Last December Fortune Brands, parent company of Beam Global Spirits and Wine, announced that it was spinning off its businesses outside of the distilled spirits industry to become a ‘pure play.’ That’s Wall Street-speak for a company whose business is entirely in one market sector.
Most publically-owned companies today are pure play. Diversified conglomerates like Fortune—which owned Moen, Master Lock, Titleist, FootJoy, and many other unrelated businesses—are considered to be dinosaurs.
Fortune says the conversion will take about a year and so far it has proceeded on schedule.
As soon at it was announced, many industry observers speculated that the new company’s lifespan will be short. They saw acquisition fodder, specifically for Diageo, where they detected a gaping portfolio hole into which Jim Beam Kentucky Straight Bourbon Whiskey would fit nicely.
“We’re always looking at possible acquisitions and when opportunities arise, we’ll be interested,” is all Yvonne Briese, vice president marketing, Whisky, Diageo NA, will say about the speculation.
One assumes the folks at Beam Inc. (Fortune’s new name) will have other ideas.
It’s easy to see that Jim Beam and Jack Daniel’s are the only American whiskeys big enough to join Diageo’s critical ‘strategic brands’ club with the likes of Johnnie Walker, Smirnoff, Captain Morgan, José Cuervo, Tanqueray, and Crown Royal.
‘Strategic’ is a euphemism for ‘big, premium, and global.’ Talisker, for example, is premium and global but it will never be big, hence it’s a niche brand and not ‘strategic.’ Seagram’s 7 Crown, the #1 American blended whiskey, sells about five million cases a year, almost all of that within the U.S. It is big enough but not premium or global enough.
“It’s Beam or nothing,” says one insider who prefers to remain anonymous. “Only Beam has the necessary scale.”
Diageo is the world’s largest drinks company. In addition to its 14 strategic brands it has dozens of niche brands such as single malts Talisker, Caol Ila, Cardhu, Lagavulin, and Oban, and American whiskeys Bulleit, I. W. Harper, and George Dickel. “We have a very small, focused position in the American whiskey category,” says Briese.
Which means they have a big hole, one that was largely self-inflicted.
Technically, Diageo was formed in 1997 when Guinness PLC merged with Grand Metropolitan, but Guinness PLC had already rolled up dozens of distilleries and brands during the preceding decade.
Three American pieces of what became Diageo were Somerset, Schenley, and Glenmore. Between them they owned Old Charter, I. W. Harper, J. W. Dant, Old Fitzgerald, W. L. Weller, Rebel Yell, Cabin Still, Ezra Brooks, Kentucky Tavern, and Yellowstone, all bourbons, plus George Dickel Tennessee Whiskey.
In those days, American whiskey was moribund. It was mostly a domestic business and had lost half of its volume since the late 1960s, as Americans discovered other drinks as well as other (illicit) intoxicants.
Guinness PLC called its spirits business United Distillers (UD). In 1993, UD sold more than 70 brands to Kentucky’s Heaven Hill Distilleries, including Dant, Cabin Still, Ezra Brooks, Kentucky Tavern, and Yellowstone. They then crafted a comprehensive bourbons strategy around the six brands that remained.
Sources who were involved in the scheme say the company was very excited about it. They believed bourbon was the missing piece in what would become a worldwide UD whiskey (and whisky) juggernaut, UD’s answer to the growth of vodka and other white spirits.
To that end they built a new state-of-the-art distillery in Louisville, created new brands as well as high-end expressions of existing brands, and ramped up production in anticipation of new sales.
Exports were driving the American whiskey category and Japan was a vanguard market. UD’s new bourbons strategy enjoyed an early success when they were able to make I. W. Harper Japan’s number one bourbon.
This was significant because Harper was no longer a top brand in the U.S. That led UD executives to believe their bourbons could beat U.S. megabrands such as Jim Beam and Jack Daniel’s in other international markets too, if they got in early when they and the competition were equally unknown.
So they invested in Rebel Yell and George Dickel, revived an old brand called James E. Pepper, and created a new one called Rx Bourbon. They were particularly enthusiastic about George Dickel, which as the only other Tennessee whiskey seemed a perfect answer to Brown-Forman’s ace in the hole, Jack Daniel’s.
In the U.S., super-premium brands such as Maker’s Mark, Blanton’s, and Knob Creek had started to get traction, so UD created deluxe expressions of I. W. Harper, George Dickel, Old Fitzgerald, W. L. Weller, and Old Charter, which they bundled together as the Bourbon Heritage Collection, a project inspired by UD’s successful Classic Malts Collection. Initial sales were strong.
Because they now owned whiskey stocks from so many different distilleries, most of them silent, UD created the Rare American Whiskeys Collection, one-off releases of the most outstanding, unique, and rare whiskeys in their warehouses. They planned to release a few every year, but only did two.
What happened? Diageo happened.
Grand Met brought with it Smirnoff. That killed the all-whiskey, anti-vodka plan. Grand Met also had distribution rights to Jack Daniel’s in many key non-U.S. markets, so the big George Dickel push was shelved. Although inertia kept a few projects going, American whiskey became a dead issue as the massive company tried to get its footing. Two years later, Diageo sold everything in its American whiskey portfolio except Harper and Dickel. It now markets Harper only in Japan, where it is no longer no.1 but still a major brand. With the big push abandoned, they had more Dickel whiskey than they needed so they mothballed the distillery in Tullahoma, Tennessee.
Just as Diageo got out, the long-anticipated American whiskey revival finally began to pick up steam, not just internationally but in the U.S. as well. With only Dickel in play, Diageo found itself on the outside of a booming, growth market looking in.
Dickel’s sales picked up even though the company did nothing to support it. Silent for four years, the distillery was restarted in 2003. That wasn’t soon enough to avoid a widespread shortage of Dickel No. 8 starting in the fall of 2007. Aging cycles being what they are, that shortage has only now worked its way through the pipeline. Dickel is now only sold in the U.S.
“We’re very proud of George Dickel,” says Diageo’s Briese. “We are just now, in the last 18 months or so, getting capacity back. We’ve struggled to keep the core Dickel markets supplied but now we’re ready to start to grow the brand.”
Good luck with that.
Because of its decisions, Diageo lost 20 years during which it could have been positioning George Dickel as the alternative to Jack Daniel’s in major international markets where both brands were unknown. That window has now closed just about everywhere that matters.
The 2001 Seagram’s breakup put Bulleit Bourbon into the mix, but Diageo passed on keeping the biggest Seagram’s bourbon, Four Roses. Later in the decade Maker’s Mark and Wild Turkey became available but Diageo passed on them as well. Why? Not strategic enough. Premium and global, sure, but not big enough.
Apparently Diageo has concluded that it can’t build major brands, it can only buy them.
While Diageo pines for Jim Beam, Bulleit has the best chance to prove that conclusion wrong. It’s not big enough now to be strategic, but it is premium and global. Despite some silly origin claims, Bulleit is respected by enthusiasts and competes well in the most desirable segment of the American whiskey category, super-premiums. “Bulleit has blown away our expectations,” says Briese.
But just like it did with Dickel, Diageo has a production problem with Bulleit. Diageo insists that every drop of Bulleit bourbon is made at Four Roses in Lawrenceburg, Kentucky, but sources in a position to know say the amount of whiskey Four Roses sells to Diageo is much less than the amount Bulleit sells to the public. It doesn’t add up.
Earlier this year a straight rye whiskey was added to the Bulleit range.
It is made at another former Seagram’s distillery, coincidentally located in Lawrenceburg, Indiana.
The world’s largest drinks company doesn’t distill one drop of bourbon or rye itself.
Diageo receives white dog from Four Roses and other distilleries, which it ages at the Stitzel-Weller Distillery in Shively, Kentucky; a suburb of Louisville. The distillery there has been silent since 1992.
So what does this all mean? That no matter how well Harper, Dickel, and Bulleit, are able to do, Diageo will kick them to the curb if it can grab Jim Beam.
Most publically-owned companies today are pure play. Diversified conglomerates like Fortune—which owned Moen, Master Lock, Titleist, FootJoy, and many other unrelated businesses—are considered to be dinosaurs.
Fortune says the conversion will take about a year and so far it has proceeded on schedule.
As soon at it was announced, many industry observers speculated that the new company’s lifespan will be short. They saw acquisition fodder, specifically for Diageo, where they detected a gaping portfolio hole into which Jim Beam Kentucky Straight Bourbon Whiskey would fit nicely.
“We’re always looking at possible acquisitions and when opportunities arise, we’ll be interested,” is all Yvonne Briese, vice president marketing, Whisky, Diageo NA, will say about the speculation.
One assumes the folks at Beam Inc. (Fortune’s new name) will have other ideas.
It’s easy to see that Jim Beam and Jack Daniel’s are the only American whiskeys big enough to join Diageo’s critical ‘strategic brands’ club with the likes of Johnnie Walker, Smirnoff, Captain Morgan, José Cuervo, Tanqueray, and Crown Royal.
‘Strategic’ is a euphemism for ‘big, premium, and global.’ Talisker, for example, is premium and global but it will never be big, hence it’s a niche brand and not ‘strategic.’ Seagram’s 7 Crown, the #1 American blended whiskey, sells about five million cases a year, almost all of that within the U.S. It is big enough but not premium or global enough.
“It’s Beam or nothing,” says one insider who prefers to remain anonymous. “Only Beam has the necessary scale.”
Diageo is the world’s largest drinks company. In addition to its 14 strategic brands it has dozens of niche brands such as single malts Talisker, Caol Ila, Cardhu, Lagavulin, and Oban, and American whiskeys Bulleit, I. W. Harper, and George Dickel. “We have a very small, focused position in the American whiskey category,” says Briese.
Which means they have a big hole, one that was largely self-inflicted.
Technically, Diageo was formed in 1997 when Guinness PLC merged with Grand Metropolitan, but Guinness PLC had already rolled up dozens of distilleries and brands during the preceding decade.
Three American pieces of what became Diageo were Somerset, Schenley, and Glenmore. Between them they owned Old Charter, I. W. Harper, J. W. Dant, Old Fitzgerald, W. L. Weller, Rebel Yell, Cabin Still, Ezra Brooks, Kentucky Tavern, and Yellowstone, all bourbons, plus George Dickel Tennessee Whiskey.
In those days, American whiskey was moribund. It was mostly a domestic business and had lost half of its volume since the late 1960s, as Americans discovered other drinks as well as other (illicit) intoxicants.
Guinness PLC called its spirits business United Distillers (UD). In 1993, UD sold more than 70 brands to Kentucky’s Heaven Hill Distilleries, including Dant, Cabin Still, Ezra Brooks, Kentucky Tavern, and Yellowstone. They then crafted a comprehensive bourbons strategy around the six brands that remained.
Sources who were involved in the scheme say the company was very excited about it. They believed bourbon was the missing piece in what would become a worldwide UD whiskey (and whisky) juggernaut, UD’s answer to the growth of vodka and other white spirits.
To that end they built a new state-of-the-art distillery in Louisville, created new brands as well as high-end expressions of existing brands, and ramped up production in anticipation of new sales.
Exports were driving the American whiskey category and Japan was a vanguard market. UD’s new bourbons strategy enjoyed an early success when they were able to make I. W. Harper Japan’s number one bourbon.
This was significant because Harper was no longer a top brand in the U.S. That led UD executives to believe their bourbons could beat U.S. megabrands such as Jim Beam and Jack Daniel’s in other international markets too, if they got in early when they and the competition were equally unknown.
So they invested in Rebel Yell and George Dickel, revived an old brand called James E. Pepper, and created a new one called Rx Bourbon. They were particularly enthusiastic about George Dickel, which as the only other Tennessee whiskey seemed a perfect answer to Brown-Forman’s ace in the hole, Jack Daniel’s.
In the U.S., super-premium brands such as Maker’s Mark, Blanton’s, and Knob Creek had started to get traction, so UD created deluxe expressions of I. W. Harper, George Dickel, Old Fitzgerald, W. L. Weller, and Old Charter, which they bundled together as the Bourbon Heritage Collection, a project inspired by UD’s successful Classic Malts Collection. Initial sales were strong.
Because they now owned whiskey stocks from so many different distilleries, most of them silent, UD created the Rare American Whiskeys Collection, one-off releases of the most outstanding, unique, and rare whiskeys in their warehouses. They planned to release a few every year, but only did two.
What happened? Diageo happened.
Grand Met brought with it Smirnoff. That killed the all-whiskey, anti-vodka plan. Grand Met also had distribution rights to Jack Daniel’s in many key non-U.S. markets, so the big George Dickel push was shelved. Although inertia kept a few projects going, American whiskey became a dead issue as the massive company tried to get its footing. Two years later, Diageo sold everything in its American whiskey portfolio except Harper and Dickel. It now markets Harper only in Japan, where it is no longer no.1 but still a major brand. With the big push abandoned, they had more Dickel whiskey than they needed so they mothballed the distillery in Tullahoma, Tennessee.
Just as Diageo got out, the long-anticipated American whiskey revival finally began to pick up steam, not just internationally but in the U.S. as well. With only Dickel in play, Diageo found itself on the outside of a booming, growth market looking in.
Dickel’s sales picked up even though the company did nothing to support it. Silent for four years, the distillery was restarted in 2003. That wasn’t soon enough to avoid a widespread shortage of Dickel No. 8 starting in the fall of 2007. Aging cycles being what they are, that shortage has only now worked its way through the pipeline. Dickel is now only sold in the U.S.
“We’re very proud of George Dickel,” says Diageo’s Briese. “We are just now, in the last 18 months or so, getting capacity back. We’ve struggled to keep the core Dickel markets supplied but now we’re ready to start to grow the brand.”
Good luck with that.
Because of its decisions, Diageo lost 20 years during which it could have been positioning George Dickel as the alternative to Jack Daniel’s in major international markets where both brands were unknown. That window has now closed just about everywhere that matters.
The 2001 Seagram’s breakup put Bulleit Bourbon into the mix, but Diageo passed on keeping the biggest Seagram’s bourbon, Four Roses. Later in the decade Maker’s Mark and Wild Turkey became available but Diageo passed on them as well. Why? Not strategic enough. Premium and global, sure, but not big enough.
Apparently Diageo has concluded that it can’t build major brands, it can only buy them.
While Diageo pines for Jim Beam, Bulleit has the best chance to prove that conclusion wrong. It’s not big enough now to be strategic, but it is premium and global. Despite some silly origin claims, Bulleit is respected by enthusiasts and competes well in the most desirable segment of the American whiskey category, super-premiums. “Bulleit has blown away our expectations,” says Briese.
But just like it did with Dickel, Diageo has a production problem with Bulleit. Diageo insists that every drop of Bulleit bourbon is made at Four Roses in Lawrenceburg, Kentucky, but sources in a position to know say the amount of whiskey Four Roses sells to Diageo is much less than the amount Bulleit sells to the public. It doesn’t add up.
Earlier this year a straight rye whiskey was added to the Bulleit range.
It is made at another former Seagram’s distillery, coincidentally located in Lawrenceburg, Indiana.
The world’s largest drinks company doesn’t distill one drop of bourbon or rye itself.
Diageo receives white dog from Four Roses and other distilleries, which it ages at the Stitzel-Weller Distillery in Shively, Kentucky; a suburb of Louisville. The distillery there has been silent since 1992.
So what does this all mean? That no matter how well Harper, Dickel, and Bulleit, are able to do, Diageo will kick them to the curb if it can grab Jim Beam.
