I started distilling in my garage in 1996, using a still that my wife bought me, and sold the first bottling in 1999. I was working in the advertising industry at the time and while I was in the US, I'd seen an ad for a US vodka. Now, you most usually associate the US with bourbon and vodka feels as though it needs to come from a cool, pristine environment like Scandinavia. But I'd just been in a meeting where someone remarked that New Zealand was the Sweden of the Southern Hemisphere and that gave me an idea…
In 2002, two other chaps got involved and put money into the business, which allowed me to go full-time. In 2003, we listed on the NZ Stock Exchange; it was only a small listing but we raised NZ$15m from it, and that gave us an injection of cash to put behind the business.
J-D: How did 42 Below become one of the world's most in-demand premium vodkas in just seven years?
Ross: Well, there are a number of reasons but there are three main ones - two functional and one emotive. The most emotive one was that it is from New Zealand, which straightaway gave us some point of difference, some form of uniqueness. We also created a good vodka; it won more awards than any other vodka out there, despite the fact that it came from a non-traditional vodka place. What was also important was the tone of our advertising. It was very fresh and irreverent and we didn't take ourselves too seriously. It was altogether super-premium and we tried to be a little risqué and we tried to stay on the edges.
Why did you decide to go down that path?
Ross: I'm not as contentious or as risqué but it was quite deliberate. From my advertising background, probably two of the industries that I was most interested in were music and fashion, mainly because they required more energy than your normal FMCG category, certainly than what is needed with liquor brands. Each new album, each new fashion line needs a whole new marketing approach. I wanted to try and bring that energy and momentum into an FMCG, and to bring some vibrancy to the brand. In the past, the approach to liquor had been closer to Procter & Gamble or Unilever than a record label or a leading fashion designer.
J-D: Should more drinks brands take a more irreverent approach to marketing, then?
Ross: Yes - but I don't know if many can. To be truthfully risqué, contentious and irreverent, you have to be prepared to take a little bit of flak from time to time. As Oscar Wilde said, it's far better to be talked about than to be not talked about. We had no money so we had to do what we could to get attention.
J-D: For any budding producer of premium vodka, the US is the key market. Did you head straight there?
Ross: We did look at the US but not at the expense of other countries. We had a limited small number of people who we'd train up to be beachheads into other countries to develop a base and then we'd export the product. We sent sales teams to the US, UK, Europe, Asia…We worked very hard on the on-premise. We had very little money - and you don't need a lot of money to break one bar compared to what you'd need for a major retail account. That forced us to win over smaller accounts first.
J-D: So how did you go about convincing bars to stock 42 Below?
Ross: We were quite fresh in our approach. We'd set up a vodka university with our team of vodka professors; we'd take our ten favourite vodkas, not just our own, and say: "Wow, isn't vodka great!" We weren't going in there as a bunch of suits, saying: "Buy only this!" We spent time explaining to customers that vodka is a fantastic spirit and how 42 Below would make a back-bar far more valuable… We did what a sommelier does when they know they stuff about wine, or someone very passionate about single malts.
J-D: How much 42 Below is sold worldwide?
Ross: We were growing at 40% from '05 to '06 - 30 March is our year end. Our total sales came in at 90,000 cases; that was up from 55,000 cases the year before, 18,000 the year before that and 5,000 the year before. We decided to invest in simply growing the brand. We wanted to keep our foot down and make the asset the brand.
J-D: What made you decide to sell to Bacardi?
Ross: You can't deny that size gives you leverage and (Bacardi) can bring that to us. Bacardi's present in 130 countries; it has huge scale and distribution.
J-D: Did 42 Below attract any interest from any other multinationals?
Ross: There were a couple of more informal talks but with Bacardi we talked a lot about culture and plans for the brands before we talked about value. They're a private company, so though they're big, they don't quite have the spotlight on them, which gives them time to develop a brand's personality.
J-D: Are you staying with the company?
Ross: Yes, I'm staying on as chief executive. 42 Below will remain exactly as it is. The core functions will remain here. My role will be the same but instead of reporting to the board, I will report to the local Bacardi head in this region.
J-D: What plans does Bacardi have for 42 Below? How will the brand fit with its other premium vodka Grey Goose?
Ross: At the moment, it's still strictly just an offer. It's got to go to all of shareholders. You've got to get to 90% to get an unconditional acceptance in New Zealand, so it's not quite a given, not just yet. We haven't developed any concrete plans. However, the probable positioning of a Grey Goose drinker is someone at home or in a restaurant, whereas 42 Below is about clubs and about cocktail culture, so although you're going get some overlap the brands will be positioned differently.
J-D: Would you say there is a danger, though, that a brand can lose its premium, exclusive cachet, the wider its distribution grows?
Ross: It is a danger for a premium brand, the fact that you do need to manage the environments it goes into…possibly even more so for a brand like 42 Below; it's a younger, smaller brand, still in its teenage years and as a brand grows that's very important. People perceive a brand based on where they see it. Grey Goose as a brand is far more established and mature.
J-D: What, for you, is the recipe for building a successful, super-premium vodka brand?
Ross: It's not just inside the bottle; what's on the outside is equally important. There has been a plethora of just good-tasting vodkas that were well marketed which failed. You need to be well funded, to have patience and you do need to seed it in a niche. Retrospectively, that was the only way we could do it because we didn't have a lot of money.
J-D: Outside the US, where else do you see growth for high-end vodkas?
Ross: Asia, China particularly…pretty much the whole of Western Europe, Dubai is going gangbusters for us, so is Shanghai.
J-D: And Asia-Pacific will be a key focus for 42 Below?
Ross: For sure. We've been strong in New Zealand, Australia. In Singapore we're the number one super-premium. In this part of the world, we were there early on in the piece in super-premiums. In the US, Grey Goose, Ketel One and Belvedere - they were there a few years before us, so it's been harder to get that first-mover advantage.
J-D: What challenges do you see lying ahead for the premium vodka category?
Ross: The challenge ahead is to uphold of the standards of the cocktail culture. Vodka has to be the lead spirit in building that culture. If vodka promotes bland cocktails, people will substitute out of the cocktail culture. It would not be dissimilar to what cheap wine brands have done to wine. Some of these $2 Chardonnays have destroyed some of the equity that was built in the wine category. We need to avoid the dumbing down of cocktails.
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