The beverage business blog from Olly Wehring
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Drinks Industry v UK Supermarkets - where are you?
02 Aug 2006 16:59
When Scottish & Newcastle came out against the UK’s supermarkets earlier this week, how many of you rejoiced that, finally, someone was saying what you’d been thinking for a long time?
In my almost three years at just-drinks, any mention of UK supermarkets to an interviewee has been met by a knowing look and the blandest of bland comments. No-one, but no-one, dared go on the record with their true feelings on the matter.
In a submission to the UK’s Competition Commission - currently looking into the power of supermarkets - S&N said: “We view with concern the willingness of the major multiples to invest in relatively cheap beer and cider prices, to drive ‘footfall’ within this sector.
“We strongly believe that the sale of alcoholic drinks at low cost, used primarily to drive ‘footfall’ into stores, is not consistent with the promotion of responsible drinking.”
The response from the drinks industry has been silence. The supermarkets, however, have come out all guns blazing. A spokesperson for the British Retail Consortium laughed out S&N’s claims. The brewer had “no evidence” to back its claims, he told just-drinks.
“It’s a very competitive market and what retailers do is try to achieve the best possible price. They then pass those costs on to consumers - that’s what competition is.” He even went so far as to suggest that S&N’s claims could be a way for the brewer to achieve “better prices” from retailers when selling their products to supermarkets.
While inter-industry squabbling may open the back door for governmental interference, S&N should still be applauded for its stand. The influence wielded by this country’s supermarkets on drinks pricing has gone unchecked for too long.
I know a lot of you will be quietly cheering them on. But will any of you stand up and be counted?
Silly Season gives way to figures-a-go-go
01 Aug 2006 15:01
The figures bun-fight, which kicked off last week, never fails to catch me off-guard. The two or so weeks in the middle of the silence of summer where everyone chucks their results at us, always comes as a shock to the system.
Most notable of the slew were Anheuser-Busch, which saw revitalised domestic beer volumes. That, plus a strong performance from Mexico’s Grupo Modelo - in which A-B holds a 50% stake - drove a 3.9% rise in net income during the first-half of the year. We’ll have an in-depth review of how the US brewer turned its tanker round later this week, so keep your eyes peeled.
Pernod also contributed to the workload last week, inviting just-drinks to the annual plate-spinning event that is its results lunch - have you ever tried taking notes while trying to cut salmon? Not easy, believe me. The figures themselves were pretty good, but the honeymoon period following Pernod’s takeover of Allied Domecq is definitely over, however. With the Allied purchase now a year old, the French drinks giant’s figures from now on will give a far better indication of how it is performing. For a look at the former Allied brands and where they stand a year on, click here.
Pernod also hit the headlines last week, as speculation mounted that it is in talks to buy Mexico’s Tequila Herradura. Naturally, the company - along with other supposed frontrunners Bacardi and Brown-Forman - remain tight-lipped on the rumours.
With the Tequila category growing impressively, it’s obvious why the big companies want to get a slice. Yet one analyst last week was unimpressed with the Herradura talk. “It’s so small in relation to other Tequila companies that we’re not paying it a lot of attention,” he told just-drinks. With Diageo’s Cuervo and Fortune’s Sauza dominating Tequila sales, he continued, it’s going to prove tough for anyone else to break into the category.
And yet, the linking of Pernod’s name to any Tequila brand shows how painful it must have been to offer Sauza to Fortune as the carrot to make the Allied purchase possible.
We’ll keep you posted.
No comment - but do actions speak louder than words?
27 Jul 2006 19:43
Regular just-drinks readers will have noticed us getting quite excited this week as speculation linking Pernod Ricard with a Tequila company refuses to go away.
The French giant is widely thought to be in the running - along with Bacardi and Brown-Forman - to buy Tequila Herradura in Mexico. Naturally - and rather tediously - all three companies, when contacted by just-drinks this week, have refused to comment on the rumours. Pernod’s spokesman said on Tuesday: “If it were true, we would not comment, if it were not true, we still would not comment.”
So, I’d been looking forward to today’s (27 July) Pernod press conference in London, which looked at the company’s full-year results - a bit of a dig, a little root around. And what did I get? This from managing director Pierre Pringuet: “Never deny, never confirm.” So, apologies, dear reader, but I tried my best.
I will let you in on one little nugget I picked up on, though.
Monsieur Pringuet, like the rest of France, is off on his summer holidays this coming weekend. And where is he going?
That’s right - Mexico.
US$225,000? For a bottle of Tequila? Is that all?!
27 Jul 2006 15:51
By my own admission, I never went into journalism for the money - if that were my motivation I wouldn’t be here now, I’ll tell you that much. Consequently, I’m pretty careful with the cash. I know how much a pint of milk is (41p) and the going rate for a pint of cooking lager in a stereotypical London public house (GBP3).
I often daydream, however, about what it would be like if money were no object. Join me, then, in my little fantasy…
I bought a bottle of Tequila today. It was a bit more than I expected to pay, but what the heck. You only live once. And at least I can now boast to my friends, Farquar and Persephone, that I own the most expensive drink in the world – US$225,000 it cost me!
It’s made by a company called Tequila Ley.925 and is called Pasion Azteca Tequila. They call it ultra-premium, but I’m not so sure. Early next year, they’re releasing a bottle plated with gold, platinum and diamonds, and expect it to go for US$1m at auction.
I might get two…
Ho-hum. Back to the world of dreams.
Coke – you can’t use that word anymore
25 Jul 2006 13:53
Any casual Coca-Cola observer must have noticed that the drinks giant gets more than its fair share of critics. Barely a week goes by without a lawsuit or an accusation targeted at the company.
Coke’s take on the matter? Responding to yet another legal challenge last week, a spokesperson for Coke described the company as an “easy target” for attention-seeking claims.
The latest attack on Coke, however, strikes me as just a shade over the top. The company has come under attack for using the word ‘psycho’ in one of its adverts for new drink Coke Zero. The campaign, which suggests that life would be easier if there were fewer downsides, includes the phrase “blind dates without the psychos”.
Mental health campaigners in Scotland have attacked Coke for their use of the word ‘psycho’, calling it “extremely derogatory” and have claimed it increases the stigma around mental illness. “It is used to trivialise serious mental illness and as a shorthand for horrendous crime,” said the director of campaign group See Me.
“It was never our intention to offend people,” a spokesperson for the company told The Scotsman.
It strikes me that Coke often offends people whether it intends to or not.
Modelo & Constellation - Everyone's a winner, baby?
24 Jul 2006 14:28
The news last week that Grupo Modelo has teamed up with Constellation Brands to beef up its presence in the US has been greeted positively by industry observers.
The two companies have signed a 10-year agreement to form a joint venture that will import and distribute the Modelo stable across the US. The venture will go live from the beginning of next year.
Modelo has a golden goose on its books in the form of the Corona brand. In as consolidated a beer market as the US, imported bottled beer is bucking the trend and performing startlingly well. This category is led by Corona to such an extent that one analyst maintains that “Grupo Modelo is one of the finest operating stories in global beer.”
The joint venture provides a favourable outcome for the Mexican brewer. Modelo has a strong brand but limited operational capability in the US on its own, but can now look forward to additional post-tax profit from the move of around US$150m. At the same time, the two can focus on gaining national scale for Modelo’s brands while making the most of back office synergies.
Everyone’s a winner then, right? Constellation - who previously had held the distribution contract for only the west of the country - certainly seems to think so. “It provides Constellation with a guaranteed profit stream from the western US states for 10 years and, from its position in the joint venture, provides us with potential incremental profits from the growth of the brands in the east,” a spokesperson said last week.
While Modelo is probably the happier of the two, it seems that everyone’s pretty chirpy. Including, I presume, Anheuser-Busch, which owns half of Modelo. However, while I’m certain A-B would have known what was going on before the deal was sealed, could this not be seen as an opportunity missed for the US brewing giant?
What's in a name?
18 Jul 2006 15:27
A press release came through to me late last week that caught my eye - but I worry that it may have been for the wrong reasons.
Am I alone in raising an eyebrow to the name of this UK company? While I hope I'm not, I also hope, for their sake, that I am.
Pepsi v Coke - a week Coke'll want to forget
17 Jul 2006 17:49
The difference in fortunes of fierce rivals Coca-Cola Co. and PepsiCo has looked pretty marked in the last week, especially if looked at in a global context.
In the last seven days, it’s been revealed that Coke could buy out a local bottling partner in the Philippines as sales slide, while the company has parachuted in a top executive to try and revive its struggling business in Japan. PepsiCo, meanwhile, posted a set of impressive first-half numbers last week, with its international business proving a key engine to sales and earnings growth.
While Pepsi saw profits from its international operations surge 21% and volumes rise 10%, Coke has moved to tackle problems in key overseas markets, which is especially critical in Japan which is said to generate around a fifth of the company’s profits.
Sure, a company the size of Coke could hardly expect to see each of its markets perform perfectly at all times. However, it must irk some in Atlanta that Pepsi seems to be enjoying solid growth in a number of markets, including China, Thailand and Russia.
Combine that with the sour news of an extortion plot against Coke in South Korea and it all adds up to a bit of an unsatisfactory week in the Coke empire. We await their first-half numbers next week with interest.
For the latest on Pepsi’s figures, click here.
How to offend a nation without really trying
14 Jul 2006 16:27
The landlady of a pub in the south-west of England has been the target of hate mail recently for upsetting the Welsh. Angie Sayer, of the New Inn in Wedmore, Somerset, has received letters and answerphone messages accusing her of racism.
Ms Sayer used a Welsh flag in a rather peculiar way when celebrating St George’s Day on 23 April. The English saint, of course, was famous for slaying a dragon, so Ms Sayer used the Welsh flag – which has a dragon on it – for locals to fire arrows at in the pub’s skittle alley.
“The whole incident has been blown out of proportion,” she told trade magazine the Publican. “We needed a dragon to shoot at and happened to use the flag.”
Not all's fair in love and (cola) war
10 Jul 2006 11:13
It’s pleasing to see that a little honour still exists in today’s dog-eat-dog corporate world.
PepsiCo has won well-deserved praise for its refusal to accept alleged secret information about Coca-Cola, and even told its arch-rival about the plot.
Late last week, it emerged that three people in the US - including a Coke employee - had been charged with fraud along with stealing and selling trade secrets, which included a sample of a new drink being developed by Coke. The trio tried to sell the information in deals worth US$1.5m. Coke learned of the theft and the attempted sale of the “very detailed and confidential information” from Pepsi - and alerted the FBI.
Pepsi could have taken the information and used it to gain an edge over the nearest competitor. After all, the two companies have been in fierce competition for well over a century, a battle that has become all the more intense as consumers shy away of fizzy drinks in favour of healthier beverages.
Admittedly, there may have been a degree of self-interest involved on Pepsi’s part. If Pepsi was caught either accepting the information or not reporting the approach, legal repercussions and/or bad publicity would have landed at the company’s door.
However, it was satisfying to hear that the message from Pepsi was: we play hard - but we play fair.
And let us be clear - there is no end in sight to ‘The Cola Wars’.
Pepsi has been quick to take a swipe at Coke’s launch of Coca-Cola Zero in the UK, embarking on an aggressive ad campaign for Pepsi Max. The campaign’s strapline: “Max Taste, Zero Hype” leaves little doubt that the rivalry is alive and kicking.