Interview

just the Answer - Casa Pedro Domecq's International Team

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This month's just the Answer sees us interview Michael Kaller, the international marketing director of Pernod Ricard's Mexico unit, Casa Pedro Domecq, and the executive director of Casa Pedro Domecq International, Olivier Fages.

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just-drinks: Your flagship Tequila brand for Pernod Ricard is Olmeca - where does it sit in the league table of Tequila, globally?

Olivier Fages: Pernod Ricard sells around 450,000 cases of Olmeca per year. In volume terms, that places us around seventh or eighth position. But, if we consider the value, then we are the number four brand in the world, behind Cuervo, Patron and Sauza. We are much more interested in building value rather than volume – this has been our strategy since Pernod took over Olmeca in 2002.

j-d: In which price categories does the Tequila industry tend to operate, and where is growth coming from?

Michael Kaller: The biggest chunk of business for Tequila, in both value and volume, comes from the standard and standard-premium levels. But, what we've seen over the last couple of years is that growth has been driven by the premium-plus segment – that's at around US$24-plus a bottle. What that means is that the likes of Cuervo or Sauza Gold have been stable or even declining over the last couple of years.

OF: In the ultra-premium arena, Patron has been the driver for the last seven or eight years. But, we can see some premium brands coming to market very quickly and aggressively. 1800 Tequila, for example, is doing a very good job in the US with a very interesting proposal. Brands like this, we believe, will drive growth of the Tequila category on top of ultra-premium.

j-d: And whereabouts does Olmeca operate?

It depends on the market. Our standard-premium offering is available in Greece, for example, at EUR20 for 70cl. The same bottle in Russia, however, goes for EUR45 to EUR50. In general, our average price for Olmeca is EUR20 to EUR23. Omeca Altos, meanwhile, is in the super premium sector at about EUR30 per bottle. Our ultra-premium offering is the small-batch Tezon at between EUR45 to EUR60 on average.

j-d: Has Tequila managed to be recession-proof over the last two years?

O-F: It seems that Patron has kept on growing, although not as much as it used to. It's been more single-digit than double-digit. Patron has been in a positive-stable position. We can also see brands like 1800 have been a little lower than Patron. Medium- to long-term, the growth has c ome from super-premium. In the short-term, value brands have moved very quickly in the last two years, especially in the US. So, there has been a trend towards value Tequila, which is clearly related to the downturn.

Olivier Fages (left) and Michael Kaller

j-d: Are you tempted to play in the value sector?

O-F: Frankly, we believe this is only a short-term trend. We have always tried to focus Olmeca on the medium- and long-term. Nevertheless, there could be some opportunities for value brands, but we will not play this with Olmeca itself. We might use other brands, like Mariachi, but they will be used to support the premium positioning of the Olmeca range.

j-d: All Tequila brands are keen to emphasise provenance and heritage. How does Olmeca do this and how do you differentiate your brand from all the others?

MK: There is a new Tequila brand being released almost every week – it's becoming a very crowded market-place. With Olmeca, we have two pillars: Firstly, we are a highland Tequila. There are many geographical advantages to using highland agave. Sauza, Cuervo and Herradura are all lowland Tequilas – they are from the lower valley of Jalisco. Secondly, we have a master distiller – Jesus Hernandez – who has been in the industry for the last 40 years. He is highly regarded among bartenders. 

We are trying to offer consumers not so much the typical cliché Mexican Tequila experience – we avoid the Mexican singers, the beach and such cliché images. We're trying to position Olmeca as a global, international 'nightlife' brand.

j-d: Looking geographically, which markets are the largest for Olmeca?

O-F: In both volumes and value terms, it's currently Russia – which accounts for 20% of our export volumes - followed by Duty Free, South Africa and then several European countries. We're not very big in the US yet, because we've only launched in the country this year! When Pernod took over Olmeca in 2002, we took the decision to build the brand in the medium- and long-term. So, to target markets with potential, we looked at emerging countries. Olmeca is clearly the market leader in the BRIC countries, as well as South Africa and Turkey.

We believe now is the time to look to enter the US market. It's the biggest market in the world; short-, medium- and long-term we have to be in the US. So, this year, we're running some tests in country. If things go well, we'll keep working on the US. It's where so many trends have come from, so it's important to be there.

j-d: What future plans do you have for Olmeca?

We're going to keep an eye on the tests in the US, and we're going to keep expanding our footprint in the emerging markets. Even though we believe these markets will provide much faster growth, it's like a mountain trail : Sometimes the growth will not be there – we can expect some days of downward-trend.


Sectors: Spirits

Companies: Pernod Ricard, Ricard

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