Posted on | April 22, 2015
Written by | Kristen Wolfe Bieler
Tim Hassett, Beam Suntory, North America President
Not quite one year on the job, Beam Suntory North America President, Tim Hassett has hit the ground running. We sat down with him recently to hear his thoughts on the ultra-competitive nature of the spirits industry, how to leverage the Japanese whisky growth engine, and the smarter way to innovate.
ON THE INDUSTRY
The Beverage Network: Since you took the helm in July, what has surprised you most about the wine and spirits industry?
Tim Hassett: I spent 25 years in the CPG (consumer packaged goods) industry, and the process of driving demand through consumer pull on a macro level is really similar. But there are definitely some key differences. First, the competitive intensity in the wine and spirits business is greater, and the pace is faster; there is a much more dynamic planning cycle. Part of this is a result of Beam Suntory’s portfolio, which competes in every category against every competitor. We are all fighting for share of mind with our distributors. I was warned that in this business people will fight tooth and nail over every single bottle and that is true!
Second, the regulatory nuances are very real, and it often feels [like] our U.S. business is operating in 50 separate countries.
And third, the 80/20 rule does not apply in this business. At my prior companies, a handful of brands made up 80% of the volume, but at Beam Suntory, we have super-premium, premium, economy and standard brands that are massive—and each play an important role.
TBN: What is your favorite aspect of working in this industry so far?
TH: I really love the integrated partnership model in this business between supplier, distributor, retailer and trade organizations. It has to work harmoniously to be really effective, and when you leverage all that expertise, it’s really powerful. In CPG, we had distributors, but they weren’t as influential in how we went to market; it was more of a direct path from brand to consumer.
ON BEST PRACTICES
TBN: This month marks one year since Suntory acquired Beam. How has this changed the culture at Beam?
TH: What has fascinated me is that of all the integrations I have experienced in my career, this has been the quickest, smoothest and most effective. After just a year, it is nearly complete, which is amazing. The foundational elements of both companies could not have been more similar. Both have a family heritage at the core, and they are entrepreneurial in how they go to market. Creating shareholder value is important to both organizations, but they want to make sure that the community partakes in that goodness as well. Suntory is a great parent company. They operate more as a holding company, truly empowering us to run our own business.
TBN: Which best practices has Beam adopted? In what ways has Suntory changed Beam’s route to market?
TH: We are already greater than the sum of our parts, because both companies wanted to learn from the other. At lightning speed, we cross-pollinated our global best practices. Beam has traditionally built brands from the top down with an emotive approach based on heritage, authenticity and craftsmanship. The Japanese have been very successful in building brands from the ground up with amazing activation at the store and street level. We’ve combined these strategies and are much stronger for it. The Japanese are also impressively focused on metrics—measuring on a monthly basis, unlike most American companies which have grown accustomed to more of a quarterly reporting practice. Taking their lead on this has made us a much smarter company.
TBN: As the only player in the industry with all five world whiskies, what do you see as the key growth drivers?
TH: I see the two biggest growth spaces coming from craftsmanship and the notion of premiumization. We are a global leader in bourbon, with Basil Hayden’s, Jim Beam, Maker’s Mark and Knob Creek, and we still see a lot of head room for growth in this category across the spectrum. We are just starting to see results from our global Jim Beam campaign, “Make History.” Contrary to global trends in Scotch, we see huge potential here as well. We have the number one and two single malts from Islay, Laphroaig and Bowmore, which are both very strong and growing.
TBN: How has the integration of Japanese whisky impacted the overall portfolio?
TH: Part of the reason Suntory purchased Beam was to help build Japanese whiskies around the world, and the inroads we are making are off the charts. We are growing 100% with some of our Japanese whisky expressions, and it would be higher if we had more product to sell.
Beam’s legacy brands have benefitted from the association too. Across the portfolio, we now have a ton of brand assets in the premium and super-premium space that are new and/or underleveraged. We are becoming a much bigger player on-premise and are adding infrastructure in large cities to make the most of this opportunity.
TBN: How do you see the flavor trend in whisky playing out?
TH: Our projections show us that there are still more points of share to be had in flavors. We led the flavored whisky trend with the creation of Red Stag, which was a courageous move at the time. There is still room for growth in this segment, but we’ll be selective in our innovations.
ON BEAM SUNTORY
TBN: What is your approach to innovation going forward?
TH: Our approach to flavors has shifted. Soon we will launch Jim Beam Apple, but it won’t just be another flavor. Today, the vast majority of flavors that consumers desire already exist, so the trick is being very targeted towards new occasions.
TBN: What do you mean by “targeting occasions”?
TH: We have learned a lot from our Japanese partners on this. They have done an amazing job of end-point marketing and are very deliberate about their channel execution. In Japan, they reinvigorated the whisky and bourbon segment with the resurrection of the Highball (whisky and seltzer on ice) and making it cool again. They brought in the next generation of cocktail consumers, and it allows whisky to compete in the refreshment segment. Borrowing from this approach positions our brands against categories like beer and wine during the dinner occasion.
TBN: So will we see fewer new products from Beam Suntory in the future?
TH: We have purposely slowed down our innovation funnel and have adopted a “fewer, bigger, better” mindset. Another fascinating point of difference in this industry is the patience you often need to nurture successful brands. In CPG, it is fairly common to build a $50 million brand in 3-5 years. In this business, with only a few exceptions, it takes much longer. We have a lot of brands in our portfolio that have been in market for over five years that are on the verge of scaling up to become huge brands.
TBN: Whisky aside, what do you see as some of the hottest segments now?
TH: The two other segments I am most excited about right now are vodka and tequila. The base Pinnacle Vodka brand and our core fruit flavors remain incredibly healthy. We will continue to be more base brand-oriented—it’s growing double digits today. And with rap icon 50 Cent behind our Effen Vodka brand, we’re seeing new growth of the premium end of our vodka portfolio.
TBN: And tequila?
TH: Beam Suntory is the number two player globally in tequila, and we have a great portfolio across the spectrum from Sauza and Hornitos (which is growing 25% each year) to Sauza 901, Tres Generaciones and El Tesoro at the super-premium end. The tequila segment is on fire, and our portfolio is outperforming it at a rate of two to one, and we expect this to continue.