Just the Answer - Larry Watson

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The rum market may be dominated by white rum - and by one brand in particular - but Larry Watson, managing director, distribution division, at Jamaican rum producer, J Wray & Nephew, believes there is strong growth potential for aged "golden" rums. In this month's Just the Answer interview, Watson talks about the company's Appleton brand and the future for the premium rum category.

J-D: How are your brands performing and what is the general outlook for the rum category?

Watson: We use a phrase, a trend is our friend. I think the premium category is hot and I think the rum sector is hot, both in flavoured rum and in premium golden rum. We are poised very nicely to exploit that opportunity. We don't target or shotgun our marketing strategy - we try and choose where we think the opportunities are and so far we have been quite successful.

J-D: What would you say is your strategy for growth?

Watson: We sell well over 1m cases of Appleton. The major areas where we do business are Mexico, Canada, the US, the UK, Peru and New Zealand. We've had a look at the global drinks market and we've identified markets like Italy, Spain the UK, New Zealand and Australia that have tremendous opportunities for growth. We find people to a large extent do not understand premium golden rums. We see ourselves in the same pond as whiskies, malts and Cognacs, but we find we are more user-friendly. We have a saying, anything that gin, vodka, Scotch or whisky can do, Appleton can do better. And that's part of our strategy. If your usual drink is gin and tonic, we say try an Appleton and tonic. It's really the most versatile spirit around. Our strategy is to put it on to people's lips.

J-D: How do you differentiate yourself from your competitors?

Watson: If you taste our rum against the other rums, we come out on top. We have nothing against people drinking decent rums. Bacardi, for example, has a particular style of rum with a particular flavour. Our rum has more flavour, more character, and quite frankly we have a higher quality and aged product. We welcome good competition, because we think the rum category as a whole is under-developed. Globally, rum consumption is around 108m to 110m cases with a very small base. If we go one-on-one with people, we will comfortably challenge any rum product in the world, and 99 times out of 100 we'll win. We'll even put our product against whiskies and Cognacs, and we have full confidence in what we have to offer.

Larry Watson

J-D: What is your distribution strategy around the world?

Watson: We're focusing on market by market, not a global deal with anybody. We are small, while Bacardi and Havana Club are big multinationals. We're pretty big in Jamaica, but internationally we are an independent company. I think when you're trying to build a brand, bigger advertising doesn't work. Rum had its genesis in the days of colonialism, when the aged, dark rums were kept a secret. This type of rum was never commercialised. Fundamentally, global alliances won't work for us, I believe.

J-D: What is your ownership structure in relation to future independence?

Watson: We're totally committed to remaining independent. We're traded on the Jamaican Stock Exchange, and we're not susceptible to a hostile takeover, as we have a share structure that doesn't allow for takeover.

J-D: So what is your take on the impending consolidation within the spirits industry?

Watson: I think the big are getting bigger and this will open up opportunities for the small and medium-sized. We tend to find success with companies that are more understanding of the brand-building process. We have got into bed with Brown-Forman in the US, for example, and we have found that they understand this process. When you get caught in the pull of a company that sells up to 50m cases, I think you get lost in the clutter of their priorities and those companies forget how to build brands. The 250-odd years that we have been in existence, it's not luck that made us survive these years!

I did a study once of the top 10 or 15 brands in the World, and I couldn't find a brand with global distribution. Every one of them was focused. Bacardi, when they were selling 22m cases, only five countries accounted for 85% of their sales, for example. We may throw out six fishing lines and see if we get a nibble - if we do, then we'll work the market and build it. Prudence would dictate that you have broad distribution, and we do believe in going out there and getting distribution. But when it takes using our limited funds to go in and work markets, we focus strategically on markets where we think we have an opportunity.

J-D: What are Appleton's plans for the future?

Watson: We are blessed in Jamaica in that we represent all of the major international spirits brands - we bottle Smirnoff and Gordon's under licence, we represent and bottle Campari. We have alliances that we may go into a country with, like our agreement with Brown-Forman in the US. I don't think any company in the world goes out looking for a global alliance. When objectives are synchronised, you work well together. When they grow a little bit apart, you run into trouble. We used to be distributed by Diageo in the US until one day they said; "If you can't put US$10m on our bottom line, then you don't get on our radar screen." We went to them with US$2m, and do you know what they said? "Hey Larry, that's a pin's prick on an elephant's ass." And I thought I was going in with big money. So you find the right partner in the right territory.

As for our future plans, let's put it this way - the Appleton trademark is inextricably linked to the shareholdings of (parent company) Lascelles deMercado, shares in which can be bought, but control of which can't be acquired. Besides, I can't think of any company today that would want to get 29,600 acres of sugar cane, at least two distilleries, a sugar factory and 2,000 employees. I don't think anyone would be interested. We're a company that is not for sale and that has the integrity and quality of our product. We know the business we are in and we know Jamaica - this is our home.

Within the next 20 years, we're looking to accumulate growth of 15% per year. We have some serious stocks of aged rums going down, some of which will be to die for. My mission is, when I retire, to have such a stock of aged rum that we're going to control the world. That's our bank.

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