The just-drinks interview – Brian Walsh
The C&C Group may have its cider brand Magners to thank for its recent success, but Brian Walsh, managing director of the Irish company's spirits arm C&C International, believes the group's spirits portfolio will play an important role in sustaining that growth. In this month's just-drinks interview, he tells Olly Wehring why.
Three years ago, The C&C Group floated on the Irish and London Stock Exchanges. Since then, the company has seen its Magners cider become one of the first major drinks successes of the 21st century. With the cider brand accounting for the wealth of operating profit last year (EUR179m from a total of EUR213m), the spirits unit - known as C&C International - is without doubt in its shadow, bringing in a comparatively lowly EUR18m in operating profit in 2006.
However, C&C's managing director Brian Walsh does not have the air of a second fiddler, and while acknowledging the importance of Magners to the company, he believes the spirits side of the business is set to assert itself.
|Brian Walsh, managing director of C&C International|
"Success has brought a sort of a lopsided nature to the group," Walsh concedes. But the recent disposal of Britvic has given a sharper focus which Walsh believes will stand C&C International in good stead. "Strategically, we're increasingly seeing ourselves as an alcohol company," Walsh explains. "Just as Diageo, for example, would have a very large spirits business and a somewhat smaller beer business, we have a rather large cider business which we regard as being in the beer market, and now a spirits and liqueurs business. We see that fitting, whereas the soft drinks, in the long term, wasn't core."
So, going forward, C&C will focus on the alcohol side - but with only four brands in its stable, the concern must be that C&C International is not a priority for the group.
Walsh is keen to highlight, however, that in Tullamore Dew, the group has an Irish whiskey that is a force to be reckoned with. "We think that the Irish whiskey market in 2006 grew by 7.7%, while Tullamore Dew grew by 16% in depletions, with shipments up by 20%," Walsh boasts. "It's absolutely on fire. We're spending a lot more money on it. In each of the last two years, we've spent over 30% more on marketing."
With Pernod Ricard leading the Irish whiskey field with Jameson, and Diageo recently appearing on the scene through its purchase of Bushmills, Walsh is still very optimistic about the brand's future. "The interesting thing is that Jameson has areas of enormous growth like Ireland, the UK, France and the US, while building strength in South Africa, Spain and to some extent Russia," he notes. "Where Jameson is terribly strong and entrenched, we find it difficult to make headway. But where it's not, we have been doing extremely well.
"Germany was historically our power base, but we've now expanded that base to cover really all of northern and Eastern Europe. In Sweden and Denmark, we're the number one Irish whiskey. Across to Germany, Czech Republic, Bulgaria, the Baltics and all the way over to Poland, we're also the number one Irish whiskey. Even in Latvia and Bulgaria, we're the top-selling of all whiskies. So there's great progress happening in Europe."
Walsh also notes that C&C is positioning its Irish offering differently from Jameson. "Pernod prides itself on positioning Jameson not as an Irish whiskey, but more as something that has its own intrinsic characteristics and competes on an equal footing," Walsh says. "We do the opposite - we unashamedly say we're an Irish whiskey and we show Irish associations with the brand. Our advertising features Irish music; it would be in an Irish bar and Irish countryside features as well."
As brands from Guinness to Riverdance can testify, 'Irishness' sells in export markets, and clearly Walsh believes that stressing heritage and provenance through Irish imagery is exactly the right tack for Tullamore Dew.
"We're embracing Irishness and using it to say that Ireland's a great place for whiskey to come from, whereas they're saying more lifestyle-related things. They're both from the same country, (but) we're saying different things - I think that's very healthy."
Nor does Walsh mind the idea of having the two global heavyweights at large in the Irish whiskey category. "I think it's good for the market to have Diageo and Pernod present, certainly," he says. "I don't think it's bad for us." Indeed, as the Irish whiskey share of the total whisky market is quite small in many global markets, Walsh believes that the category as a whole can benefit. "There's great potential for everybody. If we have to start worrying about the size of our competitors then we're in trouble. I don't think it will necessarily help us, but it won't hinder us."
The presence of a large competitor may not be an issue for C&C in the Irish whiskey segment but another of its brands has to face the kind of dominating market leader that it is hard to ignore. In Carolans, C&C has an Irish cream liqueur that competes head-to-head with Diageo's market leader, Bailey's, and Walsh cannot deny that Bailey's defines the category. But he believes C&C has found a modus operandi for Carolans.
"The nature of the competition in the Irish creams market is dramatically different to Irish whiskey," Walsh notes. "In Irish whiskey, there are three premium products and there really is no cheap sector. With Irish creams, there is only one premium brand and that's Bailey's. Other people have tried to bring out similar products at the same price level or higher than Bailey's, and everybody has failed. It's not a difficult lesson to learn. We're in a mid-market sector with Carolans - we're around 25%, sometimes even 30% cheaper than Bailey's."
Walsh sees growth for Carolans coming more from the market as a whole performing well, or consumers "realising that there's very little difference in quality between Bailey's and the other brands". The strategy is refreshingly pragmatic. Rather than dreaming of taking on an unassailable competitor, Walsh believes C&C can build Carolans on a price proposition.
"When we get new distributors, people get delusions of grandeur about Carolans," he candidly admits. "You just can't do it - you can't dislodge a brand like Bailey's. We're offering the consumer the opportunity to save money. Once you start fooling yourself that that's not the case, then you're in trouble."
Of course, the better a small company does in competing with the global giants, the more likely it is to become an acquisition target, and C&C's huge success with Magners - the other two brands in the portfolio are the liqueurs Irish Mist and Frangelico - has certainly attracted attention.
Walsh once again takes a no-nonsense view. "We're a public company," he says. "Anyone can buy the shares. Our strategy is to grow our business. We're now an alcohol company which we're very keen to optimise. But once you're a public company, you're out there. It must be attractive, however, for C&C shareholders to sit on the ride and see what happens to cider. I'm sure a lot of shareholders would be reluctant to sell when it's unclear how good this could be - and some of us think it could be very good."
Whilst C&C's recent - and markedly successful - past has been distinctly cider-coloured, Walsh is confident that spirits will feature rather more prominently in its hopefully equally illustrious future.
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