Double Measure – The Drinks Business Man and Woman Of The Year

We invited Roger Gabb and Caroline Whitfield to come in for a chat. What on earth would the wine maestro who launched Western Wines from his kitchen table and the spirits guru behind Shetland’s first distillery find to talk about?

Wasn’t it Marilyn Monroe who said to Einstein that with her looks and his brain they would have the perfect child? And Einstein is supposed to have said, “What if it had my looks and your brain?”

Why raise this? Well, we’ve put together our own dream team, bringing together our Man of the Year and Woman of the Year from the drinks business awards 2005. It was a meeting of two different minds from two different sectors: Roger Gabb, chairman, Western Wines, representing all things vinous, and Caroline Whitfield, CEO, Blackwood Distillers, with a handle on all things spirit-based.

The result? A balanced assessment of the alcoholic drinks industry. But this doesn’t mean all the news was positive. In fact, together, these two leading drinks trade figures pinpointed some of the core challenges facing the industry, issues which will alter the nature of future business. Whitfield said she sees excise duty increases and shifting consumer demand as a threat, in particular to what she calls “the middle ground”. “Mid-level branded Scotch, mid-level rum – all sorts of spirits at this level are finding it hard to survive,” she said. On the other hand, both the premium and value sector are seeing growth according to Whitfield, although even these opposite ends of the spirits spectrum have their own problems. She is especially worried about kneejerk social policy relating to alcohol, as it reduces “the armoury that all marketers have to promote their product”. She pointed out, “The Scandinavian model has been looked at by a number of countries and that’s quite a worry.”

Gabb is concerned by the economy, noting that, “People are watching their borrowing a bit more now.” He envisages a “tightening up” when it comes to spending. Similarly, Whitfield predicts “a really difficult 18 months. The economic forecasts are based on a $55- $60 barrel [of oil] as the upside and now we’re looking at $65, and that’s international.”

What about the effects of a possible slowdown? Might it encourage further consolidation in the industry? “There are certain big companies in wine that have a mission to be the biggest in the world and they are always going to be the predators,” said Gabb, “but I think there will be less consolidation in the immediate future.”

Starting at the top

Where consolidation has already occurred, perhaps to the detriment of the drinks industry, is in retail. But do companies like Western Wines and Blackwood really have to turn to the multiples to build their brands? Certainly Gabb’s approach is to launch brands in the off-trade: “We start at the top and if it works we push it out.” This is opposed to what he refers to as “the old fashioned way of creating brands: distributing them in the on-trade with lots of support people running around,” a technique which Gabb reckons is slower, but more solid. When it was suggested that the multiples are a powerful force in dictating a strategy of price discounting, he added, “You have to create ideas to protect yourself and the brand – you have to be inventive and offer the deals that suit the customer without losing brand equity, if possible. If you can’t beat them, you join them,” he said. “If you do try to beat them you are only going to be dealing with 20% of the market.”

Likewise, Whitfield also relies on the multiple retail sector to shift her brands. “I actually challenge the assumption that you have to launch in the ontrade. Our largest market is in South Africa and I have not sold a single drink through a bar. It’s all done through retail. Everywhere I go people are saying, well, you ought to be doing this, that or the other, and I’m saying what do you mean ought to? Yes you can build sustainable brands in the on-trade but at what cost? Everyone’s got a business to run. It’s really simple maths; for every bottle you sell in a bar it’s one twelfth, approximately, of what you would sell in retail. So for your efforts on sampling, or whatever, you get a much bigger multiple of return in the off-trade. I also think, with regard to supermarkets, they’ve just got a job to do. I’m very neutral about it. They’ve got to earn their margins. I don’t want to be in a business where I’ve got a big established brand where the only route forward is to just hold my presence. And if you’re coming up with new things that the consumer wants, I’m finding working with the supermarkets that they’re quite positive and supportive.” Gabb agreed: “I think the supermarkets do a very good job too, actually. Some are doing better than others, but on the whole I think they’re doing a very good job for the consumer in the wine business.”

But is the on-trade still viable for brand building? “Yes, but selectively,” began Whitfield. “What I mean is that in the UK everyone is chasing London, but don’t stop in London. Just challenge the assumption. It’s very expensive. And the other thing is you have to think, what am I competing with? I can’t compete with very expensive budgets. You have to have tremendous imagination with added-value propositions. You can’t just walk in and say here’s my product, here’s a try, it’s reasonably priced, off you go. Why would they bother? It just doesn’t work. You’ve got to come up with really innovative things or products that will suit them.”

Whitfield argued that you should “experiment wildly all the time” and have “a culture of experimentation rather than a culture of security” when it comes to product innovation. And if you do create something really compelling, “there is nothing like good old-fashioned word of mouth,” she argued. “It’s also about looking for things the press are going to find of particular interest, but don’t do it unless you’ve got something people genuinely find distinctive and innovative. Also use that as a market test. Likewise, with supermarkets, if they can look at it and say it’s a bit like [something else] don’t do it, cut it, don’t launch it. Come up with something that will generate interest and then the rest will fall into place.”

Gabb was modest when it came to commenting on his own brand-building success, in particular with Kumala. “We were very lucky because South Africa had a weakening currency when we were developing Kumala which gave us the space to promote it and make a profit. But we had a benign background with the South African rand which has not been so benign recently. I also think if something doesn’t work, bite the bullet and get on with the next one. You’ve got be tough and cut out the crap otherwise you’re banging your head against a brick wall.”

Whitfield supported this view: “No one knows what’s going to work. Everyone’s looking for security; there isn’t any. In my case we launched three different things and the one we weren’t sure about turned out to be the strongest. You just don’t know.”

“You have to suck it and see,” added Gabb.

And when it comes to uncertainly, one fear is that the alcoholic drinks industry may soon be subjected to the same draconian laws that are applied to tobacco. “It’s up to us to preempt the potential danger by encouraging education,” said Gabb. “In the wine business we want to set ourselves apart from binge drinking. It’s spirits, shots, cocktails and beer that are associated with this frenzied drinking. Wine really wants to set itself apart as a continental, gentler thing to be had with food or as an aperitif rather than for getting sloshed.”

Whitfield responded: “I think there are a lot of conflicting messages going on. Clearly as a purveyor of spirits or wine one of the key things is to reduce anything at all that will appeal to youth. So in our instance it’s making sure that nothing we do will appeal to anyone younger than 25, or even 30. We’re consciously going for that older, shall we say, more restrained audience. In a spirits context, by developing into a cocktail usage, again, you’re going into an area which is more moderate, basically because it’s more expensive. What I find frustrating is that it will all end up being seen as the brand owner’s responsibility when you have things like extension of licensing hours going on at the same time.”

On the other hand, Whitfield sees a “wild card” in the form of the health benefits of moderate drinking. “It’s clear from research of the beneficial antioxidant factors of red wine, and I think there are some similar things emerging with brown spirits. I think you’ll find in the future that the daily tot of one or the other will be recommended, as it historically was.”

Returning to the subject of tobacco, Whitfield suggested, “What’s made an impact on smoking is not so much the haranguing but actually the stopping of being able to smoke in a public place. And that has finally made some kind of impact on usage behaviour. There isn’t a direct corollary with drinks, but publicans don’t want to be seen to be generating loads of people who might damage the streets in a small town.”

Calming influence

One factor which should moderate the desire to binge drink, said Whitfield, is the “environment and ambience” of the on-trade, which she feels is altering. “Places are being refurbished. Everyone is looking for destination visits. The expectation has changed,” she said. “I’m seeing a lot more influence, particularly from some of the American style bars,” she continued. “And you’ll basically see that what’s happening in Manhattan and London is very similar. Key cities like Sydney and Melbourne, Jo’burg and others are tentatively following. But again it comes back to economics. It is more expensive to go out to have a drink, and I think that will be the overwhelming factor.”

Whatever tomorrow’s trends though, both Gabb and Whitfield are continuously enthused by their chosen industry. For Gabb, without it, he would still be in the army, while Whitfield would be caught in corporate life, although, with her selfconfessed entrepreneurial spirit, that seems hard to believe. Certainly they are worthy recipients of their respective awards. We’ll just have to hold on until May next year to find out who are their worthy successors. 

 Roger Gabb, chairman, Western Wines

the drinks business Man of the Year 2005
Ex-captain in the Welsh Guards who started Western Wines from his kitchen table in 1980 and sold it in 2004 for £133m

Caroline Whitfield, CEO, Blackwood Distillers
the drinks business Woman of the Year 2005
Shetland-based entrepreneur who built this remote island’s first distillery, now the highly regarded Blackwood Distillers