Distiller Edrington established its own sales, marketing and distribution company in the US this April, and Paul Ross tells BeverageDaily.com why the distiller of The Macallan isn't worried by a general Scotch whisky slowdown, while white spirits have much more scope to premiumise.
Ben Bouckley: Cutty Sark, Highland Park, Snow Leopard Vodka (this a recent acquisition). Are you pushing hard in the States now with these brands or is the core focus and marketing spend on The Macallan and Brugal?
Paul Ross: "The Macallan has the highest individual value by bottle in The USA and there’s still huge potential to grow the brand, so it gives us a very firm foundation on which to build the American business. Brugal – especially Extra Dry is a priority. But we also see huge potential for Highland Park, which is a gem, and for Cutty Sark, with Prohibition. Consumers are looking to drink less and drink better. They want brands that have a story to tell – and our brands have amazing stories."
Ben Bouckley: On the subject of marketing spend – do you have an above-the-line push planned now in the US?
Paul Ross: "Word of mouth has always been at the heart of our business, and that’s a model that works for us. Where we’re developing that is in combining that experiential work with a focused and creative approach to digital and social media."
Ben Bouckley: You speak of hitting US cities – any in particular of promise?
Paul Ross: "We have historic strength in the east coast and we’ve had a very good run. We’ve doubled our revenue in the past three years and our plan is to double again in the next five years.
"To do that, we want to get closer to consumers and that’s where the new hub offices in Chicago, Dallas, Miami and Newport Beach are going to make a huge difference. We’ve created the infrastructure so that our employees have direct access to customers and consumers and can talk about the brands."
Ben Bouckley: What difference do you believe taking control of distribution in the States will make to Edrington’s top and bottom line?
Paul Ross: "The US is the world’s powerhouse of premium spirits – 40% of the world’s premium spirits are sold here - and our brands are ideally positioned to respond to a growing interest the quality and authenticity of spirits – the stories they have to tell. Independence in America gives us the ability to invest more behind the brands, increase focus and rebalance the US business. We can get closer to consumers in a way that’s inevitably more difficult if you’re not handling your own distribution."
Ben Bouckley: Why did you feel that the time was right to do so?
"There are well established demographic trends that really play to the strengths of our portfolio. Consumers are searching for authenticity, quality, heritage. Our brands have a lot to talk about and this is the right time to expand our footprint and start building the business."
Ben Bouckley: As a spirits maker – given the need to lay down products like The Macallan for 8-30 years – how difficult is it to plan for the US spirits market of, say, eight years time, in terms of assessing growth potential and demand? Doesn’t that make your business a risky one, even if it is profitable?
Paul Ross: "The strength of our business model is that we’ve been able to invest in the long term for 50 years (and it was the policy of the Robertson family for 150 years before that). In an industry where spirit matures slowly and quality and consistency are paramount, if you make your point of difference about quality, then you’re playing a long game. We have a business model that is built to deliver exactly those strengths. The higher the quality the lower the risk."
Ben Bouckley: Do you worry at all about a Scotch slowdown in the US? The rise in interest in Irish whisky, Japanese, Bourbon, etc.?
Paul Ross: "On the contrary, that’s evidence of the trends that we’ve identified; that search for something distinctive, something different – but different for a reason. That trend absolutely works for us."
Ben Bouckley: On this note, Edrington is a big company, just shy of $1bn in sales now (£593m 2013 turnover in sterling). But how difficult is it to mix it with the larger companies in the US – Diageo, Beam, Bacardi, Constellation, Pernod-Ricard, etc., especially in terms of their stranglehold on distribution and also their relative marketing muscle?
Paul Ross: "We’ve quadrupled our headcount and we’ve built the infrastructure we need to focus on key US cities. No matter what size a company you have, the structure of the US spirits market means that distributor relationships are crucial. They’re the feet on the street. We’ve presented Edrington’s brands to 10,000 people this year and it’s gone well. We have a lot to offer. The brands offer more in the glass to consumer, and because we’re focused on value more than volume, they offer more profit to trade partners too."
Ben Bouckley: On a relatively new product. Brugal Especial Extra Dry – How are sales shaping up, and what is the white rum market doing in the US?
Paul Ross: "There’s a $2.8 billion rum category and only a small proportion of that is premium or super-premium. It’s the last spirit category to premiumise and we believe that will be a trend in the long run. Brugal Extra Dry is a premium, aged product that we filter to remove the colour, so it has a flavour and mouthfeel that you wouldn’t normally associate with a white spirit. It’s perfect for cocktails, and the quality stands on its own if you want to serve it on the rocks."
Ben Bouckley: With Suntory snapping up Beam, and a smaller world ‘talent pool’ for the biggest players to fish in – does this mean that (A) Edrington might look for more assets/brands to acquire or (B) that you could prove a tempting takeover target yourselves, especially given your strong spirits brands?
Paul Ross: "Edrington has a business model that’s unique in the industry. We’re a profitable company that is owned by The Robertson Trust, which was created specifically for that purpose. The Trust is Scotland’s largest independent funder of charities."
"Regarding acquisition plans, no company would every say that the door is closed to new opportunities, but we’ve got a very strong portfolio already. We see huge opportunity for organic growth and that’s what we’re focused on."
Ben Bouckley: What innovations – in terms of products or packaging – might we expect from Edrington in 2014?
Paul Ross: "Our key business advantage is that we’re equipped to focus on the long term. So Edrington Americas isn’t about the next year, this is about the next 5, 10 years and beyond. But to talk about innovation, Cutty Prohibition is an innovation that was led by the US team and it’s had a great response so far. Snow Leopard has just had a repack and that has great potential in the US, so I think the brands are in a good position for the market."
Ben Bouckley: Do you have a goal for this year, in terms of sales or any other achievements in the US?
Paul Ross: "Yes, we’re ambitious for this market. We’ve doubled in the past three years, our goal is to double again in the next five years."
Ben Bouckley: Why do Edrington’s brands matter in a crowded market?
Paul Ross: "They matter because they belong naturally in a space that consumers are moving towards. Our products offer affordable luxury and they have amazing stories to tell."