What can the spirits industry learn from Remy Cointreau? - Comment

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Following on from just-drinks' analysis of Remy Cointreau's performance over the last five years, spirits commentator Ian Buxton considers the takeaways for the wider spirits industry.

What lessons can other spirits companies learn from Remy Cointreaus recent adventures?

What lessons can other spirits companies learn from Remy Cointreau's recent adventures?

What lessons can we and the rest of the drinks industry take from Remy Cointreau's performance in recent years and the strategies they have employed to claw back their position? What, if anything, do Remy's experiences mean for the wider spirits category?

At the risk of being both simplistic and wise after the event, one major lesson might be summed up as "don't keep all your eggs in one basket". Five years ago, Remy's one golden egg was its Cognac output. The decision to double-down by concentrating on one key market for the segment, however, created a real danger for the company. As is now well-known, Remy bet heavily on China but, when the market turned sharply down in 2012-13 in response to new leader premier Xi Jinping's anti-corruption campaigns, the company saw a dramatic drop in sales and profitability.

There's another moral here: If you play with the pitch, expect to get your hands dirty. The nature of much pre-2013 Chinese business was hardly unknown. Much of the drinks industry turned a convenient blind eye to extravagant entertaining, lavish 'gifting' and other business practices that would have been considered as uncomfortably close to corruption - if not actually illegal - in the West. Rather as the Scotch and Canadian whisky industry shipped to intermediaries during Prohibition, knowing that their products would end up in the hands of some unsavoury characters, so business was done in China that would not have been condoned elsewhere.

It turned out that Remy didn't have a long enough spoon and so paid a heavy price for tacit acceptance of 'cultural differences' that all concerned must have suspected would eventually end badly.

As this China experience demonstrates, it's hard to buck the market, especially for a company of Remy's size. But, where they have been successful subsequently is in smartly catching and riding trends – and here their relative lack of scale allows them to move faster and more flexibly than larger and less nimble rivals.

Notable examples are the group's US$90m purchase of Bruichladdich in mid-2012, giving them representation in single malt Scotch with a cult brand; the more recent acquisition of Westland Distillery in the US opening up the craft spirits segment, and the well-targeted cocktail mixer campaign for Cointreau giving new life and purpose to an old favourite in the declining liqueurs category. As the tortured history of Drambuie illustrates, taking historic brand equity and making it relevant to today's consumer is easier said than done, so kudos to Remy for a smartly-executed piece of positioning.

Why the spirits brands of the past should be wary of the future - Click here for a just-drinks comment

There are, though, some interesting lessons that have come out of the Bruichladdich acquisition. For one, be lucky: the purchase price looked very full at the time, but Scotch has continued its long-term move up-market and cult single malt brands are right at the forefront of the trend. Bear in mind also that the price doesn't look so unreasonable when considered in the light of the $415m Brown-Forman chose to splash on the BenRiach, GlenDronach and Glenglassaugh single malts.

But, it gets better. Bruichladdich came with a bonus - gin brand The Botanist - that turned out to be perfectly positioned for a gin boom that few would have foreseen back in 2012. Indeed, informed insiders suggest that Remy would have been perfectly content to see the brand depart with former MD Mark Reynier. Today it's been an extraordinary success. Sources tell me that in the current year, Bruichladdich will sell more cases of gin than whisky - 2015 IWSR figures credit The Botanist with case volumes exceeding 75,000 worldwide, a number which has likely grown since that report.

Considering that Bruichladdich has been making whisky, albeit intermittently, since 1881 and The Botanist was launched as recently as 2011, that's a remarkable achievement and a tribute to some positioning that now looks shrewd but had more than an element of good fortune. Given the 10x sales multiple that Beam Suntory reputedly agreed for a controlling interest in Sipsmith, the 'accidental' acquisition of a premium gin now looks like a masterstroke. It's hard to imagine that anyone could now prize it from Remy's grateful hands. Beam Suntory will be hoping for a similar sales trajectory as they put their new baby into a professional international distribution network far more sophisticated than any small independent could aspire to.

And a final lesson from Islay: Let the management manage. One of the great successes at Bruichladdich has been keeping the majority of the team together, happy and motivated. With relatively few changes at senior level, Remy has proved to be a benevolent owner supporting the existing management's established strategies and plans with greater investment and discreet support. They have shrewdly understood that the Bruichladdich team know whisky (and, it seems, gin) better than they do. Adding Remy's international marketing power to Bruichladdich's insights has enabled the business to think global, yet continue to act local.

Perhaps chief executive Valérie Chapoulaud-Floquet's single biggest step has been to apply lessons from other categories. Building on her previous experience at Louis Vuitton, she has worked to turn Remy into what she termed a "luxury goods" player; using its "exceptional spirits" to drive new opportunities in the US and other key markets around the world. Remy has moved its target to a growing younger, discerning consumer with a willingness, and ability, to spend more on $50+ brands. Again, the timing seems to have been near-perfect and this is a niche better suited to Remy's scale than trying to tough it out with industry giants.

So, what can we learn?

  • Be careful of the company that you keep. If you suspect the ripe whiff of corruption and have to hold your nose when dealing with certain markets, then perhaps you shouldn't be there in the first place
  • Ride trends. Be flexible, responsive and back your winners, accidental or not!
  • Invest in - and support - talented people. Give them the scope to run their business unit
  • And, remember that you'll never buck the market forever – have a contingency plan for the next nasty surprise. Chances are, it's just around the corner

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