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Interview, Part 2: Brown-Forman’s Mike Keyes On Consolidation And Innovation

April 27, 2012

In the last few years, Brown-Forman has ramped up the pace of innovation—not only for its whiskies, but for the rest of the portfolio as well. In this second part of our interview with Mike Keyes, Brown-Forman’s North American Region president, Shanken News Daily explores the Brown-Forman portfolio beyond whiskies and looks at future plans for diversification, while also discussing the company’s role within the industry at large.

SND: Brown-Forman was at the forefront of going global more than 20 years ago. How much of your business is international today?

Keyes: In the early- to mid-1990s, Brown-Forman recognized that it had brands that should be global, and it began determining how to get that done. It was the dream of Owsley Brown II, and he put the resources against it. Back then, our business was probably 85% U.S. and 15% international. Today we sell a bit more internationally than domestically.

SND: In the U.S. market, how important is scale, in terms of support from wholesalers, and how are your alliances going?

Keyes: We’ve got relationships with Bacardi and Rémy in about two-thirds of the country, which provide scale and dedicated resources within each distributor. That has given us focus and allowed us to be more innovative than we’ve been in years. I would rather introduce a product with a (distributor) that has 500 SKUs instead of 5,000.

SND: Are such partnerships a key to future expansion?

Keyes: They provide a natural benefit of focus, but it would also be great to find a successful acquisition in vodka. We like to grow our business organically, but acquisitions have been a big part of our history. We’re looking at regional and global categories that could help us in different ways. That could be a growth category we don’t play in, a regional play, or something that could help with distribution.

SND: Finlandia’s global depletions are up strongly due to success in Poland and Russia. What about the U.S.?

Keyes: Finlandia is growing again in the U.S., but not as fast as the vodka category. So I would say I’m disappointed with its performance. It’s obviously in a very competitive environment, but it does seem to resonate with 25- to 35-year-old males. We’ll keep introducing flavors that can excite consumers. Our goal is to grow our vodka business, and clearly Finlandia must be part of that.

SND: What about the other vodka innovations like Chambord and Little Black Dress?

Keyes: Chambord vodka can really resonate among young adults, females, the African-American markets—sweeter brands and pink brands do well with African-American females and the GLBT (Gay-Lesbian-Bisexual-Transgender) environment. There’s a lot of enthusiasm for this brand. Little Black Dress vodka has been designed by women for women. A group of women at Brown-Forman had the idea and developed it, and they’re marketing it toward women, as was the case with Little Black Dress wine (now owned by Concha y Toro).

SND: You’ve introduced a variety of flavor extensions for Southern Comfort, including SoCo Lime, Fiery Pepper and the latest one, Black Cherry. Is this the plan for turning the brand around?

Keyes: You’ll definitely see more innovation. Southern Comfort is really the original flavored whiskey, and we’d be silly not to take advantage of that. Southern Comfort Lime has done very well. It’s more of a convenience package, the perfect pour for people who also enjoy it on-premise. Fiery Pepper is more of a challenge shot. It’s not for everybody, certainly. It’s primarily consumed in shots, although it’s also on brunch menus as Fiery Bloody Marys. But it’s largely for people who simply like the Tabasco-hot taste. Cherry is also very exciting. Overall, a soft on-premise market in recent years hurt brands like Southern Comfort. It’s very popular among 21- to 29-year-olds, and that became a very difficult demographic on-premise. You’ll now see more on-premise work, and more new and traditional media.

SND: In Tequila, how is Herradura doing relative to El Jimador? You also have Pepe Lopez.

Keyes: Herradura is doing very well, from a much smaller base than El Jimador. But Herradura ($40-$50) is more than double the price of El Jimador ($20). As the top super-premium Tequila in Mexico, Herradura has great credibility. Last year, we introduced a new package, which helped accelerate growth. El Jimador is the number-one premium 100%-agave Tequila in Mexico, so it too has strong credibility. The Tequila category is pretty competitive right now, so this will be a brand building exercise. And Pepe Lopez is growing. At a lower price, it’s now around 200,000 cases and reaping the benefits of an expanding category. It gains us some well business and Margarita business.

SND: How would you define Brown-Forman’s role in the industry today?

Keyes: If you look back at the top companies in 1950, we’re the only one that’s still around, and we’re still in about the same position we were then. Our goal has never been to be the biggest company in our industry. We think solid business decisions will drive our company. We’ve got a very active shareholder base, many of whom are in the Brown family. Our goal is to be around for a long time.

 

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