The beverage business blog from Olly Wehring
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01 Sep 2006 17:11
Indra Nooyi, the chief executive-designate at PepsiCo, has received a welcome fillip as she prepares to take the top job at the soft drinks giant.
Forbes magazine has named Nooyi as one of the most powerful women in the world.
Nooyi, who will become Pepsi’s CEO on 1 October, was fourth in the list of the most powerful women on the planet.
The only women above her on the list were the Chinese vice-premier Wu Yi, US secretary of state Condoleezza Rice and at number one, German chancellor Angela Merkel.
And it seems that women have arrived on the wider corporate stage. A total of 48 women on Forbes’ list now run businesses either as chief executives or chairmen, up from 35 last year.
Foster's takeover talk is a load of froth
30 Aug 2006 16:38
Is Foster’s Group really a takeover target? Despite shares in the Australian drinks giant fizzing to their highest point in over 15 years this week, speculation that InBev or SABMiller would be interested in buying the company seems wide of the mark.
Foster’s would be unattractive to a pure brewer. The company generates around 40% of its profits from its wine business, operations that it is also still in the process of restructuring after its takeover of Southcorp.
InBev or SABMiller would not derive any synergies from keeping Foster’s wine assets and would need to line up a buyer for the business. While, in theory, that is not out of the question, few major wine players would be keen to snap up a wine portfolio that remains unsettled post-Southcorp.
Nor does Foster’s appear ready to follow the sale of its international beer business by offloading its domestic brewing assets. The company has worked hard to organise its domestic distribution arrangement along multi-beverage lines, where beer, wine and spirits are handled together. What’s more, Foster’s enjoyed a 17% rise in earnings from its domestic beer business, proving it can make money from a mature beer market.
SABMiller has already signalled where it thinks future growth in the Australian beer market will be with a joint venture with Coca-Cola Amatil that will push its stable of premium beer brands.
InBev, meanwhile, is unlikely to plunge into a mainstream Australian beer market categorised by slow growth when it has enough problems driving sales in similar markets in Western Europe.
Foster’s CEO Trevor O’Hoy may have spent the last couple of days saying that the company was on the “radar” of multinational drinks producers as a “strategic” asset but this sounds like a move to reassure investors that the company is a dynamic one - rather than an indication that bids are on the horizon.
Tips for Coke and Pepsi in India
30 Aug 2006 16:27
One thing that the Coke/Pepsi pesticide debate has thrown up is a wealth of so-called experts giving their opinion on how best to handle the furore.
Naturally, the two soft drinks giants must be incredibly grateful to have all these tips after the event. But before I give you what I think is my favourite piece of advice on this situation, let me wade in with my opinion, which is this:
Never forget that India - like China - is totally different to any other market on this planet. What may have worked in the past might not necessarily work here. The rewards offered in India are potentially unlike any we’ve known, but so is the market.
And the winner of the best nugget to help Coke and Pepsi has to go to this, anonymous, head of an Indian marketing consultants: “The best way to handle controversies is to not allow them to develop in the first place.”
While we were sleeping...
30 Aug 2006 11:48
With apologies to those of you who thought we were off the pace on Monday (28 August) - we were off celebrating/commiserating the last day of the British summer, hence no just-drinks output.
While we were away, however, Brown-Forman took the opportunity to snap up the Tequila assets of Grupo Industrial Herradura.
Not everyone remains convinced by the attention given to Herradura in recent months. Robert van Brugge, an analyst at US investment bank Sanford C. Bernstein, said he was unsure whether the acquisition of Herradura would be a great way to break into the buoyant market for Tequila in the US.
“Cuervo and Sauza dominate the mid-end and Patrón is the premium end - it’s tough for anyone else to break into the category,” he told just-drinks. “High-end brands are gaining share but given the growth rate of Herradura, it’s not a game-changing move in the category.”
However, though the independently-owned Patrón is the dominant premium Tequila in the US, there remains a lot of room for rival brands at the top end of the market. And with the distribution strength of Brown-Forman behind it, be sure that Herradura will be a Tequila to watch in the coming months.
Coors boss learns a hard lesson
29 Aug 2006 17:18
Pete Coors, chairman of US beer giant Coors Brewing, faces the indignity of lessons on alcohol education after reportedly pleading guilty last week to driving while impaired.
His plea - which is believed to have been against the advice of his lawyer - follows his arrest on drink-driving charges in May.
Mr. Coors faces 24 hours of community service and the uncomfortable prospect of sitting on a panel sponsored by Mothers Against Drunk Driving, a US activist group that lobbies hard to stop what it calls “the violent crime” of drunk driving.
He is reported to have pleaded guilty to driving while impaired to spare any further embarrassment to him and his company.
Just last month, Mr. Coors seemed intent on prolonging the embarrassment when he pleaded his innocence to charges under the influence.
The stance seemed all the more confusing when he very publicly admitted that he had “made a mistake” when he drove himself home after leaving a friend’s wedding reception. Both parties will be hopeful the move draws the whole sorry episode to a close.
Whyte & Mackay - how much is enough?
22 Aug 2006 10:46
It’s a maxim in business that everything has a price - and that truism could soon be tested at UK distiller Whyte & Mackay.
The company has started attracting interest from potential suitors after enjoying the first positive results of a turnaround in strategy over the last three years.
Whyte & Mackay has embarked on a series of cost-cutting measures and invested heavily in its brand portfolio, including its namesake Scotch whisky brand and Vladivar vodka. The moves underpin the company’s desire for a change in direction - away from low margin, private-label Scotch towards more premium brands.
Growing sales of the company’s branded whiskies are a sign that the hard work is beginning to pay off. However, that success has made Whyte & Mackay an attractive asset - and reportedly at the front of the queue is Indian billionaire Dr Vijay Mallya, the head of spirits giant UB Group.
Whyte & Mackay decided to keep its Invergordon Distillers business after witnessing a revival in the price of own-label whisky and has admitted that it has received “a number of approaches” for parts of the business.
Should those approaches turn into concrete offers, how long will the company’s largest shareholder, South African business tycoon Vivian Imerman, rebuff any advances? Whyte & Mackay’s focus on premium brands is a sensible move but it may only be a short-term fix. Healthy returns on upmarket whiskies like Isle of Jura are constrained by a distilling process that can take a decade.
Imerman is known to want to build the Whyte & Mackay business but his commitment to the company would be tested if Dr Mallya - known as India’s answer to Richard Branson - gave him an offer he couldn’t refuse.
Havana Club - It's a fair question... isn't it?
17 Aug 2006 15:28
As you'll see when it goes live tomorrow, I've been researching the full story about Havana Club this week. I've spoken to both Bacardi and Pernod Ricard, and some of the language has been really quite colourful.
Pernod is, naturally, a tad peeved at Bacardi for launching its own Havana Club rum this month in the US, a market Pernod can't penetrate with the product right now due to a longstanding trade embargo. The French company has subsequently hit Bacardi with a lawsuit, accusing the US company of misleading consumers by offering a rum called Havana Club that is actually made in... Puerto Rico.
I stopped short of asking Pernod one question yesterday, just so I could publicly ask the company now.
Pernod, where is Malibu rum made?
Bacardi and Pernod - another battle starts, but who will win the war?
14 Aug 2006 16:30
The uneasy impasse between Bacardi and Pernod Ricard flared up last week, as the ‘Havana Club War’ (as we’ve coined it) kicked off again.
Earlier this month, the US patent authorities blocked the Cuban government’s move to renew its trademark registration of Havana Club in the US.
Bacardi claims it legally owns the rights to the name having bought it from the founding family and last week announced that it was relaunching its own version of Havana Club, initially in Florida. The timing, Bacardi maintains, was coincidental.
The situation is one where both sides are as right or as wrong as the other. Where it goes from here is anyone’s guess, especially with Bacardi pushing for trademark registrations in other markets around the world, while Pernod insists that its rights to the name outside the US are safe.
“We bought the rights from the legitimate owners,” says Bacardi. “No court anywhere has ruled that they’re the rightful owner,” Pernod counters.
Who will win? I daren’t call it. But I’ll tell you who will lose if this isn’t handled deftly, and that’s the consumer. Two products with the same name will dilute brand equity for Pernod, while Bacardi will have a job on its hands explaining the differentiation.
And that’s good for no one.
S&N - Une biere, s'il vous plait?
11 Aug 2006 09:25
Scottish & Newcastle this week posted a set of healthy results partly thanks to robust beer sales in the UK - but for all its success domestically, several questions remain across the English Channel.
The brewer has moved to revamp its local on-trade sales force and ramp up marketing investment in France in an attempt to drive sales. However, S&N again saw volumes in the country fall during the first half of the year while fierce price competition again put pressure on revenues.
The strict enforcement of drink-driving laws in France and a weak economy in recent years has hit alcohol consumption in general. However, in a country not renowned for its beer drinking - beer consumption stands at just 35 litres per person - it’s clear that brewers in France suffer acutely when the demand for booze falls.
As you’d expect, as market leader in France, S&N is confident that it can turn things around. It says changes to its sales network servicing France’s bars and restaurants, as well as investment behind its more premium brands, has started to pay off.
Didier Lefèvre, the head of S&N’s French arm, Brasseries Kronenbourg, believes spending more on marketing the company’s premium brands and on innovation will help revitalise sales.
“The beer market in France has not totally developed but, again, the name of the game is segmentation and innovation,” he said in London this week.
To back this up, Lefèvre pointed to rising sales of “super-premium” brand Grimbergen and the initial success in France of innovations that have proved popular with UK drinkers - the fruity Kronenbourg 1664 Blanc and the Super Chilled fonts (dubbed in Super Fresh in France).
S&N chief executive Tony Froggatt was even more bullish about the prospect of turning around the business in France. Low beer consumption, he said, was an “opportunity” to grow attract French drinkers back to the market “with the right concept”.
“Ultimately, there are a lot of people in France who are lax users of beer or have never tried beer - we see it as an opportunity,” Froggatt insisted.
But for all the talk, it’s clear that tough challenges lie ahead. The brewer has already started talks to sell its Champigneulles brewery and last year laid off around 70 workers at its Obernai site, but getting costs down in a mature market is a relatively straight-forward business compared to driving sales.
While S&N has managed to turn around its UK business, encouraging the historically reluctant French to drink beer is another matter entirely.
S&N has a strong domestic business, a buoyant position in Russia and has carved out shrewd positions in India and China. But, if the French would only drink more beer, then the brewer would really be able to compete with the big beer boys.
Private-label Scotch prices - heading north, but wait and see
07 Aug 2006 18:08
Frustration seemed to give way to satisfaction in the Scotch whisky industry last week, on one issue that has long irked many distillers - the prices of private-label Scotch.
UK retail prices of own-label Scotch have long been in the doldrums and most distillers usually refuse to discuss the situation, frustrated, no doubt, that there seemed no prospect of improvement.
However, Whyte & Mackay, which sells over half its volumes as private-label Scotch, has indicated that there may be light at the end of the tunnel. The company’s managing director Bob Brannan told just-drinks last week that retail prices were rising for the first time in 15 years.
Brannan said the firming of prices at the UK’s big four supermarkets over the last three months, plus growing sales of the company’s branded labels, had convinced Whyte & Mackay to hang on to its Invergordon Distillers business to safeguard its stock levels. Whyte & Mackay had put the business, which mainly produces own-label Scotch whisky for UK supermarkets, up for sale last year.
The decision to keep Invergordon could be a positive sign that the prospects for own-label are indeed improving. However, Whyte & Mackay’s figures on the price of private-label Scotch apply only to the summer months - traditionally a quiet time for Scotch sales. Let’s see what happens closer to Christmas when retailers are only too keen to slash spirits prices and launch promotions to drive footfall.