The beverage business blog from Olly Wehring
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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.
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.