This week, with the help of Canadean Company Watch 2002, we review two of the industry's smaller but more determined operations, France's Remy Cointreau and the Swedish State-run Vin & Sprit. Both have been experiencing considerable success of late, not least because of their mutual membership of global distribution behemoth Maxxium.
Remy Cointreau
By the late 1990s Remy Cointreau was at the front of a wave of companies suffering from the crash of the Asian economies. And, when current chairman Dominique Heriard Dubreuil took hold of the reigns in January 1998, a significant turnaround of the group's financial performance was needed. Within a matter of three years, a tough and unsentimental approach to the business has seen Dubreuil implement a strategy that has quelled fears Remy was on the slide and returned the company's leading brands to levels of significant growth.
Turnover in 1999 was €646m and operating profit €81m (on a pro forma basis) but by 2002 the company had seen an increase to €926m in turnover and €184m in operating profit. As Canadean says in its Company Watch: "The company (Remy Cointreau) may be a smaller player in the big league, but it has a clear strategy which is achieving the desired results."
Dubreuil's approach was to select potentially profitable brands from Remy's portfolio, revitalising them through repackaging, creating additions to the range and sharply targeting the marketing spend, thus enabling price increases. The company has also been focussed on cutting costs and improving efficiency and been keen to expand through alliances and partnerships.
Its worldwide distribution network Maxxium, with JBB and Highland Distillers, has been expanded to include the Swedish state-run Vin & Sprit, which of course has brought with it the Absolut brand.
But Canadean singles out the acquisition of Bols in 2000 as the most significant factor in re-energising the Remy management. The benefits have included, "the acquired brands, which although relatively low profit items, offer the financial benefit of short life-cycle products, thereby not tying up Capital," explains Canadean. "Perhaps more important, however, is the wider distribution system, the expertise in innovation and the modern management skills."
There are still concerns over Champagne stocks, following the millennium and the company has had to cut the current year growth forecasts from 20% to 4 to 5% following the world economic slowdown after September 11th.
However as Canadean points out the company will continue to develop its strategy, making markets that show the best rates of growth the priority. "The US was top of this list," says Canadean, "and efforts will certainly be made to maintain the momentum of the group's marketing efforts here."
There are also good prospects Remy will continue to expand its portfolio, although it has rejected the idea of buying any of Seagram's spin-offs. Not only has the Group indicated it is open to further acquisition possibilities, but the Maxxium distribution system and Remy's own operations in the US and Caribbean will continue to attract other groups, who are finding it difficult to compete in the consolidating environment.
Vin and Sprit
The fortunes of Vin & Sprit, on the international scene at least, have until recently been tied into the performance of its number one brand Absolut Vodka, and some fortune it has been. The brand growth in recent years has been outstanding with a further 9% achieved in 2000, taking it to 7.3m cases.
Absolut is now the world's fourth largest spirits brand but V&S's ambitions are far from satisfied. As Canadean says in its Company Watch: "Whilst it obviously has a long way to go in its quest for the number one spot, it is gaining ground at a remarkable rate."
And, whilst competition in vodka remains one of the fiercest of any drinks category, the move into the Maxxium portfolio, following the sale of Seagram, the previous global distributor, may be greatly to the company's advantage.
As proud of Absolut's success as V&S is, the company has become increasingly aware of its dependence on one product. As a result V&S has set itself the target of becoming one of the leaders in the global spirits industry by 2005, which will include a business with a better product balance.
To achieve this, an aggressive growth strategy has been developed to complement the organic growth of the business. This vision has been broken down into four basic objectives. The first is the most obvious, which is to continue to build the Absolut brand, by developing the range, expanding markets and widening distribution.
Secondly, it has begun building a Nordic power base, using its good financial position and local knowledge. Already it has succeeded in clinching bolt-on acquisitions of other Nordic countries' domestic spirits operations, such as Danish Distillers and Marli of Finland.
V&S is then looking to expand its distribution system in other local markets towards Eastern Europe. On this front it has already acquired the leading Czech Distiller Dynbyl and launched its own vodka Kron in Poland. It is also one of the leading contenders to take part in Poland's vodka privatisation process.
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The final piece of the strategy is to acquire and grow international brands, and this part is more of a long-term goal. It has acquired 50% of Plymouth gin but the brand, whilst not without potential, is still fairly niche.
As V&S fortunes continue to grow, the subject of privatisation of the company keeps cropping up. The debate centres on whether the government can run a successful alcohol business and try and combat the woes of alcohol abuse. However, for now there would appear to be no change in the situation on the horizon.
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