Comment - Spirits - Drambuie For Sale
Drambuie was put up for sale last week
Last week, the owner of Drambuie put the Scotch whisky liqueur brand up for sale. Ian Buxton considers Drambuie's history and the potential runners and riders.
Drop in to almost any bar, anywhere in the world and chances are you’ll see a familiar name: Drambuie. Allegedly the ‘secret elixir’ of Bonnie Prince Charlie - its recipe said to be known only to members of the MacKinnon family - it languished in the mists of the Isle of Skye until the early 1900s.
Its glory days came after the war and, up until the late 1980s, the business was quietly successful. Run conservatively and high secretively, Drambuie seemed the classic Scottish family business.
Then, the rot slowly set in.
Following the death of their father Norman in 1989, brothers Calum and Duncan MacKinnon took over just as after-dinner liqueurs dropped out of fashion and the company began to lose its way. Some ill-judged acquisitions and the owners’ taste for speedboats, fast cars, art collecting, museum quality Jacobite glassware, a trophy office in London St James’ and a palatial Edinburgh HQ with gardeners, curatorial staff and security team didn’t help.
A steady decline in sales, compounded by inexperienced management, meant that, by 2001, Drambuie was losing over GBP3m a year (on GBP150m turnover) and carrying substantial debt. Sales had dropped from around 600,000 cases in 1987 to under 400,000 cases, despite high-profile TV advertising with lavish production values. Poorly-conceived and under-funded new products and line extensions diverted executive time and energy, and it seemed then that this proudly Scottish business, one of the few remaining in family hands, would inevitably be snapped up by one of the industry’s corporate giants.
But, radical action was taken. Under this severe pressure and scrutiny from their bankers, the family relinquished day-to-day control. CEO Calum MacKinnon stepped down and industry veteran Phil Parnell, a former marketing director at United Distillers, took his place in 2005.
At his instigation, new, professional management arrived; the art collection, lavish company HQ and several unrelated businesses were sold off and a new strategy focusing on cocktails, long mixed drinks and younger drinkers was launched. Slowly, things turned around: the bank was repaid, shareholders’ funds rebuilt and the company focussed on its core product, although not without cost and some pain.
Drambuie turned itself into a sales and marketing business, outsourcing production and bottling, first to Glenmorangie and, from 2009, Morrison Bowmore. Staff numbers fell dramatically but profitability, if not the volumes of the glory years, was restored. New, high margin expressions such as Drambuie 15, Drambuie Legacy of 1745 and the ultra-premium Jacobite Collection were launched to some success, especially in Travel Retail. New, modern packaging was introduced in 2009 for the core brand – the first significant change in nearly 100 years.
However, tragically, Parnell died of cancer in June 2011. His work, though well in hand, was far from complete and new CEO Michael Kennedy has had to battle with a continued decline in sales in Greece, once a key market, and the challenge of driving through what is a significant repositioning of the brand. The company’s last reported accounts, published in September last year, showed net profits down by 12% to GBP2.5m (US$4m) with net sales falling by 3% to GBP22.2m.
But, throughout this radical change two things have stayed constant – the secret Drambuie formula and the MacKinnon family ownership. Now, it appears they have decided it’s time to relinquish control and cash in on the ‘gift of the Prince’. Analysts suggest that the family are looking for a price of GBP100m-plus, but that will seem optimistic to many observers based on recent volumes and profitability.
The brand would fit comfortably alongside a premium whisky portfolio, such as Morrison Bowmore or Glenmorangie’s current line-up. Given their current or recent knowledge of the brand and the fire-power of their respective owners (Suntory and LVMH, respectively), both would be well-placed to bid. While Suntory is probably fully engaged with the integration of the Beam business. LVMH has been more inclined to disposals than further whisky-related acquisitions.
The Pernod Ricard and Diageo portfolios would equally represent a suitable home; competition concerns seem unlikely and both could integrate the production and bottling into their existing facilities. But, the scale of the brand seems hardly worth the effort and likely expense to an operation of their size. A return to historic sales seems a remote possibility in today’s market and one wonders why either would consider Drambuie worth the trouble.
Perhaps Drambuie fits better with William Grant & Sons. The firm has the scale and finances to absorb the brand without undue strain, can leverage Drambuie’s Scottish heritage and could easily supply the whiskies for the base product. Once again, though, the hoped-for price tag must surely give cause for pause. With the MacKinnon camp remaining tight-lipped, we can only guess at their ‘reserve’ price.
Maybe, after all, Drambuie’s days of independence are not behind it. Bonnie Prince Charlie famously escaped a price on his head, perhaps his secret elixir will as well.
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