Just the Answer – Adrian McKeon
In this month's Just the Answer interview, managing director of Beam UK Adrian McKeon spoke with Olly Wehring about the future of the Maxxium partnership, Beam's relationship with the notoriously hard-nosed UK supermarkets and possible future acquisitions.
J-D: Last year, the spirits market in the UK saw volumes slip by 1.6% and value sales in the off-trade fall by 0.4%. What's your take on this tough environment for spirits companies?
McKeon: People could construe it as bad news, but I don't see it that way. I see it as a realisation that consumption of alcohol patterns have changed and that the major spirits companies need to react to that accordingly - they need to become more innovative in their approach. They have to put the consumer at the forefront of everything they do. So I actually see it as an opportunity, not as a negative. That may be overly optimistic - the future will tell if we're nuts.
J-D: What do you mean by changing consumption patterns?
McKeon: People are looking for better quality products in better quality environments. They're drinking less, but they want better. I don't think that's necessarily something we should be scared of. It's something we should welcome - how do we set about marketing to that type of environment. That covers not only drinks companies but pubs and bars as well, for example. You have to think differently about it.
J-D: In September last year, you called on alcohol companies to use innovation to improve relationships with retailers in the UK. Can you expand on this, and how do you think the relationship between the two sides is developing?
McKeon: I think suppliers need to get better at convincing retailers that the innovation they're bringing to market is the way to succeed in the future.
I think the supermarkets in the UK are world class at what they do. The Tesco operation in the UK is one that suppliers enjoy being critical of, but we think what they do is absolutely stunning - they sell one in three bottles of alcohol in the UK; they must be good at it. Our job as a supplier is to find reasons for them to work more closely with us and at the same time to try and come up with marketing and innovative ideas that say there's a different way to merchandise and sell alcohol. I think consumers have moved away quite a lot from the typical aisle with walls and walls of alcohol. I think that's become a little bit too beguiling for them, and they're looking for more informative and educated purchase terms. They want the purchase process to be simplified for them.
The supermarkets love what we're doing. We're challenging them. They're very open to ideas if they're done in the correct way. We've put recommendations to them about the fortified wine section that frankly rocked them a little bit. Hopefully, we'll see some of those tests coming to fruition over the next year or so.
J-D: The Beam portfolio in UK is split between Maxxium and Beam UK. What's the thinking behind this?
McKeon: The Beam brands that Maxxium distributes in the UK - Jim Beam Knob Creek, After Shock and Sourz - are managed and owned by us. We are P&L responsible for them in the UK. Maxxium is our sales and marketing route to market in the UK for those brands. At the moment, we're happy with what we're doing. Our company prides itself on setting up partnerships around the world. Maxxium is one example, and another is our 50:50 joint venture with Absolut in the US called Future Brands. We're an organisation that works well in partnerships. If we're happy with it, then our intention at the moment is to remain as it is.
J-D: What was your reaction to Rémy Cointreau's announcement last year that it will quit Maxxium?
McKeon: I don't know if I had a reaction, to be honest. Obviously, when any organisation pulls out of a partnership, you have to look to yourself and ask if the partnership is one that works. It's similar to personal relationships - if a partnership breaks down, you have to examine all sides of it. So I think there's a little bit of that going on currently in Maxxium. It doesn't significantly affect our UK position. I think Rémy Cointreau will reach a determination as to their routes to market in the key markets around the world as and when they reach it. Is that something that we can influence? No. Is it something that I or our business in the UK worries about? No, it's not. I think it's only 22% of the Maxxium business in the UK, so Maxxium remains strong in the UK marketplace.
J-D: What do you think the future holds for Maxxium?
McKeon: I think the Maxxium position worldwide will evolve over time. What it looks like in a couple of years' time is going to be interesting, and a lot of that will be determined by what happens when the Swedish government issues its agenda for the sale of Absolut. That will in itself trigger some sort of evolution in Maxxium. What that looks like at the moment, I really don't know.
J-D: So, any interest in V&S? How tempting would it be to plug the vodka gap in Beam's portfolio?
McKeon: Any spirits company in the world regards Absolut as one of the top spirits brands internationally. In terms of whether we would be interested in buying it, that's something I don't have any information on or a position on. I think when it comes to the growth of our organisation, we've stated that we'd like to grow organically. We've just spent nearly US$7bn on buying the assets we currently have and probably right now, certainly in my role, our focus is on growing those brands organically to do the right things from the assets we bought.
But I don't think that says that Beam wouldn't be interested in adding brands that supplement our portfolio, and at the moment we don't have a vodka in our portfolio in the UK.
McKeon: Look, we've got ambitions, there's no doubt about it. I think, we've got the ambition to be one of the major alcohol companies in the world and in order to do that you have to be of a sufficient scale. Our initial foray into the spirits market with the buying of the Allied Domecq brands would indicate that we are ambitious. Are there more steps to come in that direction? I hope so. From a UK market position, it is important to have enough scale to be relevant to your customers. We're doing a lot of things which show them relevance in other areas, but actually as the market place consolidates - both retail and supply - it gets more and more important to have as large a portfolio as one can enjoy and as relevant a portfolio as the customer would want to have.
J-D: Can you see any other Beam portfolio gaps that still require filling?
McKeon: Frankly, we're quite happy with what we've got. I think there's a tendency to always look at the other side and say that would be nice to have. But our job is to focus on growing the brands we've got and give them enough TLC to flourish, and that's a big enough job on our hands. We've got enough on our plate in terms of ideas to keep us going for some time.
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