I ONCE READ THAT THE TRICKIEST THING about owning an advertising agency is that all your assets go down in the elevator every evening. The spirits business makes tangible products, but we’re really in the business of intangibles. A spirits company, like an ad agency, is an ideas factory.
Recently, while being interviewed about Bacardi’s purchase of Patrón, I gave my opinion that Bacardi got a bargain. My reasoning was along the lines that Patrón had (a) created a successful brand in the US, with its infamously difficult three-tier system, (b) mastered possibly the trickiest supply chain in the business, that of an agave spirit, and (c) dominated the bar call for luxury tequila to a degree you only see otherwise with Tennessee whisky and Jack Daniel’s. All three achievements are assets.
Challenger brand Casamigos is an even better example – it doesn’t even have a distillery, but in addition to expertise and experience, it’s got G Clooney on the asset side of things. Even if a guest can’t remember the name of the brand, they can just say “That George Clooney tequila, please” and they’ll get a glass of Casamigos. That’s as real an asset as a warehouse full of gently ageing liquor. On a slightly less elevated plane of celebrity, the likes of Desmond Payne of Beefeater, Carlos Camarena of El Tesoro, and John Georges of Angostura are not just distillers – they are salespeople, ambassadors, literal living, breathing embodiments of their brands. Which asset would you rather have – a warehouse full of Jefferson’s whiskey, or Trey Zoeller, its owner who built Jefferson’s to its current dizzy heights of sales and profitability? You can source whiskey a lot easier than you can obtain the exclusive services of someone such as Trey, you know.
Not that the assets are always undervalued. There have been two high-profile breach of noncompete lawsuits recently in – where else? – the US. Beam Suntory International (BSI) sued its former exec Rudy Costello when he jumped ship to be CCO at Stoli. As I write a separate lawsuit was reported where Miller Coors is suing its former strategy & analytics supremo Eric McCloskey because he took a job at Constellation. Both lawsuits hinge on the definition of ‘competition’. Stoli’s vodka business is 99% of sales, whereas at BSI vodka was just 1% of sales, so how relevant was the expertise Costello gained at BSI? The lawsuit cited Costello’s inside knowledge of how BSI’s relationship with mega-distributor Southern-Glazers worked, which sounds like a very real asset to me. Miller Coors sees spirits as a definite competitor to beer – apparently McCloskey was working on a strategy to target spirits drinkers before he resigned and went to work with Constellation, whose stable includes Svedka vodka.
We’ll be seeing more mergers & acquisitions activity in the spirits world, which isn’t half as consolidated as beer or wine. The Duff prediction is that intangibles will be valued even more with every passing year. If you want to know who’s going to be in play, keep an eye on the likes of Tales of the Cocktail Spirited Awards, Mixology Bar Awards and the Drinks International Brands Report Trending section. A brand that can catch the eye of the mixology community has an expertise that is a real asset – and the creator of that asset probably takes the elevator down each evening.
