The just-drinks interview - The new Maxxium
Yesterday (1 April) signalled both an end and a beginning for Maxxium, the global sales and distribution joint venture created by Beam Global Spirits & Wine, The Edrington Group and Remy Cointreau in 1999. In those ten years, the company has gained one partner - Vin & Sprit in 2001 - and lost two, with Vin & Sprit calling time last year, and Remy Cointreau pulling out yesterday. The two remaining members subsequently decided to pool their resources, rather than go it alone. Speaking to just-drinks, the MD for Beam Global's international operations, Donard Gaynor, and group sales and marketing director at Edrington, Bill Farrar, look back at the break-up process, and consider how the new Maxxium - of which they will be co-chairmen - will perform in the current economic climate.
This year marks the tenth anniversary of the creation of Maxxium, created in 1999 by Beam Global, Edrington and Remy Cointreau. Two years later, Vin & Sprit came on board, and the partnership, which operated globally outside of the US, sought to offer the partners a much stronger package when dealing with customers. Indeed, the creation of the partnership was a clear attempt by the four to combat the powerhouse wine and spirits companies of Diageo and Pernod Ricard.
This week, however, sees the company take on a radically new look. Last year, Vin & Sprit exited Maxxium, when its new owner, Pernod, agreed to pay EUR59m (US$85m) to take V&S' brands, including Absolut, out of Maxxium from October. Before that, in 2006, founder member Remy Cointreau said it would pull out of Maxxium on 31 March this year - the move cost Remy EUR241m ($324.3m) before tax.
The two departures left Beam Global and Edrington with something of a quandary: call time on the venture, or carry on regardless. The companies decided on something in between. Starting yesterday, the two companies launched a 24-market agreement, with Beam Global and Edrington having joint ownership of the Maxxium organisations in Spain, the UK, Russia, China, Hong Kong and travel retail, while, in 12 markets - Germany, Australia, New Zealand, Canada, Philippines, Singapore, Thailand, Laos, Vietnam, Malaysia, Indonesia and Cambodia - Beam Global will distribute both the Beam Global and Edrington portfolios. Finally, in six markets - Norway, Sweden, Denmark, Finland, Taiwan and South Korea - Edrington will distribute both its and Beam Global's brands.
Bill Farrar, group sales and marketing director at Edrington.
Despite the complications of setting up the new venture, Donard Gaynor from Beam Global, and Edrington's Bill Farrar - the co-chairmen of the revised partnership - are notably upbeat about how they got where they are today. "The announcement that Pernod had won Vin & Sprit was a year ago yesterday," says Farrar. "It was at about that time that we started talking to each other. You can imagine the complexity of those discussions, the disentangling of the V&S business and then the departure of Remy. But what has really stood out through all this has been the confidence and capability of the Maxxium team to deliver on what was completed yesterday, as well as the good relationships we've been able to hold on to, particularly with Remy over the last three months. It's been a very smooth transition in terms of the operational side of the business."
Considering the vacancies created by the departure of two of the four, I put it to Gaynor that finding replacement partners would help the company to continue to make a broad offering to its customers. "I think Maxxium was four partners who had been together for ten years and knew each other quite well," he says." I wasn't around at the time, but I'd imagine the formation of Maxxium was not without some bumps in the road. To bring in new partners at this time would probably have opened all those bumps again as you try to get used to new cultures and ways of dealing with each other. When ourselves and Edrington looked at the future together, we found extremely complementary portfolios, and a relationship founded ten years ago. We wanted to go forward together, and that just seemed the right thing to do at the time."
Farrar agrees: "If you look at the key geographies around the world, add in the Brugal golden rum brand we acquired about a year ago and Beam's brands that weren't formerly in Maxxium, we suddenly had the scale that we needed in the markets that demanded such scale, for example, in Spain and the UK. We've got the scale in those two markets now to compete effectively with any of the other major players."
The suggestion that Beam and Edrington could have merged, however, gets short shrift from both Farrar and Gaynor. "I never comment on those kinds of things," says Gaynor. "That goes in to (Beam's parent company) Fortune Brands." Again, Farrar concurs.
The structure of the new alliance, detailed above, would at first sight appear somewhat convoluted, but Farrar believes the format offers a pragmatic solution. "Where we (Edrington) have become the wholly-owned business, we are a very strong part of that business," he says. "The same applies for where Beam has taken wholly-owned ownership.
"As we made the change, we felt that there was a way of ensuring that we didn't allow any bureaucracy or any additional infrastructure to slow down what we believed is absolutely critical looking forward. In a slightly more troubled economic environment, speed and agility is going to be extremely important in delivering the kind of brand goals we're looking for."
Donard Gaynor, MD for Beam Global's international operations.
Gaynor offers the Australian market, where Beam's Jim Beam Bourbon is the biggest spirits brand, as an example of this thinking. "We're working with Coca-Cola as our distributor (in Australia), and there was no need to do anything more complicated than that," he says. "It's just logical."
But whither the Maxxium name? So far, both Beam Global and Edrington have referred to the partnership simply as an "Alliance". What will happen to the Maxxium moniker going forward?
"Maxxium is a name that's been around for ten years now and has built a certain amount of recognition with the trade," says Gaynor. "So, Maxxium will remain the name of the JV entities and Edrington will also use the name for its wholly-owned subsidiaries." Beam Global already had "pretty strong" subsidiaries going in several of the markets where it will own the operations, Gaynor notes, "so we will move to the Beam Global name there. But we will use the name that is most recognised commercially in the respective marketplaces going forward."
Going forward, then, I ask Farrar if this new alliance would consider taking new partners on board? "The intention at the moment is not to look for additional partners," he says. "We are confident that we have got brands that cover all drinking occasions, therefore, at the moment, we're absolutely focused on driving our core brands.
"If, in the fullness of time, we identify areas where we could work closely with other people, I wouldn't rule it out, but it's certainly not an immediate objective."
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