A scotch whisky distiller, when asked recently if he made any blends, was gloriously sniffy and dismissive of blended whisky. It would have been interesting to see and hear what he would have made of the Johnnie Walker Directors Blends, which I got to taste last Thursday (November 28) in London.
FOR YEARS Drinks International has been publishing its annual Millionaires supplement charting the progress of the industry’s million case spirits brands. Over the years Millionaires has become a much awaited and sought after publication.
As we all know, volume sales do not tell the whole story and last year we introduced a new league table to add another dimension to measuring the success or otherwise of the big players in the sector. This was a league table based on brand value and we are pleased to be able to publish the results of this year’s table in partnership with Brand Finance.
Brand Finance is the world’s largest independent brand valuation consultancy which specialises in valuing companies business and branded assets. The table can give us a good view not just of a brand’s monetary value but also its ability to generate value today and tomorrow.
Through analysis and a complicated matrix of calculations based on financial results, future forecasts, brand strength and royalty relief (see methodology box, page 24), Brand Finance has produced its second World’s Top 50 Spirits and Wine brands by Value.
The company’s chief executive David Haigh says: “We have been surprised at how dynamic the sector has been in terms of increases in value, there are some hotspots in the world where the major players are benefiting from years of investment in creating international symbols of success that newer consumers aspire to drink and can afford.”
Johnnie Walker has maintained its position at number one with Bacardi, Smirnoff, Hennessy and Chivas making up the top five. But it is not just the famous global brands that are going from strength to strength.
We were surprised last year to see two Chinese brands, Kweichow and Wuliangye, in the top 10, but this year they have consolidated that position with a move up the table to sit at six and seven just behind the big global players.
Further down the table we see other Chinese and Korean brands moving up and some well-known brands such as J&B, Dewar’s and Beefeater slipping down the table. This could be an indicator of the going being tougher for brands with a dependence on the harder pressed economies of Europe and the US.
The measuring of domestic brands is always a challenge and we know there are some huge domestic brands in India and Asia generally and as the data improves we hope to reflect this in the table.
This year, Brand Finance has added some brands which did not appear last year and it will continue to make the table as comprehensive and accurate as it can be. This has moved some of last year’s brands positions about, but generally the moves are caused by changes in brand value.
We hope you find it interesting not just for seeing where your brand, or a brand that interests you, measures up but for the issues it raises about the shifting roles of global, regional and local brands and how the industry landscape could change in the years ahead.
If you were an investor, where would you put your money?
Local brands and global brands
With both Diageo and Pernod Ricard publishing their half-year results, it is clear that despite the “divergent macroeconomic trends” both have posted strong performances through two key factors, their portfolio of premium brands and their established presence in emerging markets.
Where those two factors combine it is a recipe for exceptional growth and with some reports suggesting that within five years Chinese consumers will account for more than 20% of all luxury goods purchased in the world, the value generating prospects for these premium international spirits brands look well set.
Currently this is favouring dark spirits of whisky and cognac and it will be interesting to see if the power brands in light spirits can capitalise too.
The league table shows that it is an international top five of brands with Johnnie Walker, Bacardi, Smirnoff, Hennessy and Chivas, but with a change in last year’s placings. Hennessy moves up from five to three, Smirnoff drops from three to four, and Chivas Regal slips slightly from four to five .
It has been a particularly strong year for the LVMH house of brands not just Hennessy but its champagne brands too have made strides up the table.
In terms of volume though, even the top five are eclipsed by the sheer size
of China’s domestic brands (and no doubt by other domestic brands that we have not been able to recover financial data for).
Last year we were surprised to find two Chinese brands in the top 10 and this year they have strengthened their positions with improved performances in their domestic market.
It can be tempting to write these products off as just cheap local liquor that is all people know until they can afford the international brands they really aspire to, but that is perhaps an underestimation of the country that claims the invention of distillation.
Kweichow Moutai is considered the drink of banquets and has been served to heads of state as a national drink. Wuliangye describes its objectives to be “a world renowned brand” and has started to make a move beyond the boundaries into Korea and into Times Square in New York.
But what about brands who are slugging it out in mature markets and having to force the pace to generate growth?
It is good to see evidence of some value-adding activity by brands in these markets too, with strong growth for Jameson for example moving from 27th to 24th place and The Famous Grouse benefiting from its innovation in line extensions at number 37.