Olly Wehring

The beverage business blog from Olly Wehring

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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?

Comments on this blog post

Given that Bacardi was huge over in China 60 years ago and almost a ghost now, Havana Club (Pernod) should take advantage by working this market. Let Bacardi use their muscle to market it (the name) in the US because the world isn't going to stay the same. Pernod will have the last laugh because there are lot of other names Bacardi could have used

 

Mike Armstrong, Taiwan

I ask you this though, what would happen if the shoe was on the other foot? If the US was in Cuba's position against a country like China; would the US Govt. stand for that?

 

Fraser, Myanmar

You should ask Bacardi why they bought the Havana Club name, but give all their other spirits (from several distilleries and several qualities) the same name. You can't distill at different places and get the same result.

 

Rene van Hoven, Netherlands

The bottle clearly states on the label in 1/2" type that it is PR rum!

 

Marc Skinner, United States

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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.

Comments on this blog post

I smell a marketing partnership between the two companies, or possibly a merger with Pernod Ricard as the leader. Stay tuned...

 

Jeffrey Pipes Guice, United States

It is long past time to end the embargo on trade and travel between the US and Cuba.

 

Doug McDowall, United States

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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.

Comments on this blog post

I agree re: the poor drinking habits of the French as to beer, but a good part of blame, as in the US, has to do with the way beer manufactuers advertise their products, ie always in a sports bar or at baseball games or cookouts. The big problem is that they don't show beer being drunk with food, as the wine companies do.

 

Norman Weiner, United States

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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.

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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?

Comments on this blog post

James Maitland of Seckford Wines Ltd says that supermarkets are a great nursery for developing wine interest. http://www.newsquoter.com/ViewQuote.aspx?QuoteId=347

 

Newsquoter, United Kingdom

Olly, As one who earns a living selling wine to the supermarkets I have watched supplier margins being squeezed for 13 years now. Pretty soon there won't be enough there for many of us to survive on! However I have always maintained that 'if it's too hot then get out of the kitchen'. So while I can still enjoy doing a deal or two I will....but when it all finally gets too tight then I guess I'll have to look elsewhere. Shame...but that's life I guess?! MD

 

Mark Denison, United Kingdom

The argument over supermarket discounting neatly ignores the uncomfortable fact that most of us now live in a discount culture. Before giving a presentation on the UK wine trade recently to a group of Argentine producers, I spent half an hour walking around my nearest shopping centre photographing promotions for half-price offers. These included pizzas, movie tickets, shampoo, sofas, knickers and potatoes. Members of the drinks industry who complain about under-pricing in supermarkets should take a look at the price they paid for the Ryanair and Easyjet flights they took to get away to the sun this summer. That's if they're not too busy reading their BOGOF novel. There's nothing remotely laudable or attractive in pretending that a carpet, a kitchen, a leather sofa or a bottle of Aussie wine is really being sold at half the price that it ought to cost. But, since when was unbridled capitalism supposed to be laudable and attractive? The idea of bringing in rules of some kind is appealing, but it's worth noting that the Irish have just thrown out a whole batch of theirs that were supposed to prevent selling at below cost - because they were too hard to implement.

 

Robert Joseph, United Kingdom

As an operational marketing person, I certainly believe there may be increase in traffic and I doubt whether it will have a major incremental growth on the incidence. If the manufacturers are to create a focussed ATL and BTL efforts to expand their landscape as per their target clientele, then it will have a major growth. As a community and corporate social responsibility, the corporates need to play pivotal role on educating responsible drinking....the classic example I can quote is the markets like S.Africa where the corporates play a major proactive role on educating the public on 'responsible drinking'.

 

Rajan, India

Speaking COMPLETELY as an individual voicing his own PERSONAL opinion. I would like to float the idea of an alcohol commodity exchange as a way round these issues. If alcohol were traded as a commodity then seasonal problems could be smoothed over and flourishing derivatives and futures markets created. Being regulated it would also enforce a great deal of transparency too. Any takers? Joe Claxton

 

Joe Claxton, United Kingdom

Olly The damage done by supermarkets in Australia to the wine industry is imponderable. Supposedly taking advantage of a surplus, supermarkets have cut margins so badly the wine industry is struggling to survive in Australia. Sometimes supermarkets need to protect the industry they are making profits on, not rape it to death! Warm cheers, Peter

 

Peter Saunders, New Zealand

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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.

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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.

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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.

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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.

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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?

Comments on this blog post

I can think of one south Texas company, led by the individual who introduced Corona into the United States, that has, through its relentless focus, consistently outperformed Barton (Constellation), that led the brand's revitalization in the early 1990's by absorbing the FET increase, that championed Corona Light, and acted in the Modelo brands' best interest in the appointment of Anheuser-Busch wholesalers ... that may not share in your "everyone's a winner" comment. “To the victors go the spoils” may be the better epitaph.

 

Jim, United States

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