Posted on | June 23, 2014
Written by | Kristen Wolfe Bieler
Edrington launches U.S. operation to market its brands.
Last year, the Scotland-based Edrington announced it would be setting up its own distribution unit in the U.S. market, and April 1st it became official. The owner of The Macallan, Brugal and Cutty Sark, among others, officially took the reigns back from Rémy Cointreau, who had been importing its brands, and Edrington Americas opened its doors. We sat down with Edrington Americas President & CEO Paul Ross, the man charged with building the company’s U.S. operation.
THE BEVERAGE NETWORK: Your brands have been on a steady growth curve in the U.S. What motivated you to create a wholly-owned U.S. subsidiary to control them yourself?
PAUL ROSS: It’s true, we have doubled our revenue in the U.S. in the last three years—we are just under $200 million here now—so Rémy Cointreau USA was doing a great job. Yet we felt strongly the time was right to realize growth and opportunities that might have been restricted otherwise. It is all about our customers: We weren’t close enough to them, and we knew we needed to get closer.
This was a big decision because it was a huge investment—$10 million to set up here, and another $60 million annually. It’s not about the next year or two, it’s about the next several decades. If you are looking to invest and innovate, you have to be in the market and do it yourself. Many of our competitors—Bols, Stoli, Disaronno—have recently done the same thing.
TBN: What are your first priorities?
PR: We want to create demand over the next decade, and this is the time to put people on the street. In the last six months, we opened four new offices in Miami, Chicago, Dallas and Orange County and quadrupled our sales force—we are up to 120 people now. While Edrington is a 200-year old company, this is a very young organization and there is a terrific energy. It feels like a start-up company in some ways.
From my experiences managing Edrington divisions in many other countries I can share best practice, but what we really need to do is look at this marketplace and listen to our customers. Every day is like a day at school.
Our goal: To double our revenues in the next five years.
TBN: A lot of spirits companies are looking to Asia to build demand. How much of a priority is the U.S. market for Edrington?
PR: The USA is now our #1 priority. While Edrington is very strong in Europe, it’s quite small in the U.S.—only 20% of our business is done here. Yet over 40% of the world’s premium spirits are sold in the U.S. All the growth we’ve seen in Asia and South America is exciting, but it doesn’t add up to the growth in U.S.
TBN: Describe Edrington’s unique ownership structure and the advantage it affords you.
PR: Edrington is privately owned by a charitable trust, The Robertson Trust. Last year alone, the Trust was able to donate over £15 million as a result of our success. Being owned by a non-profit allows us to take a long-term view and focus not on the next quarter, but the next 20 years.
TBN: Edrington has made a significant investment in The Macallan, the company’s most important brand in the U.S. market.
PR: We are investing $200 million into The Macallan, and most of this won’t pay back for a decade. Much of the whisky we have laid down I won’t even see in my lifetime, which is a bizarre thought! Part of this investment goes towards the production of Sherry oak casks in Spain, which is the signature of The Macallan taste profile and style (as well as Highland Park and Famous Grouse). We currently produce 90% of the world’s Sherry oak casks, and they’re 10 times the price of a Bourbon barrel. Although The Macallan is the number two selling Single Malt Scotch in the U.S. market, it is far from a mature brand and once we can meet demand without running out of product, it will grow exponentially. Our success model has been word of mouth for our brands. We support our customers, they bring consumers in, and they tell their friends.
TBN: Edrington’s purchase and continued investment in Brugal makes a statement about the company. Can you comment on your optimism about rum?
PR: We see rum as a huge growth area. Many categories—tequila, vodka, bourbon—have premiumized but while rum is a $2.4 billion category, only a tiny proportion is super-premium. I’m confident this will be a category to watch in the future. In 2008 we bought Brugal with the goal of targeting markets like the U.S. specifically. Over the last 36 months, we’ve invested $34 million. We see huge potential for Brugal Extra Dry. It’s a white rum, but it’s unique in that it’s barrel-aged for four years and the color has been filtered out, so you get that creamy texture yet it’s a white spirit. Bartenders love it because unlike many rums, it is completely dry so it’s very mixable. Many people have bad experiences with rum, not taken seriously, and we see that changing.
TBN: What other brands should we be keeping an eye on?
PR: Highland Park is significantly under-represented in the U.S. and there is huge opportunity to build it here. Even many Scotch connoisseurs have not tried it. We have a new Highland Park expression hitting shelves this September.
And Cutty Sark. It was created for the U.S. market in 1923 and has always delivered spectacular quality in the glass. It was the #1 imported spirit in the 1960s, selling 2.5 million cases annually. Sales declined, but they started coming back organically and we’re now starting to invest in and talk more about Cutty Sark again. It’s turning up in places we wouldn’t necessarily have put it, and we plan to fuel that fire. One way is by partnering with breweries to build the beer-and-a-shot occasion, which traditionally may have been more about Irish whiskey. The new Cutty Sark Prohibition Edition ($30), which is 100-proof, is all about the U.S. market; it’s doing well out of the gate.
Also, keep an eye on Famous Grouse, the best-selling Scotch in Scotland for 30 years. It is on fire in the U.S. right now and mixologists really love it.
TBN: Edrington Americas has signed long-term agreements with national distributors, including Charmer-Sunbelt, Martignetti, RNDC, Wirtz, Youngs and SWS. It seems you’re happy with your route to market?
PR: I have dedicated the last year to getting to know our distributor network. We have doubled our revenue in two years, so we believe our distributors are on the right track. This market is so unique and we are quite naïve about it, so we are listening and learning from our distribution partners.
Interview conducted by Jason Glasser, CEO and written by Kristen Bieler, Managing Editor, at the Beverage Media corporate office in NYC.