Corporate social responsibility has attracted the interest of marketers at international drinks companies. But is it all about encouraging people to drink responsibly?
By Ed Charles
When the best-selling beer in the UK is Foster's, and Australia's most popular wine is New Zealand's Oyster Bay Sauvignon Blanc, you know the drinks business has evolved into a truly global industry, where savvy marketing is the name of the game.
As governments worldwide focus on social issues, such as underage drinking, binge drinking and the banning of smoking in pubs and bars, global drinks companies come under pressure as they seek to promote their products sensitively and wisely, as well as build business in emerging markets.
Despite the rise of artisan drink makers, particularly in the wine and beer segments, it's a business where global companies rule. Johnnie Walker, Smirnoff, Bacardi, and Absolut are the top selling spirits in the world. They are owned by the world's biggest alcohol companies, Diageo, Bacardi and Pernod Ricard. In recent years a series of mergers and acquisitions have taken place, leaving the most high-profile drinks brands in the hands of a few giant companies.
The world's largest alcoholic drink group is Diageo, itself the synthesis of Guinness and Grandmet. It trades in 180 markets, employs 22,000 people and has sales of £9917m ($A25 billion). Apart from that it isn't too different from Pernod Ricard and Bacardi, give or take a few nuances of domicile or ownership.
Paul Walsh, CEO of Diageo, says that Scotch whisky defines the company's business. He's referring to Johnnie Walker, which is ranked as the world's most valuable premium branded spirit. As Walsh told shareholders in the 2007 annual review: 'The brand also reached sales of over 15 million cases this year, one of only three brands to do so. We are fortunate enough to own a second brand in that elite trio, Smirnoff, which is the best-selling premium spirit in the world.'
There is a great deal at stake, with each company honing its portfolio of brands by shedding those that don't fit and buying those that do. Only in March this year Pernod Ricard, which owns Orlando Wines and Jacob's Creek in Australia, bought Absolut, which accounts for about half the vodka sold in the US.
Each company invests an enormous amount in corporate and social responsibility. As anyone who reads the papers knows, alcohol and politics don't always mix well, especially when drunken youths start spilling onto the streets.
The industry knows well how the drinker's palate develops. Sweeter drinks attract a young consumer who gradually matures into dry beers and white wines and eventually big reds.
Every drink marketer worth her or his salt makes product to meet their customers' demands. And as the drinks companies honed their marketing in the 1990s, the inevitably sweet brand extensions arrived in the form of Bacardi Breezers, Smirnoff Ice and the now defunct Absolut Cut, known collectively as ready-to-drink or RTDs. In March this year these drinks hit the headlines after mass media hysteria about drunken violence on Australia streets. The new Rudd Labor government announced an RTD tax. The message was clear, and Lion Nathan cut production of this lucrative product. At the time Lion Nathan Australia managing director Andrew Reeves said: 'We recognise that there is a level of community concern about these products and therefore we have decided to remove them from circulation.
'We believe excessive alcohol consumption is a cultural problem, which is best addressed through a significant and long-term investment in social marketing and intervention programs. Such programs need to be supported by measures to encourage people to take responsibility for their drinking decisions.'
Every drinks company has its eye on the problems caused by alcohol abuse. Pernod Ricard prides itself on the level of attention it pays to corporate and social responsibility.
'We have an incredibly strong corporate and social responsibility network. Everything has to go though a number of sign-offs,' says Australian marketing manager Angus Barnes.
'We are very clear on what age groups we target, what sort of message we have, what the visuals are. In some ways we regulate ourselves much harder than the industry does because we believe it is important to make a stand and be a benchmark. We don't want to get ourselves in a situation where advertising is either banned or made very difficult for us. We play very much within the rules.'
The same goes for its marketing of the glamorous champagne brand Mumm, which is a podium sponsor of all the Grand Prix events. But as Barnes points out, this is a very specific sponsorship. 'We sponsor the celebration of Grand Prix. In no way do we endorse drinking and driving. Again we have absolutely no promotional shots of cars involved. Really what we sponsor is the podium celebrations, almost the joy of life.'
In many ways Pernod Ricard is typical of the 'think global, act local' approach taken by many drinks companies. Globally forged strategies are implemented and tailored to suit local tastes by local teams. For Mumm, how Grand Prix events are celebrated illustrates some of the differences.
As Barnes says: 'In Australia it is not as significant as, say France or Monaco, where people who go to these events are genuine champagne consumers and enthusiasts. In Australia it is about genuine motorsport enthusiasts.'
It's grim up north! A great British institution is under threat
Indeed, it's a grim story. The quintessential English pub is suffering. And the reason? Well, it isn't because of drink, but the UK government's recent blanket ban on smoking, together with the knock-on effect of the global credit crunch.
According to the British Beer and Pubs Association, pubs are closing at their fastest rate in history, 27 a week.
The Independent newspaper in London says the ban knocked up to 4 per cent of sales from the £15bn-a-year (A$31bn) industry. As one drinks analyst told the paper: 'Within the industry the family-friendly, food-led pubs may never lose sales. Some of the city boozers may go down by 25 per cent, and never recover,' he said.
The same pub crunch hasn't hit Australia yet thanks to partial bans on smoking implemented in 2002 and plenty of notice given before the total ban than kicked in on 1 July 2007.
But similar drops in sales have been reported. Melbourne bar entrepreneur Vernon Chalker reported that his gross sales for the Gin Palace fell 20 per cent after the indoor smoking ban was brought in.
Luckily he'd prepared himself by opening a raft of funky new bars that have outdoor areas suitable for smokers and non-smokers alike.
Massive failures have not yet emerged here but the online newsletter Crikey! reports that National Leisure and Gaming Ltd and Hedley Leisure and Gaming Property Fund are wobbly, thanks to smoking bans, increased food and staff costs.
Peter Jones CPA, finance director, Bacardi Lion Pty Limited
What does your job involve?
A major responsibility is 'business partnering' with the managing director in the management of the business both tactically and strategically, as well as managing shareholder expectations. There is also the day-to-day running of the finance function, i.e. reporting, planning, forecasting, business risk analysis, working capital management and so on. All in all, it is a very broad role covering all aspects of finance.
What's different about your role at Bacardi Lion compared to previous jobs?
This is my first role as a finance director. After working for over 10 years in different companies in different finance roles, it is great to have reached this level. One of the major changes from previous roles is that I'm now directly answerable to our company's shareholders. This in itself is a great challenge.
What was your first big break?
My first job after university involved working for Pioneer Ltd (a building materials company). While the industry was not overly exciting I had a fantastic boss who taught me a great deal both functionally and from a leadership perspective. I've been very fortunate throughout my career in that I've been able to learn valuable lessons from some very good leaders. However, like most people my success also comes from hard work and application. I have studied and worked hard to put myself in a stronger position later in my life.
What's challenging about your job?
Every day throws up different challenges. Being able to respond to these is what makes the job rewarding. A great challenge right now is increasing the financial capabilities of our non-financial team members, sales and marketing staff.
What do you find most satisfying?
There are many satisfying components to the role. This includes working with great people and fantastic brands in a truly positive and supportive company. It is also great to see the members of my team over-achieve and grow every month.
On top of that is seeing that your insights and recommendations are making a difference to our business' results.
What is your favourite tipple?
Bacardi Lion has great, premium brands such as Bombay Sapphire Gin and Grey Goose Vodka. However, my favourite tipple is a Bacardi, lime and soda. Very refreshing.
I've been wine making with Rosemount for six or seven years now. I studied a bachelor of commerce at Adelaide University and I joined Southcorp Holdings as a finance graduate. I worked in a few different areas there, internal audit, treasury, tax, financial accounting, then I moved to their wine group head office in Sydney as wine group management accountant. That was where I gained my CPA qualifications and was heading down a finance path. I've been with the same company my entire career. How did you move to winemaking?
I wanted something that was less corporate and more hands on. I'd met a few winemakers and they were passionate, enthusiastic people. I also always liked food and drink. I studied bachelor of science (wine) part time through distance learning at Charles Sturt University at Wagga Wagga, which took six years. I moved to the sales branches for a few years as a business analyst. It was an interesting role because sales people are completely different to accountants or winemakers. Finally in 2001 I clicked off my little black heels and put on my steel toe caps and went and worked as a cellar hand for the vintage at Rouge Homme in the Coonawarra. After that I joined Rosemount in the Hunter Valley for two years. Then I transferred to Rosemount in McClaren Vale and I'm now a full-time winemaker. Currently there are five of us winemakers.
What's it like working with winemakers?
They are really 'salt of the earth' kind of people. They are most passionate about what they do, taking something produced by the earth and turning it into something you can be proud of.
What does it take to be a winemaker?
There is a lot of science-based stuff and you have to use your palate and your nose to make decisions. During vintage there is lots of planning and logistics, problem solving in a hurry, and of course in big companies everything is computerised. Vintage is a really hard slog especially when you have young families. [Buckley has a young baby.] It's always eight-to-10-hour days.
What are the rewards?
For me it isn't the financial incentives. Everybody works so hard and intensely that you have to do something that you are passionate about.
What's your favourite tipple?
My favourite grape is grenache for a red and for a white I like the aromatic gewurztraminer.
