Shaping the New SCHIEFFELIN & CO.
 Schieffelin & Co. president and CEO John Esposito and the company’s new logo (below).  |
When Diageo and Moët Hennessy, the wine and spirits division of LVMH, announced an amicable end to their joint-venture relationship in the U.S. (effective July 1, 2004), it meant that there would be a major restructuring at Schieffelin & Somerset, which has been functioning as the U.S. arm of that deal since it was established in 1987.
The Diageo brands that were being handled by Schieffelin & Somerset now join Diageo North America’s portfolio, including Johnnie Walker Scotch, Tanqueray, Tanqueray No. TEN, Cîroc, J&B, Buchanan’s, Pinch, Cardhu and The Six Classic Malts of Scotland (Talisker, Lagavulin, Oban, Glenkinchie, Dalwhinnie and Cragganmore).
For its part, Schieffelin & Somerset has moved quickly forward, introducing a new corporate identity, Schieffelin & Co., while underlining its commitment to successfully managing its prestigious portfolio of brands owned by Moët Hennessy, Marnier Lapostolle and Ruffino, which include Hennessy Cognac, Moët & Chandon, Dom Pérignon, Grand Marnier, Domaine Chandon, Ruffino and Casa Lapostolle.
“There were two parallel dynamics developing over the past few years that resulted in disbanding the joint venture,” said Schieffelin & Co. president and CEO John Esposito, in a wide-ranging interview with Beverage Dynamics. “The first is that Diageo has been building a very effective organization in North America, to the point where they no longer really needed the cost-sharing presence [of the joint venture]. In all honesty, it was awkward for them to have their brands marketed by a third party.
“The second important dynamic is that, globally, the Moët Hennessy wine and spirits business has been increasing rapidly, with profits up dramatically both here and around the world. For example, by themselves, the Moët Hennessy brands now represent sales of three-quarters of a billion dollars just here in the U.S. ($1 billion including the company’s share of Millennium Imports and Clicquot). Simply, Moët Hennessy felt that its wine and spirits business was now big enough to warrant its own company in the U.S., especially with an experienced organization already in place.”
Importantly, continued Esposito, “LVMH has emphasized that it is more dedicated to the wine and spirits business than ever before.” Indeed, he added that the separation from Diageo’s brands might create opportunities that weren’t there before.
Building Brands
Together, Diageo North America and Schieffelin & Co. have been engaged in strengthening distributor networks for their brands over the past few years, especially in the face of ongoing consolidation. “We were always interested in building brands, not in churning volume, especially because we are dealing with high-margin, highly profitable products, ” said Esposito. He added that the two companies have established a board — jointly headed by Esposito and Ivan Menezes, president and ceo of Diageo North America — to continue looking at distribution issues. “It’s fair to say that the companies have a favorable symbiotic relationship,” Esposito noted.
Esposito is proud of the fact that Schieffelin’s portfolio of brands plays at the high end of their respective categories and provides high profits “all across the board” — to his company, to distributors and to retailers. He suggested that the “luxury” positioning of brands such as Hennessy Cognac, Moët & Chandon, Grand Marnier and others affects how the company approaches all phases of its business. “Everything we do goes through the luxury filter,” Esposito noted, “from how we market to public relations to creating appropriate displays and gift boxes, to considering what brands to add to the portfolio, to pricing strategies, to anything else that might affect the perception of the brand.”
Esposito explained that brands like Hennessy represent “affordable luxuries” for consumers, and “everything we do has to reinforce that brand positioning.”
Upbeat About the Future
The significant downsizing of the company was necessary to accommodate for the transference of so many brands (40% of company personnel either went to Diageo or were let go). A large portion of those employees hired by Diageo are working on the brands, Esposito said, and he is hopeful that all of the others will soon be hired by other companies in the industry. “I know that several are now in the second or third stages of the interview process.”
Still, with a much smaller company (155 employees), Esposito is excited about the new Schieffelin & Co. “We have an experienced management team, a focused strategy, brands that are doing well and are highly profitable, the full support of LVMH and the ability to be flexible and nimble as a smaller company. Our measure of success will be our ability to continue to grow our brands.”
He concluded: “Stick to what you do well. That’s when you succeed.”
B-F Debuts LOW-CARB WINE
It was bound to happen. The low-carb market has finally reached the wine world with the recent launch of One.6 Chardonnay and One.9 Merlot, from Brown-Forman Wines. As the names of the wines suggest, the Chardonnay contains 1.6 grams of carbohydrates per 5-ounce glass, while the Merlot contains 1.9 grams of carbs per 5-ounce serving. This complies with the latest Alcohol and Tobacco Tax and Trade Bureau (TTB) ruling, which states that a product can be deemed “low carb” if it has 7 grams of carbs or less per serving (servings are measured as 12 ounces for beer, 5 ounces for wine and 1.5 ounces for distilled spirits).
The company estimates that nearly 60 million U.S. consumers are counting carbs. “It’s a reflection of a powerful consumer trend, and we are thrilled to be the first to address this opportunity in the wine industry,” said Andrew Varga, vice president and global brand director, Brown-Forman Wines. The suggested retail price for each is $9.99 for a 750 ml.
GREY GOOSE To Be Acquired By Bacardi
Ruben Rodriguez, chairman of Bacardi Limited, and Sidney Frank, chairman and CEO of Sidney Frank Importing Co., Inc., announced an agreement whereby Bacardi Limited will acquire Grey Goose vodka. Completion of the sale is expected within the next few months once regulatory approvals are obtained.
Grey Goose is one of the fastest-growing superpremium products in the U.S. Last year, the vodka sold 1.4 million 9-liter cases nationwide, representing a 21.7% increase from the previous year. While financial details of the transaction were not announced, at least one major news source cited the figure for sale of the brand at an estimated $2 billion.
Commenting on the acquisition, Javier Ferran, president and CEO of Bacardi Limited, said, “Grey Goose is a perfect fit with the Bacardi portfolio of premium brands and fills a significant category gap. We see great potential to further build on the extraordinary success that has already been achieved under the excellent guidance of Sidney Frank and his company.”
Sidney Frank stated, “One cannot avoid having mixed feelings on the sale of such a great brand. However, I cannot think of a better new home for Grey Goose than Bacardi. The people at Bacardi understand brand building, and this will ensure the development of the full potential of Grey Goose.”
BUSINESS BRIEFS
Theodore C. Roman has been appointed senior vice president, sales, of Pernod Ricard USA. Roman replaces Charles R. Smith, who has assumed the new position of senior vice president, trade relations, who will work with industry groups and organizations to support Pernod Ricard’s growth in the U.S. …. Diageo appointed James Thompson as president, Global and North American Marketing, for the Smirnoff and Captain Morgan brands…. The board of V&S Group (Vin & Sprit), the Swedish company that owns Absolut Vodka among other brands, has named Bengt Baron as the new president and ceo of the company…. David Sherman Corporation and Pearl Spirits announced a joint agreement under which David Sherman Corp. has been granted a license to produce, sell and market Pearl Vodka in the USA, Canada and Australia…. Stimson Lane Vineyards & Estates of Washington State has changed its name to Ste. Michelle Wine Estates. The company owns Chateau Ste. Michelle, Columbia Crest, Northstar, Domaine Ste. Michelle and Snoqualmie in Washington State and Conn Creek and Villa Mt. Eden in Napa Valley, CA. Over the last 18 months, the company says it has expanded the size of its sales force by 50%, and has instituted a customer/trade channel focused approach with this new staffing initiative.
MILLER’S Beer Book Now Available Online
Miller Brewing’s yearly compendium of beer industry trends and statistics, “Beer Is Volume with Profit,” is now available online for retailer viewing at www.milleradvantage.com. This annual beer industry guide, produced with the help of Adams Beverage Group research, provides many additional benefits in this electronic format, including earlier release of the data, regularly updated sales trends and statistics, and the ability to add appropriate information in a timely manner. Retailers need only complete a short registration form.
