Super Powers

Which wine and spirits brands are the real heroes of the drinks industry? Patrick Schmitt reveals the top 100

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Power. It’s a subjective concept and, therefore, difficult to calculate – unless you’re talking about engines and the archaic use of horses to gauge output – but that didn’t stop the drinks business in its aim to put together a brands “power” list, a ranking of the 100 most powerful wines and spirits in the world, which has been timed to coincide with
the 2006 London International Wine & Spirits Fair.

The list is the first of its kind. Sure, there have been many drinks lists, mostly based on measures such as volume or value, but none has ever rated wines and spirits according to the criteria outlined below, to provide, if you like, a close approximation of true brand worth – and on a global scale  as well.

Selection process
So how was this achieved?

A panel of experienced drinks-industry figures, mostly from the brand-valuation company Intangible Business (see p.27 for brief biographies), researched nearly 10,000 wines and spirits to derive a core of 100 brands. This initial 100 was decided according to volume sales and international presence. Local mono-market brands were excluded – for instance, no shochu features – while some brands with low volumes did make it because of their super-premium status, notably the more famous of the Champagne brands.

You will also notice that there are no beer brands. This list was stripped of these because beer was perceived as a more FMCG category.

Then, having decided on 100 brands, a series of measures was drawn up to rank them. Eight were used – four “hard” and four “soft”. These were picked because “they are the ones we would use for valuing a brand,” explains joint managing director of Intangible Business, Stuart Whitwell, who has recently worked with Fortune Brands on valuing the company’s portfolio of drinks. For each measure, every member of the panel scored the brand from 0 to 10, with 10 being the highest score.

Four hard measures
The first of the hard measures was “share of market”. This was a figure based on a brand’s volume share of its category, of which there were 12: whisk(e)y, vodka, rum, Cognac, other brandy, gin, still light wine, fortified wine, Champagne, sparkling wine, light aperitif (eg Martini) and flavoured spirits, which included digestives such as Jägermeister and cream liqueurs like Baileys. The volume figure was adjusted on wines and certain fortified wines (for example, Cockburn’s) to spirits value levels. Champagne was not adjusted because its price is equivalent or above that of most spirits. As Whitwell explains, “This was important so the start point of volume has some meaningful relation to value.”

Following this, brands were rated on their projected growth, based on 10 years’ worth of historical data as well as future category trends. Jack Daniel’s, for instance, scores seven for future growth, “it is approaching the eight million case mark and growing at 5%,” says Whitwell. “It is not strong in places like the Far East, and it isn’t as widely distributed as Johnnie Walker, but it has the potential to be.”

Then came price positioning, which was basically a figure representing a brand’s ability to command a premium. For example, Whitwell compares Ballantine’s and Johnnie Walker whiskies. “Ballantine’s comes top in the standard category, but it doesn’t really have a 12-year-old offer and, while its 17-year-old does stand out in the Far East, there is no real 21-year-old offer. Johnnie Walker, on the other hand, has the Red, Black, Green and Blue labels, and it covers the bases on everything. For this reason, Ballantine’s has a lower mark than Johnnie Walker.”

The final “hard” measure was market scope. This measures the number of markets a brand has
a significant presence in – for instance Cutty Sark is the number-one standard whisk(e)y in Greece and Portugal. However, if a brand has small volumes in lots of markets, it would not score highly, as is the case with Laphroaig, which has tens of cases in hundreds of markets.

Now for the soft stuff…
The soft measures were based purely on the opinions of the panel. Firstly, brand awareness reflected “our view of how naturally aware of a brand a population, not just its users, is” explains Whitwell. “For example, even if you don’t drink Johnnie Walker Black Label, you probably know about it.”

The second soft measure, brand relevancy, was defined as the “capacity to relate to the brand and a propensity to purchase”. In other words a population’s regard for a brand, not just whether they know about it, but whether they would actually want to buy it.

Third was brand heritage, which was rated on both the length of time a brand has existed and how strongly embedded that brand is in local culture. Lastly, brand perception involves rating the likes of consumer loyalty to a product and whether or not a brand is aspirational.

Once each member of the panel had scored every measure, the results were aggregated and averaged. A brand score was then produced from the eight measures of brand strength. Finally, a total score was calculated by multiplying the brand score by the brand’s weighted volume.

Smirnoff rules
Listed below are the results. Should one be surprised that Smirnoff comes out top? Whitwell doesn’t think so. “Vodka is a phenomenal category, and Smirnoff is the talisman of vodka.” Not only that, but Smirnoff now has several brand extensions, although Whitwell does note that its image has been slightly “cheapened” in the US.

For Whitwell, the order is a reliable indicator of “power”. He makes the point that he knows “the values of these brands in transactions and the value of them in current use, and we can use that knowledge to check relativity with these results.” 
He also picks out a few brands that have failed to feature as prominently as they could. Kahlúa is one. “For all its international potential, Kahlúa has stayed very much a three-market brand: it is big in the US, Australia and Japan,” Whitwell explains. Likewise, Canadian Club (number 42) may be well known, but it “doesn’t have a big market presence outside Canada, the US and Japan”. Tia Maria is another brand that Whitwell considers is being held back. At number 82, Whitwell wonders what Pernod will do with it now that it is in the company’s stable, along with Kahlúa.

On the other hand, brands showing impressive power levels include, for example, Hennessy. “Hennessy has 33% of the Cognac market and it is mostly sourced from the Fine Champagne region, there is no VS,” he says. “And in many markets Cognac and Hennessy are the same word. Also, it is number one in Asia and growing in the US.” Similarly, Jack Daniel’s, just beneath Hennessy at number seven, scores highly because, as noted above, it is showing 5% growth from a massive base, as well as because “it has redefined US whisk(e)y”, according to Whitwell.

Interestingly, E & J Brandy appears just above Courvoisier, but that’s because it’s more than twice the size of Courvoisier points out Whitwell. Champagne Alfred Rothschild was another brand that surprised. Again, its result, just above category rival Perrier Jouët can be explained by Rothschild’s massive volumes. It sells almost 300,000 cases according to Whitwell.

Gallo, the highest-scoring wine brand, comes in at 20. “It is a standard bearer,” believes Whitwell, “and sells at a range of price points.” Jacob’s Creek, on the other hand, can be found in 45th place. This is because “its only real presence is in the UK,” begins Whitwell. “It is imported to the US, but it is not strong there yet. It is also only mid-range when it comes to price positioning, having been discounted regularly, although Pernod Ricard has tried to put in a more premium range. On the other hand, it does have good potential for future growth, and Pernod Ricard will make sure it has distribution.”

Wine brands such as Torres or Campo Viejo didn’t make the top 100 because, although “they are great brands, their distribution is not wide enough,” explains Whitwell. Likewise, Mouton Cadet didn’t make the list because “it hasn’t got enough volume, even though it is a great brand name and one of the few international brands that is a wine.”

Overall, there are only 10 wine brands in the power list, mainly because “individual wine-brand growth is restricted because of its agricultural base. Wine is at the mercy of the elements, and much more part of the cultural make-up of a country, than a spirit is.” Hence, for example, the lack of presence for a brand like Jacob’s Creek in wine-producing countries such as France, despite being owned by Pernod Ricard.

Champagne brands, on the other hand, do feature prominently in a wide range of markets, wine-producing or not, although some, like Duval-Leroy, aren’t in the top 100 because, “despite their high volumes, they are not so well known,” points out Whitwell. On the other hand, Krug is tiny in terms of volume, but extremely valuable. It won’t grow a great deal because it can’t, but it is recognised as the pinnacle of its class.”

And finally, as he says, “a lot of these are extraordinary brands, with years of heritage. Some have even become more relevant in foreign markets, for example Cognac brands are drunk in much greater quantities in the US and Japan than they are in France”. Even a brand like Malibu, created by committee, “is nearly 3m cases at a top price and mostly sold through the on-trade; it is worth a fortune,” admits Whitwell.

There are some brands, however, that Whitwell is disappointed not to see in the top 100. “Bushmills didn’t make it. It is the top premium Irish whiskey and, although smaller than Jameson, it is still highly valuable. A great brand like Macallan didn’t make it either. But these brands are tiny relative to the whisk(e)y category.”

“With this list,” he concludes, “we are trying to represent the perceptions of a wider universe from our own perspective. It should invite scrutiny and opinion.”  db  May 2006

Methodology

Nearly 10,000 brands in the wine, spirits, beer and cider industries were researched to derive a list of the 100 most powerful alcoholic drinks brands in the world. Power is defined by a brand’s ability to generate value for its owner. Value
is classified by a series of measures as identified below. The population for the research is all current and potential users of alcoholic drinks.

Hard measures

• Share of market: volume-based measure of market share
• Brand growth: projected growth based on 10 years’ historical data and future trends
• Price positioning: a measure of a brand’s ability to command a premium
• Market scope: number of markets in which the brand has a significant presence

Soft measures

• Brand awareness: a combination of prompted and spontaneous awareness
• Brand relevancy: capacity to relate to the brand and a propensity to purchase
• Brand heritage: a brand’s longevity and a measure of how it is embedded in local culture
• Brand perception: loyalty and how close a strong brand image is to a desire for ownership

A panel independently ranked each selected brand out of 10 on the above measures (10 = high, 0 = low). The scores were aggregated and averaged to reach a total score for each brand. A total score was achieved by multiplying a brand’s weighted volume by its brand score (a derivative of the eight measures of brand strength), within a defined range. The weighting is designed to adjust the volumes to a comparable level.  db  May 2006

THE PANEL

The panel has more than 100 years’ combined experience in the global drinks industry. Its members have been involved with all of the major drinks companies and held positions of responsibility in virtually every market. Between them, they hold detailed financial and marketing knowledge of every brand covered in this report.

Stuart Whitwell spent ten years with Hiram Walker in Europe and Asia Pacific, specialising in brand and market business-development projects. He then set up a consultancy under-taking projects for Brown-Forman, Pernod Ricard and José Estevez in China and the Philippines, as well as for Allied, Pernod Ricard, Fortune Brands and Angostura. He is co-founder and joint MD of Intangible Business.

Allan Caldwell has considerable international experience and was most recently finance and commercial services director for Allied Domecq’s duty-free division. He has since been heavily involved in the drinks industry through
his work as a director of Intangible Business.

Alan Craig has dedicated his business life to the drinks industry and has worked for companies including Whitbread and Allied Domecq. He was head of customer services for Long John Whisky Distillers, and financial controller for brands such as Ballantine’s and Teacher’s. He was finance director for a number of spirits brands, including Beefeater Gin
and Lambs Rum. He also works with Intangible Business.

Malcolm Davis has held many senior positions in international drinks management, notably in Asia Pacific markets. He has worked at Hiram Walker and Allied Domecq and was a senior director at Harveys of Bristol, Suntory and Baskin Robbins. Malcolm is a director of Duval-Leroy Champagne and Intangible Business.

Patrick Gillon’s specialist markets are Continental Europe and Latin America. His career spans senior marketing and management positions in UDV, Hiram Walker and Allied Domecq, with whom he was president of Latin America for four years. Patrick has recently been involved in valuing Allied Domecq’s brands as part of its acquisition
by Pernod Ricard and Fortune Brands.

Intangible Business is the world’s largest independent brand valuation consultancy, specialising in valuing intangible assets, such as brands for financial, management and litigation purposes.  db  May 2006