WHAT, if anything, do Scotch whisky brands have in common with ancient Rome? The answer: they’re not built in a day.
Edrington Group, the Glasgow-based company which acquired Highland Distillers in November 1999, now has four “drive” brands in its drinks cabinet. But these have an average age of 141 years, a collective longevity that may well be unprecedented in the branded goods arena.
Highland Park was first distilled in 1789, the year of the storming of the Bastille. The Macallan was launched soon after the ending of the Napoleonic wars in 1824. Edrington’s biggest-seller, The Famous Grouse, fluttered on to the scene at the apogee Victorian Britain in 1896, while Cutty Sark is a relative newcomer, having been launched by upmarket London wine merchant Berry Bros & Rudd in 1923.
With such a long heritage, creating another Scotch whisky brand from scratch is not on the agenda for Edrington. Instead, Ian Good, the company’s 59-year-old chairman and chief executive, believes that brand extensions are the name of the game.
The company recently opted to focus its marketing effort on a small collection of “drive” brands. The four were singled out mainly because they were deemed to have a capacity for constant rejuvenation, as well as international growth.
Currently just 60% of Edrington’s sales are exported, against 90% for the industry. In its attempts to catch up, Edrington is determined not to spread itself too thinly.
Ian Good says: “With Macallan, The Famous Grouse and Cutty Sark we’ve got to be realistic and say we cannot devote the resources to those brands in every market that they have got a chance in. So we’ve got to focus, decide which markets we believe they have the best chance in and then make a meaningful spend rather than the scatter-gun approach.
“Part of our strategy is to grow The Famous Grouse, particularly in overseas markets, where we have got more ground to make up against the rest of the industry,” says Ian Good.
He says the company is also toying with the idea of launching ready-to-drink products based on one or more of these four brands. These could be along similar lines to Bacardi Breezer and Smirnoff Ice.
Ian Good explains: “That’s something which as a company we cannot ignore. Whether we enter it, how we enter it, what we do, is another thing. But it would be irresponsible for us to say that’s just a fad ignore it.”
Good denies that Edrington’s more focused strategy will see its other brands — Black Bottle, Bunnahabhain, Glengoyne, Glenrothes, Gloag’s Gin and Tamdhu — starved of resources. He says these will continue to receive a degree of marketing support, but only as and when opportunities arise.
The approach is starting to bear fruit. Amid stockmarket turmoil, privately-owned Edrington last week said its pre-tax profits for the year to 31 March had risen by 12.8% to £49.7 million, with sales up 6.6% to £200.8m. Earnings attributable to shareholders — a yardstick Good says is particularly relevant given that 675 of the company’s 900 staff own shares — rose 16.8% to £24.8m.
Ian Good says: “One factor in these results is that we have invested in our brands. As your brands start to develop, you start to feel the incremental benefit. Brands are a much more valuable proposition than selling a commodity. All of our brands have outperformed the industry and we have gained market share in the respective sectors.”
In May, 60 of Edrington’s top distribution executives from around the world gathered at the Famous Grouse Experience — which opened to the public last month at the Glenturret Distillery near Crieff — to examine ways of furthering the group’s international expansion.
It seems that efforts are likely to be concentrated in the emerging markets of South America and the Far East (especially in the case of The Macallan), markets in which Good sees signs of an upturn, and where the group has a lower than average market share. He also sees potential for growth — especially for The Famous Grouse and Cutty Sark blended Scotch whiskies — in Europe. They are already well represented in Spain, Portugal and Greece.
Ian Good says: “For The Famous Grouse, the UK is still our number one market, but we are seeing tremendous growth in Greece, Sweden, the Netherlands and, to a lesser degree but still important, progress in the US, where we have grown against a market which is in decline.”
This is partly attributable to the success of the Famous Grouse branded Vintage Malts range, a collection of aged blended malts which Good says have helped “build a bridge” between the more esoteric malt markets and the more accessible premium blended sector. “They have also created a halo effect for The Famous Grouse.”
Good also attributes some of The Famous Grouse’s success to the strength of Edrington’s part-owned distribution network, Maxxium. Inaugurated in 1999, this is a joint venture between Remy Cointreau, Absolut vodka distillers Vin & Sprit and Jim Beam Brands.
He says: “It’s pretty self-evident that The Famous Grouse is growing in overseas markets. Part of the reason for that undoubtedly has been Maxxium’s strength in certain markets. You need a strong distribution partner. We’ve got more than a distribution partner, we’ve got a company in which we have a 25% shareholding.”
Yet Ian Good doen’t relish the prospect of extending Maxxium into the US market. “The Macallan and The Famous Grouse are growing very well in the US. I don’t see how putting that together [with the other Maxxium brands] would enable us to retain the focus we have now.”
Kyndal, the management buyout from Jim Beam Brands, is on what Ian Good terms an “exit route”.
Another plank in Edrington’s drive to boost The Famous Grouse’s international credentials was the opening last month of the £2.5m Famous Grouse Experience in Crieff. It is described as a sort of “spiritual home” for the 106-year old brand.
The aim is for overseas visitors to flock there and return home suitably educated as “ambassadors” for the brand. The attraction is targeting 140,000 visitors in its first 12 months, which would place it below Blair Castle but above Glamis Castle in visitor number terms. “Given the tourism business in Scotland, it’s quite a challenging target,” says Ian Good.
Ian Good on responsible drinking
Given Edrington’s possible launch of ready-to-drink products — which have come in for censure because they are quaffed by youngsters, many of whom have little or no idea of their alcohol content — where does Good, also chairman of the Scotch Whisky Association, stand on the thorny subject of alcohol abuse?
He said: “The SWA and its member companies have a very strong message on moderation. Alcohol in moderation can be beneficial to health. From the US to Europe, the research has proven that.
“Alcohol abuse is something which as a society we should be tackling. The industry, through the Portman Group particularly, is trying to focus on moderation and preventing underage drinking.”
“At the end of the day it is a much wider thing than anything the Scotch Whisky Association or even the industry generally can do much about. But it is something that I can assure you is very much on the agenda at the Scotch Whisky Association. As a general rule the more information we can give to the consumer the better. How it’s communicated, whether that’s on the bottle, or whether it’s at the point of sale, is another issue.”
Personally, Ian Good is a strong supporter of the euro. “I believe it would be beneficial from a business point of view. If 40% of Scotch whisky exports go to the EU and we are the odd ones out in currency terms it does seem rather illogical.”
Yet Good has little desire for Edrington to be used as a political football in the heated euro debate.
He says: “Our business is about growing our brands and delivering earnings to shareholders, not being sucked into the political debate on the euro.”
This interview with Ian Good, chairman and chief executive of the Edrington Group was published in the Sunday Herald on 28 July 2002.