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‘Brand building not brand battling’: Beam CEO tells analysts why tequila makes him happy

By Ben Bouckley , 02-Aug-2012

Key Beam Inc. tequila brand Sauza (Picture Copyright: TillinKa/Flickr)
Key Beam Inc. tequila brand Sauza (Picture Copyright: TillinKa/Flickr)

The CEO of Beam Inc. claims tequila will yield attractive global growth in the long-term, as his firm boosted sales of its core Sauza brand in H2 2012 after an indifferent few quarters.

Beam’s overall sales for Q2 ending June 30 were $752.4m, with net income of $100.5m, against $702.7m in sales and net income of $328m, with the latter figure lent a $267.6m boost from discontinued operations.

For the six month to ending June 30, sales of $1.415bn rose from $1.375bn year-over-year.

“Our strong top-line results were driven by our power brands and rising stars, led by Jim Beam, Maker’s Mark and Skinnygirl, and record quarterly sales from new products that improved our product mix,” Beam CEO and president Matt Shattock said.

Beam said its North America sales were particularly strong, but its top line in the EMEA (Europe, Middle East & Africa) and APSA (Asia Pacific South America) regions was hit by the timing of sales in Q2.

“We’re encouraged by several dynamics that benefited Beam in the quarter, including the strong sell-in for our innovations, impactful brand activation in markets around the world and strong worldwide demand for Bourbon,” Shattock said.

Attractive global category

During a later investor call to discuss Beam’s H1 results, analyst Ann Gurkin from Davenport asked Shattock what was driving the firm’s improved tequila sales in H1 2012.

The US and Mexico account for over 80% of tequila sales, and despite a downturn in 2009 the global category as a whole is showing solid mid-single digit volume growth, driven by premium categories.

And after sluggish growth over several quarters, Beam’s key tequila brand Sauza (pictured) grew net sales 6% in the year to June 30, although Horintos brand sales fell 7%.

Shattock told Gurkin: “Long-term tequila is going to be a very attractive global category. It’s very important for us, but we faced this situation of an excess of supply versus demand but we think that will even out, probably in 2013 and beyond rather than this year.”

‘Rising stars’ and ‘power brands’

What was encouraging was tequila returning to growth in the market, Shattock said: “From our point of view, this reflects our decision to focus on brand building rather than price battling.

“Take Sauza – its positioning around talking to women, the girls night in…has been extraordinary in terms of its reach. The innovation of Sauza Blue, it’s all helped bring that focus on brand rather than just trading.”

That said, ‘rising stars’ and ‘power brands’ such as Skinnygirl, Jimm Beam and Maker’s Mark drove Beam’s strong top line growth in Q2, particularly in North America.

Skinnygirl was the pick of the rising star bunch, with net sales up 81% in the year to date, while of the power brands, Jim Beam rose 12%, Maker’s Mark 29% and Courvoisier 21%.

Beam said it was targeting organic growth by investment in marketing behind key brands in H2, and laying down more aged spirits to service future demand for Bourbon, Scotch and Cognac brands.

The firm also plans to extend its distillation network, and add around nine new warehouses in Kentucky and Scotalnd, while it said a global innovation center in Kentucky would open in Q4.