Just the Answer - Bengt Baron
Absolut is the world's third largest spirits brand and has consistently won plaudits for innovative marketing. Just-drinks quizzed Bengt Baron, president of V&S Absolut Spirits, about the brand's success, new product launches and V&S Group's plans for the future.
J-D: How are V&S's plans to establish itself among the world's top league of wine and spirits producers progressing?
Baron: V&S Group has doubled its volumes and tripled its turnover in the last five years and is now number seven among the international wine and spirits producers.
J-D: How has your partnership with Maxxium benefited V&S since it joined?
Baron: Our collaboration with Maxxium is excellent, which the increase of Absolut Vodka shipments by 5% for 2004 shows.
J-D: Is the Absolut brand still the international force it once was, or, has the plethora of new premium vodka launches from competitors hit the brand?
Baron: Absolut Vodka is the world's third largest spirits brand and the sales volumes are continuously increasing. The competition in the US market is tough with more than a hundred new vodkas being launched in the last two years. However, Absolut has a stable market share of around 11%.
In other markets, i.e. Europe, the volume growth has been significant.
Only in the last 10 years have we taken Absolut and looked outside the US. What we found was that the brand had travelled further than the product. It is growing in a number of markets including Germany and the UK.
J-D: How do you see Absolut's future evolving?
Baron: Absolut will continue to grow both in the US and in the rest of the world. In 2004, we have reached a volume of 5m 9-litre cases in the US. Absolut Vodka will be only the third distilled spirits brand to achieve this milestone in the US.
Level Vodka, our new super-premium vodka, reached 97,000 9-litre cases in its first year on the American market. Level will then be the first super-premium vodka to achieve this in its first year.
We are also seeing a significant growth for Absolut Vodka both in Europe and in Asia & Pacific. In 2004, markets like Canada grew by 17%; markets like Germany and the UK grew by 21%. Asia & Pacific grew by 56% in 2004, where China is now our biggest growing market. As Asia is a traditional brown spirits region, we have to see growth on a more long-term basis, however the growth development is very good so far. For 2005, we again have high expectations for growth in both Europe and Asia & Pacific.
J-D: I see you are launching a ready-to-drink Absolut, is this a sign of things to come globally or should we keep more of an eye on the recent premium Level launch and new flavour extensions?
Baron: Level is our super-premium vodka; in the US market it is already 97,000 cases. Cut is our entry into the FAB market; it has been launched in Canada and in 100 outlets in the UK, where it is still not a mainstream launch.
The consumer is growing a little tired of the FAB offering and is looking for a more sophisticated offering. We hope that's where Cut can fit in. It is less sweet and brings a higher level of quality and sophistication to the category. Absolut Cut is also premium priced and we feel the packaging itself radiates premium. It is a 5-10% premium on Smirnoff Ice.
Yes, we will see new flavours. But we won't see 21 flavours of Absolut. Some will stay for good, other will come and go. Perhaps there will be different portfolios in different markets.
J-D: Does V&S still rely too heavily on one brand (Absolut) for its international growth?
Baron: Absolut is the most important brand for V&S Group, but we are investing in growing other brands both internationally and regionally. Plymouth Gin, Frïs Vodka and Danzka Vodka are aimed at the international market.
J-D: Will V&S look for further acquisitions to broaden its portfolio?
Baron: V&S Group will take an active part in the changes within the international spirits industry and will consider opportunities that might come up.
Four years ago after the Seagram sale it was all about size, size, size. But we see Brown-Forman, essentially a one-brand company, doing well. Bacardi is a focused business and doing well. Then we see some of the big players struggling to handle a wider portfolio.
We have tried to build scale through distribution partnerships.
Would I love to have another Absolut? Definitely. But I am not sure that size alone gives you an advantage.
J-D: Can medium-sized company's such as yourselves continue to compete effectively in the face of competitors who continue to get bigger and bigger. If so how?
Baron: Our partnerships within Maxxium and Future Brands are very good examples of how you can compete successfully, even though you are a medium-sized company.
J-D: Could Maxxium take on further partners?
Baron: Yes, that is possible, given that the brands fit into the portfolio.
J-D: Would V&S not benefit from being privatised? Do you ever see this happening?
Baron: We don't see that it would be any big difference. For V&S it is important to have an owner with a long-term perspective. There are no plans for privatisation.
I am not sure that Absolut would have happened under a publicly-traded owner. We are not focused on quarterly profits and who would have thought Absolut would have done what it has when it was launched. We were able to take a long-term view.
From a business point of view, they (the government) are good owners, no less demanding on results. And as long as we deliver, they are happy owners.
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