Chasing the Holy Grail

Back in the day there were spirit companies (some with wine brands), beer companies, wine companies and ‘soft drink’ companies. And they kind of lived in somewhat separate silos, each with their own fundamentals around the marketing and financials of each category.

Wine is a branding graveyard, with consumers almost looking down on brands since being encouraged and self-taught to choose by varietals and provenance.

Many beer brands have struggled to create true global reach (albeit there are very strong country brands), and have tried for decades to deliver truly premiumized versions of their brands that consumers would readily buy. And soft drinks/US sodas, either as mixers or stand-alone offerings have never really shaken off the high sugar tag.

Which leaves you with spirits – high margins, global brands with endless permission to premiumize …the promised land?

This dynamic, coupled with the incredible morphing of categories from flavoured whiskies, pink Gins, hard seltzers to low/no alcohol, has meant that traditional wine and beer companies have been gearing up their onslaught into spirits like never before. Aggressive acquisition agendas plus new-to-world innovations of spirits are high on the agenda of the likes of ABI, Constellation and Molson Coors with a host of other non-traditional spirits companies looking to get into the game.

The question is not what took them so long, but what does the future hold, when some of the very big players start to compete head on with the likes of Diageo and Pernod-Ricard in mainstream categories such as vodka and gin?

But equally can beer companies in particular, change internal behaviour and manage expectations in shifting from fast moving consumer goods into a market where smart patience is often the difference between success and failure.

So, whilst on the face of it a Budweiser vodka and a Molson’s Malt whiskey might make a lot of sense on paper (particularly the future balance sheet), the real question is do these non-traditionist companies have the mindset, stomach and culture to really make an impact?

This article was written by Mike Spurling, Managing Partner.