Comment - Spirits - Tullamore Dew: If You Build It...
Tullamore Dew could do with its own distillery, says Richard Woodard
Scanning some of the reaction to last week’s news that William Grant & Sons is selling its recently-acquired Irish liqueur brands to Gruppo Campari, the first word that springs to mind is “blarney”.
One or two commentators have used the apparently indecent haste surrounding the sale – the Scottish firm owned Carolans, Irish Mist and Frangelico for less than five months – to question the company’s professed commitment to Ireland.
Rubbish. William Grant bought the brands for one reason and one reason only, and that reason is Tullamore Dew. I’m sure the company had every intention of doing its best to develop the liqueurs too, but does anyone seriously think they were the real prize of the deal with C&C International?
The deal with Campari is as close to a win-win as you’ll get in business these days. EUR129m (US$172.3m) looks a good price for both sides and the brands make a much more natural fit in the Italian group’s portfolio. After all, Campari already distributes Carolans and Irish Mist in a number of markets, and is the global production source for Frangelico.
I’m not sure the same brands would have been anything more than an unwanted distraction for Grant’s. I well recall C&C’s previous bold ambitions for Carolans in particular, but there’s little evidence of them being realised in a sector still dominated by the monolithic Baileys.
I suppose you could posit a similar argument against Tullamore Dew. It, too, is in the shadow of a dominant sector leader (Jameson), one that accounts for well over half of all Irish whiskey volumes and even produces (along with rival Irish whiskey firm Cooley Distillery) Tullamore Dew under licence.
But, Tullamore Dew is all about potential, not least for the Irish whiskey sector, which Datamonitor is forecasting will grow by 9% a year until 2014. If Jameson is likely to remain the prime beneficiary of that growth, Tullamore Dew and Diageo’s Bushmills can only reap the knock-on benefits as the sector matures.
Back in November 2008, C&C said it aimed to push Tullamore Dew through the 1m-case barrier by 2012. Economically, the world has become a very different place since then, but that potential for growth should be still greater within the more sympathetic portfolio and distribution picture at Grant’s.
The company will also have its eye on the value potential of the Irish whiskey sector. At the moment, the level of under-achievement here is frankly woeful, with only 13,000 cases of super-premium and higher Irish whiskey sold in 2008, according to a recent IWSR/just-drinks report.
Compare that paltry figure to the 2.6m cases of similarly priced Scotch sold over the same period and you get some idea of the challenge - and the potential - for high-end Irish whiskey.
Exploiting that potential is necessarily a long-term process, although no-age-stated products and the careful manipulation of stocks can help. But, it’s hard to see how William Grant can truly hit its long-term targets for Tullamore Dew without doing one thing: controlling production through its own distillery.
To do this, the company has only two options as far as I can see: buy and develop Cooley; or start from scratch with its own facility. The benefits of the latter strategy could be felt well beyond the Irish whiskey sector.
Grant’s has already shifted the marketing for its non-Scotch brands – including Tullamore Dew and Hendrick’s Gin – to Dublin, so could this be a precursor to a larger-scale shift in production too?
Clearly a new-build distillery is a huge financial commitment, but arguably there’s never been a better time for it. The Irish drinks sector is crying out for new investment and it’s a well-worn truth that money injected in poorer economic days is often repaid many times over when the good times roll again.
It’s also what the Irish whiskey sector desperately needs. For historical and commercial reasons, it simply doesn’t have the rich tapestry of distilleries and single malts of Scotch and, despite the worthy efforts of the likes of Cooley, it’s hard to see that changing in the near future unless William Grant takes the lead.
The result is very likely to reap lucrative long-term rewards for the company. And it would also have the satisfying side benefit of silencing the critics currently questioning William Grant’s long-term commitment to its new presence on Irish soil.
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