Playing the long game

“Wine making is really quite a simple business. Only the first 200 years are difficult.”Baroness Philippine de Rothschild was speaking only partly in jest when talking about the need for patience when building a premium drinks brand such as Chateau Mouton-Rothschild.

Posted by Guy Lawrence, CEO Mast-Jaegermeister UK Ltd

I was reminded of the Baroness’ remark after reading the media commentary that accompanied last week’s publication of Diageo’s half-yearly results, which disappointed many analysts.  The criticism levelled at the world’s leading drinks business – after what was felt to be an underwhelming third quarter performance – underlines the inevitable difficulty of balancing long-term brand building with the need to deliver the quarterly numbers in a volatile global economy.  Currency fluctuations, ‘anti-extravagance’ measures imposed by the Chinese government, price competition in the US vodka market and a weak European economy were all cited as reasons for the drop in sales.  Despite the fact that a recent valuation of the global spirits market, undertaken by Brand Finance, reaffirmed the position of Diageo’s whisky brand Johnnie Walker as the world’s most valuable spirits brand, these market and economic factors – unrelated to the health and vitality of Diageo’s impressive roster of brands – were the dominant talking point within the investment community.

This is one of the reasons why I believe that privately owned businesses, such as Mast-Jaegermeister, enjoy a distinct, competitive advantage in the spirits marketplace.  We can invest in the future and sustain a premium positioning, without the pressure to chase short-term profits.  Our team can think of themselves as true custodians of the brand, which will continue to thrive long after they have left the business.  This doesn’t mean that every privately-owned business will succeed, but it does allow us to focus on the needs of consumers and the employees who satisfy the needs of those customers, taking a medium to long-term view, rather than on those seeking short-term gains.

Premium brands in general and spirits brands in particular repay their owners in the longer-term.  They can demand heavy levels of upfront investment, from the establishment of modern, sophisticated production processes to the development of innovative packaging.  It also takes time and effort to ensure that your brand is asked for in the right way, in the right places, but once the groundwork has been established, premium drinks brands have the potential to be profitable for many decades.

Johnnie Walker became the world’s most valuable spirits brand thanks to years of sustained and consistent investment.  The Diageo team spent time identifying a powerful and distinctive insight that would resonate with consumers around the world and gave a group of talented people the freedom and money to bring that insight to life through stand-out creative work.  It held its nerve when some questioned the likely return on this investment and – despite the criticism accompanying Diageo’s half-yearly results – the company is continuing to reap the benefits.

Consistency sustains premium brands, whereas inconsistency – such as changes in positioning, pricing strategies, packaging, targeting and distribution – destroys them.   This doesn’t mean that spirits brand owners cannot innovate.  As I hope we have demonstrated by the dramatic growth in sales of Jaegermeister around the world, you can bring fresh ideas to a category whist remaining true to the ‘spirit’ of the brand.  The same Brand Finance study that reaffirmed Johnnie Walker’s position as global leader, showed that Jaegermeister’s brand value has risen faster than any other drinks brand in the top 30.  It would appear that we have got the balance right so far.  Although my team and I won’t be around for the next 200 years, we think the Baroness was right, and we’ll do our best to play the long game.

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