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26 Ibid, Monopolies Commission, Unilever Ltd. and Allied Breweries Ltd. A Report on the
Proposed Merger, PP (1968“69, LX, HC297) (9 June 1969).
27 Unilever, Annual Report and Accounts (1994, 1996).
139
Acquiring Brands
During this period, new opportunities appeared in some emerging markets in
Africa, Latin America, and Asia, where rising incomes stimulated an interest
in Western lifestyles and brands.
The largest multinationals in alcoholic beverages ¬rms now competed at
a multimarket level. Firms were involved in foreign direct investment and
international alliances rather than just exports. Foreign direct investment
was directed to emerging markets such as Africa and Latin America, and
leading alcoholic beverages ¬rms achieved international expansion essen-
tially through alliances with local partners. While in the previous two merger
waves, ¬rms essentially became domestic leaders and gained an international
presence by acquiring foreign brands in their domestic markets, from the
1980s they became truly global multinationals by targeting consumers in for-
eign markets as well as ¬rms with the similar portfolios of brands. The new
strategies reversed the 1970s trend in which ¬rms diversi¬ed beyond alco-
holic beverages. Firms now followed the general tendency in all industries
to own brands with global potential and to build scale in “core” businesses,
owning successful brands and appropriating the margins of those activities
in the value added chain that added most value.
The larger ¬rms tried to reach new cultural, political, or geographic mar-
kets and to appropriate more value added by acquiring ¬rms that owned
successful brands. These would form part of a wider array of brands that
could provide access to multiple market segments, allowing ¬rms to respond
to the increasing power of having a position in the channels of distribution
and to take advantage of scale and scope economies in marketing and phys-
ical distribution. Those ¬rms that were not able to pursue these strategies
of globalization in production and distribution during this period did not
survive independently, even if they had previously ranked among the largest
worldwide.
Edith Penrose and other researchers on the growth and survival of ¬rms
argue that ¬rms behave like species in biology, where only the “¬ttest” are
able to adapt to changing environments.28 In the late twentieth century, sig-
ni¬cant changes took place in the corporate environment. Those ¬rms whose
control remained in the hands of families were safe from takeover and sur-
vived independently, still following distinctive strategies. Anheuser-Busch,
Bacardi, Heineken, Martini, Mo¨ t-Hennessy, Pernod Ricard, all privately
e
held ¬rms, and also Carlsberg, owned by a charitable foundation, tended
either to focus on their domestic markets or to internationalize, specializing
in particular products, such as champagne, rum, or beer alone.
The rapid growth of sales in dollar terms of the Japanese ¬rms Asahi
Breweries, Kirin, and Suntory during this period was in part illusory, caused
by the rapid appreciation of the yen after 1971. However, the growth in

28 Edith Tilton Penrose, “Biological Analysis in the Theory of the Firm,” American Economic
Review, Vol. 42, No. 5 (1952): 804“19.
140 Global Brands
incomes and the steady spread of western consumption patterns in Japan,
combined with strong investment in the development of new and prestige
brands by ¬rms (some through alliances with foreign multinational competi-
tors), led to fast “real” growth as well.
While larger multinationals grew by merging and acquiring ¬rms in differ-
ent parts of the world, smaller ¬rms specialized in niche markets, offering a
single brand and relying on other companies to distribute their products. Vin
& Sprit from Sweden is a classic example of a smaller ¬rm that developed a
survival strategy focused on a niche market, with a single brand “ Absolut
vodka.29
Guinness, Grand Metropolitan, Mo¨ t-Hennessy, American Brands, Allied
e
Lyons, Seagram, and Bacardi exemplify the larger-¬rm strategy during this
period. Beginning in the 1980s, ¬nancial analysts and advisers, who played
a very important role as intermediaries between the stockholders and the
¬rms and in the negotiations for mergers and acquisitions, had a large in¬‚u-
ence on the strategies of the publicly quoted U.K. ¬rms. They believed that
alcoholic beverages ¬rms, in order to remain competitive, should integrate
vertically into distribution and shift their management focus from marketing
to ¬nance.30
In the 1980s, Guinness disposed of all its nonrelated businesses and
acquired several ¬rms, gaining the size necessary to compete with the world™s
largest ¬rms, that is, Grand Metropolitan, Allied Lyons, and Seagram.
Guinness ¬rst bought Arthur Bell™s (owner of the scotch whisky brand of
the same name), followed by Distillers. In 1987, Guinness acquired Schen-
ley, which had an old established alliance with Distillers Company for the
distribution of Dewar™s scotch whisky in that market.31 This acquisition,
along with Grand Metropolitan™s acquisition of Smirnoff, illustrates another
aspect of the merger wave from 1985 to 1988. Often, ¬rms aimed at gaining
access to distribution channels or production rights to successful brands that
were being produced or distributed under license by direct competitors in
strategic markets.
Heublein was a very attractive target for takeover in the early 1980s owing
in great part to its ownership of Smirnoff and its distribution subsidiaries. In
an effort to remain independent, it reinforced its portfolio of imported brands
in the United States through its distribution companies. Pernod Ricard™s

29 Susannah Hart and John Murphy, Brands: The New Wealth Creators (London: Macmillan,
1998), 129; M. Troester, “Absolut Vodka,” in Janice Jorgensen (ed.), Encyclopaedia of
Consumer Brands (London: St James Press, 1994): 4“7; C. Hamilton, Absolut: Biography of
a Bottle (London: Texere, 2000); Interview with James Espey, former Chairman of Seagram
Distillers and former Chairman of IDV-UK, Wimbledon, 3 December 1999.
30 Interview with Michael Jackaman, former chairman of Allied Domecq, Somerset, 19 June
2000.
31 Schenley, “Annual Meeting of Stockholders” (21 May 1971), HBS, Historical Collections;
Schenley, Annual Report and Accounts (1963).
141
Acquiring Brands
Wild Turkey is an example of a brand that was newly imported during that
period. Despite having just acquired Austin Nichols, Pernod Ricard agreed
to form an alliance with Heublein, in which it would have 30 percent of
Heublein™s business and rights to distribution of Smirnoff in Brazil and Japan.
Heublein, on the other hand, would acquire 30 percent of the production
and distribution of Wild Turkey in the United States.32
During this period, General Cinema began purchasing stock in Heublein.
In order to avoid a takeover, the management of Heublein approached
Pernod Ricard, asking the latter to consider the acquisition of Heublein.
At that stage, however, Pernod Ricard was only prepared to pay a small
amount of cash. Heublein ended up being bought by J. R. Reynolds,
which later sold the business to Grand Metropolitan.33 The alliance cre-
ated between Heublein and Pernod Ricard lasted in its majority (except
for the right for Pernod Ricard to distribute Smirnoff in Europe) until 2000,
when Diageo formed a consortium with Pernod Ricard for the acquisition of
Seagram.34
In 1986, Allied Lyons (the successor to Allied Breweries following the
acquisition of the foods and retailing company J. Lyons & Co. in 1978)
acquired Hiram Walker, owner of several successful brands such as Canadian
Club, Ballantines, Courvoisier, and Kahlua. Hiram Walker was also well net-
worked in terms of distribution in the North American market. Seagram had
challenged the acquisition, but although outbidding Allied, did not succeed
in acquiring the ¬rm.35 In 1994, Allied sold the Lyons business as part of the
¬rm™s strategy to focus on its core activity.36 It then acquired Pedro Domecq,
a leading Spanish brandy and tequila family ¬rm that had a long-standing
joint venture with Hiram Walker, a large market share in Latin America, and
owned the successful brands Don Pedro, Presidente, Fundador, and Sauza.
Allied was interested in Domecq™s brandy and tequila brands and its busi-
ness in South America. It also wanted to appropriate the rest of the joint
venture network in Spain to correct tax inef¬ciencies that did not allow
the pro¬ts to be repatriated to Britain. This deal, which the Domecq fam-
ily resisted for some time, was ¬nally agreed on by the widely dispersed
shareholders.37
North American ¬rms that had largely stood aside from major acquisitions
(except in a passive way) also started concentrating by merging and acquiring

32 Interview with Thierry Jacquillat, former CEO of Pernod Ricard, London, 22 October 2003;
“Pernod Ricard Buys Liggett Liquor Unit,” New York Times (5 June 1980).
33 Interview with Sir George Bull, former CEO of Grand Metropolitan and Diageo, London,
19 November 2003; Reader and Slinn, “Grand Metropolitan.”
34 Interview with Thierry Jacquillat, CEO of Pernod Ricard, London, 22 October 2003.
35 36 See chapter 6.
Seagram Archive, Accession 2126/ Box 774.
37 Interview with Michael Jackaman, former chairman of Allied Domecq, Sussex, 19 June
2000; Interview with Jos´ Isasi-Isasmendi y Adario, former President of Pedro Domecq and
e
also a family member, Madrid, 18 July 2000.
142 Global Brands
other ¬rms from the 1980s. American Brands acquired two leading U.S.
spirits ¬rms. In 1985, the ¬rm took over Jim Beam, owner of the bourbon
brand with the same name, and in 1987, National Distillers. Besides Windsor
Canadian Supreme whisky, National™s portfolio included the American rights
for Gilbey™s Black Velvet gin (since 1956), as well as De Kuyper™s liquor,
which had been a very fashionable cocktail in the 1980s.38
Seagram, despite its many acquisitions of small ¬rms before 1960, had
essentially grown organically. In 1987, it made a major takeover of the
French cognac ¬rm Martell, which had a signi¬cant market share in the
Far East. Seagram was then able to globalize some of its successful brands
with international reputations for quality and prestige.
The mergers and acquisitions into foreign markets were mainly by ¬rms
that in previous merger waves had already consolidated leading positions
in their domestic markets. There were also some mergers between ¬rms
that had not participated in the previous merger waves. In 1987, LVMH
was formed as a result of the merger between Mo¨ t Hennessy, which had
e
interests in the luxury industry (having acquired Christian Dior in 1971), and
Louis Vuitton, which owned champagne houses such as Veuve Cliquot and
Canard Duchˆ ne. The merger resulted from Christian Dior shareholders™
e
desire to diversify into a business that was French and had a similar image.
Mo¨ t Hennessy acquired the management knowledge of the Vuitton family,
e
in particular with regard to the management of luxury brands, and made the
company a truly global competitor.39
In 1988, Interbrew was also formed as a result of the merger between two
Belgian brewers Artois and Piedboeuf-Interbrew. The two leading brands
had very distinctive positioning and were sold in different kinds of dis-
tribution channels. Artois was an old established brand associated with
peasants. It had a reputation for creating headaches and was distributed
mainly on-trade. Piedboeuf was a comparatively new brand symbolizing
youth, virility, and sports and was distributed off-trade.40 Artois was a
leading brand in Belgium until the 1960s when volume began to grow,
and Piedboeuf brands such Jupiler started to gain visibility. The alliance
between the two ¬rms took place in 1971. It allowed Piedboeuf to have
better access to the Belgium market and Artois to improve its market
share.


38 Interview with Barry M. Beisch, president and CEO of James B. Beam Distilling Com-
pany, Impact International (October 1987); National Distillers, Annual Report and Accounts
(1973); K. E. Sluyterman and H. H. Vleesenbeek, Three Centuries of De Kuyper 1695“1995
(Shiedam: Prepress Center Assen, 1995).
39 Interview with Colin Campbell, Director General of Mo¨ t Hennessy (Paris, 22 November
e
1999).
40 Interview with Charles Adrianssen, Member of the Board of Directors of Interbrew, and
family member, London, 11 June 2004.
143
Acquiring Brands

Rationalizing Portfolios of Brands
The last merger wave occurred between 1997 and 2005. In this phase, leading
global alcoholic beverages ¬rms sought not only to buy successful brands, but
also to rationalize costs and obtain other operating ef¬ciencies in maturing
markets. Very few new brands were now developing successfully into global
brands, and the threat of new entries into the industry had diminished as a
result of high concentration. Firms realized that the internalization of inter-
mediate product markets, such as distribution, produced higher transaction
costs than using the market, so they kept their wholly owned channels of
distribution only in markets that were strategic in the total activity of the
¬rm. There was an increase in mergers and acquisitions of close competitors,
along with vertical disintegration, even in markets culturally and geograph-
ically close.
This merger wave was initiated by Guinness and Grand Metropolitan,
which combined in 1997 to form Diageo. At the time the merger talks started,
there were four leading multinationals in the wines and spirits industry “
Guinness, Grand Metropolitan, Allied Domecq, and Seagram. None was
signi¬cantly large in relation to the size of the industry, leaving scope for
further mergers between large ¬rms. There were several attempts at mergers
between these ¬rms. For example, prior to merging with Guinness, the top
management of Grand Metropolitan had approached Seagram. The lack
of interest of Seagram™s shareholders thwarted a merger. Guinness was a
good alternative. It had well-established distribution networks for its spirits
brands in the emerging markets of Asia and Latin America, while Grand
Metropolitan™s business was strong in central Europe. The spirits brands™
portfolios were also complementary: Guinness was strong in scotch whisky
and gin, whereas Grand Metropolitan was strong in vodka, liqueurs, and
tequila. Other synergies related to logistics at several levels of the value-added
chain (such as with raw materials and glass purchasing).41
When the merger was announced, it was clear that the combined company
had a very high share of scotch whisky in both the United States and in several
European countries since it owned successful global brands such as Johnnie
Walker, J&B Rare and Dewar™s. The European Union antitrust authorities
forced Diageo to sell Dewar™s, as Johnnie Walker and J&B had a broader
international presence. Bombay Sapphire was another brand sold in order
to allow the merger. The European authorities did not raise any concerns
over the combined gin share of the merged group, but the U.S. Federal Trade
Commission constructed a market subsegment for imported gin and noted
that the two leading gin brands of Diageo, Tanqueray and Bombay Sapphire,

41 Interview with Jack Keenan, Executive Director of Diageo and Deputy Chief Executive of
Guinness/UDV, Cambridge, 14 May 2003; “Analysing the Impact of the UD/IDV Merger,”
Spiritscan, Vol. 10 (November, 1997): 2; ABN AMRO, Spirits Consolidation (20 March
1998).
144 Global Brands
had virtually the entire U.S. market for premium imported gin. Even though
Diageo contested this decision, countering that their subsegment was not
relevant to consumers in economic terms, they ended up selling Bombay
Sapphire, the smallest of the two brands, to avoid any more delays with the
merger.42
The early twenty-¬rst century saw the start of the international consolida-
tion of the brewing industry that until then had remained essentially regional.
Pressure had increased on local giants to expand outside their home mar-
kets, with trade barriers falling in Europe and Latin America. Exports and
imports of beer were no longer cost-effective, creating new incentives for
¬rms to merge and acquire other brewers in order to have production plat-
forms in key markets and also to create alliances with direct competitors.
In 2001, Belgian Interbrew acquired the brewing business of Bass and
Whitbread, in a deal that was subject to an antitrust investigation.43 Prior to
being acquired by Interbrew, Bass and Whitbread had made a few mergers
and acquisitions, such as Bass™s acquisition of Charrington United Breweries
in 1967. However, Whitbread relied essentially on organic growth, and its
acquisitions within the alcoholic beverages business did not provide control
of the management of the breweries. Unlike its major competitors, Whitbread
and Bass remained vertically integrated into retailing for most of the period
of analysis. This became a disadvantage once new forms of distribution, in
particular supermarkets and hypermarkets, developed.
Artois and Whitbread had a long-established licensing agreement that
allowed Whitbread to develop the brand Artois in the United Kingdom for
about twenty years with no interference from the Artois family. By the time of
Whitbread™s sale, the main assets of the ¬rm were the brands produced under
license to Stella (positioned as a top-of-the-market beer), and Heineken (posi-
tioned as a core lager). Heineken bought back the rights for the Heineken
brand, and Interbrew bought the rest of the brewing business.44
At the same time, Bass was also coming up for sale. Already strongly
positioned in its home market, Interbrew decided to buy Bass as a way to
get an important share in the British market.45 Interbrew thus acquired 34
percent of the market share in Britain, raising antitrust concerns at the Of¬ce
of Fair Trading. As a result, Interbrew was only able to keep Bass brewers

42 Interview with Jack Keenan, Executive Director of Diageo and Deputy Chief Executive of
Guinness/UDV, Oxford, 5 August 2003; Circular to Shareholders, “Proposed Merger of
Guinness Plc and Grand Metropolitan Plc” (3 November 1997).
43 See, e.g., “Interbrew Attacks UK Over Bass Hangover,” Financial Times (15 March 2001);
K. H. Hawkins and C. L. Pass, The Brewing Industry (London: Heinemann, 1979), chap-
ter 3.
44 Interview with Philippe Spoelberch, member of the Board of Directors of Interbrew and
family member, Brussels, 5 July 2004.
45 Interview with Charles Adrianssen, member of the Board of Directors of Interbrew and
Inbev, and family member, London, 6 June 2004.
145
Acquiring Brands
by disposing of Carling, Britain™s best-selling lager, to Coors of the United
States at the end of 2001. In the same year, Interbrew continued its strategy
of international growth by acquiring Brauerei Beck, the third largest brewer
in Germany.46 Brauerei Beck™s main brand, Becks, was a German beer with
very high visibility in the United States. In 2004, Interbrew merged with
the Brazilian leader, Ambev, to form a world-leading brewer with a global
platform. This merger brought successful regional brands “ Stella, Artois,
Becks, and Brahma “ together with the aim of transforming them into global
brands.
Scottish & Newcastle, which always focused on the British market and
had become the largest brewer in the country after the acquisition of Courage
in 1995, started expanding abroad in 2000. Its strategy was to acquire
leading domestic brewers in various European countries, such as Brasseries
Kronenbourg in France, Hartwall in Finland, and Central de Cervejas in
Portugal. In addition, it added stakes in brewers in Italy, Russia, and India.
Even though the main aim was to grow in foreign markets by selling existing
local brands, Scottish & Newcastle also turned some brands such as Kro-
nenbourg and Foster™s (for which the company had a long-term license to
produce and market in Europe) into international brands.47
Anheuser-Busch, which had always concentrated on producing and selling
for the U.S. market, also took part in this last merger wave. In 2000, it
acquired a controlling share of Grupo Modelo, the largest Mexican brewer,
producer of the brand Corona. In 2002, it also became the second major
shareholder after the Chinese government of Tsingtao, the largest of the four
Chinese brewers. Other major North American mergers took place, including
one between the two family ¬rms Molson, from Canada, and Coors, from
the United States, in the beginning of 2005.48
In South America, there were also several major mergers and acquisi-
tions in the brewing industry. The most important was between Companhia
Antarctica Paulista and Companhia Cervejeira Brahma in 2000, to form
Ambev, thus acquiring a 70 percent share of the Brazilian market. This is
the company that in 2002 merged with Interbrew to become Inbev. The ratio-
nale behind Interbrew was a desire to overcome the barrier created by the
Brazilian government to foreign takeovers in brewing. For its part, Ambev
wanted to be connected with a leading multinational brewer with a family
structure.49
The acquisition in 2002 by South African Breweries (SAB) of U.S. Miller
brewing from the tobacco and food group Philip Morris gave SAB a major

46 World Reporter (17 August 2001); idem (4 September 2001).
47 Interview with Tony Froggatt, CEO of Scottish & Newcastle, Edinburgh, 11 July 2003.
48 Molson Coors, Press Release (9 February 2005).
49 Interview with Charles Adrianssen, Member of the Board of Directors of Interbrew and
family member, London, 11 June 2005.
146 Global Brands
step into the developed world. Until then, SAB had mainly acquired local
brewers in African countries and in central Europe. Protection by the South
African government had allowed the company to grow and develop its capa-
bilities at managing ¬rms in a monopoly environment. Shareholders ini-
tially viewed the acquisition with anxiety, feeling that the company had not
acquired suf¬cient marketing knowledge to operate in an environment where
competition over branding and marketing was intense. Although this acqui-
sition did not create huge ef¬ciencies for SAB, which had a limited presence
in the United States, it reduced the ¬rm™s dependence on the depreciating
South African currency, provided the ¬rm with a source of hard currency,
protected it from a possible takeover from Interbrew, and gave a broad U.S.
distribution network for its brands, including Castle and Pilsner Urquell.50
In 2005, Pernod Ricard acquired Allied Domecq, becoming the second
largest multinational in the world in wines and spirits. Fortune Brands sup-
ported this acquisition by buying more than twenty spirits and wines brands.


Conclusion
Between the 1960s and the beginning of the twenty-¬rst century, brands
played a major part in the concentration of the alcoholic beverages indus-
try through mergers and acquisitions. Despite the signi¬cant role of tech-
nological innovation in the industry, the reputation associated with brands
increasingly shaped the trends and fashions of alcohol consumption. As the
main source of competitive advantage in this industry, brands turned the
¬rms that owned them into strategic targets for mergers and acquisitions in
an environment characterized by constant changes in consumption patterns,
competition, and government and taxation policies.
There were four merger waves from the late 1950s: 1958“1962, 1968“
1972, 1985“1988, and 1997“2005. Despite their similarities, each one had
some distinguishing characteristics. The ¬rst was mainly concerned with the
British market. A group of old established ¬rms, in particular in the brew-
ing industry, merged to become national leaders. The second was similar
but involved ¬rms from other countries, in particular from Europe, which
merged in their domestic markets becoming national leaders in their particu-
lar products. During these two ¬rst waves, ¬rms widened their portfolios of
brands in their domestic markets and entered new markets (other regions
within the same country or other countries), different from where these
brands originated. The targets were mainly beer and wines ¬rms (in par-
ticular producers of processed wines such as port, champagne, and sherry).
At this stage, the levels of marketing knowledge acquired by the ¬rms were
still relatively low.

50 “SAB™s bid to Miller raises eyebrows,” Financial Times (26 May 2002); “SAB mulls $5bn
bid for Miller Brewing,” Financial Times (24 May 2002).
147
Acquiring Brands
The third merger wave had quite distinct characteristics, basically giving
the industry the shape it has today. Leading multinationals with widespread
geographic activities emerged, and successful brands developed to become
global. As ¬rms acquired high levels of marketing knowledge, they entered
markets more culturally, politically, and geographically distant and acquired
¬rms that owned brands with the potential to be sold globally. Mergers and
acquisitions during this period targeted essentially spirits ¬rms and ¬rms that
owned distribution channels.
The fourth wave aimed at rationalizing costs and taking advantage of syn-
ergies at various levels of the value-added chain. The trend toward vertical
integration that had taken place during the 1980s was reversed. Instead,
there were widespread alliances between leading multinationals and local
partners with complementary activities, or between direct competitors with
complementary brand portfolios. This consolidation took place in beer, spir-
its, and wines, where technological changes had made global brands and
distribution viable strategies, in particular with wines from the new world.
For the ¬rst time, the industry aroused signi¬cant antitrust concern in the
United Kingdom and the United States. Even this did not, however, stop the
trend toward global organizations and global brands.
8

The Life of Brands




Introduction
Many of the world™s top brands in wines, spirits, and beer that we know
today are originally from diverse countries. They exchanged ownership mul-
tiple times, outliving the entrepreneurs and the ¬rms that created them. As
shown in previous chapters, most of these brands were added to companies™
portfolios after the 1960s. Nevertheless, some multinationals have grown
by remaining focused on particular kinds of beverages, such as Heineken
and Carlsberg on beer, or E. & J. Gallo on wine. Their brands tend to have
the same names as the ¬rms.1 This chapter focuses on the life of brands in
alcoholic beverages from 1960, taking the reverse view from previous chap-
ters. I analyze the origins of today™s leading brands and look at the processes
through which ¬rms build and grow portfolios of successful brands. I also
provide a detailed analysis of how LVMH built its portfolio of brands over
time and how ¬rms extend brands. I explain the role of ¬rms in the rational-
ization and globalization of portfolios of brands and highlight the tendency
of ¬rms to trade brands almost as pieces of intellectual property, to ratio-
nalize their portfolios of brands, and to standardize the marketing of those
brands remaining in their portfolios. I discuss the increasing role of brands
in ¬rms™ everyday lives, and why and how brands may achieve independent
and eternal lives. Detailed empirical examples on successful and unsuccessful
branding strategies accompany the central discussion. Finally, I highlight the
role of the entrepreneur in explaining the life of brands.


The Origins of Leading Brands
The origin of brands in alcoholic beverages varied widely over time.2 Before
the 1960s, while markets were fragmented and the industry was developing,
it was possible for brands to grow and ¬‚ourish as long as they had some
distinctive characteristics such as original recipes or innovative modes of

1 Appendix 1 lists leading multinationals and their brands by 2005.
2 Paul Duguid, “Developing the Brand: the Case of Alcohol, 1800“1880,” Enterprise and
Society, Vol. 4, No. 3 (2003): 405“41.

148
149
The Life of Brands
distribution. The increase in global competition, the professionalization of
management, and the pressure for ¬rms to obtain short-term results, either
for shareholders™ interests or for performance-related pay, changed the suc-
cess rate and the life expectancy of brands. A much smaller number of brands
launched in recent years became leaders in the industry.
The launching of new brands involves more risk than the management of
existing brands. From the 1960s, innovations thus tend to focus instead on
the creation of line extensions (using existing well-established and successful
brands) and on other investments in the marketing mix of existing success-
ful brands, such as the packaging of the beverages. The increase in compe-
tition means that innovation involves very extensive consumer research to
position the brands in speci¬c market niches. Consumer research becomes
even more important once ¬rms create global brands that require appeal-
ing to similar tangible and intangible bene¬ts sought by consumers world-
wide.
The most successful brands in wines, spirits, and beer at the beginning
of the twenty-¬rst century had a good deal in common.3 Many were ¬rst-
movers in their beverage categories. Most relied on family names and were
owned by leading multinationals. There were also similarities in terms of the
countries where they had been launched. Appendixes 11.1, 11.2, and 11.3,
respectively provide detailed information on the evolution of the world™s
leading brands in wines, spirits, and beer in 2002.
A large number of brands are long-established and were created by
entrepreneurs whose businesses were focused on the production of one type
of beverage and one brand. They usually built brand identity by relying
on the reputation and commitment of their creators: Bacardi in rum, Gallo
in table wines, Heineken in beer, Ricard in anis, and Suntory in Japanese
wines. Brand identity was particularly important when brands were sold in
restricted geographical regions where it was possible for customers to have
contact with the entrepreneurs or members of their families working in the
business. In the present day, giving family names to brands is still important
to the success of the brands. The association of the brand with a history and
an entrepreneur provides the customer an assurance about the authenticity
and reliability of the product. To the families that own the brands, they are
a way to perpetuate the family name, even after the creator of the ¬rm has
died. Brands are also an important marketing tool, especially when the fam-
ily members with the same name as the brand are involved in the marketing
activities of the ¬rms.

3 For the purpose of this study “successful brands” are considered to be those that have the
largest volume of sales worldwide in their beverage type. Other factors, such as the importance
of the volume of sales of the brand in relation to the total activity of the ¬rm and the margins
it provides, would have also been very useful in de¬ning what successful brands are. However,
the lack of systematic and detailed information led to their not being considered.
150 Global Brands
Brands may owe their original success to the efforts of different kinds
of entrepreneurs. In most cases, the original entrepreneurs who created the
brands were responsible for building their imagery and ¬rst making them
successful. For example, Budweiser from the United States, the world™s top
beer brand, was always owned by the same family. It was ¬rst produced in
1876 through an alliance between Anheuser & Co. and Carl Conrad, a St.
Louis wine merchant. When Carl Conrad went bankrupt in 1883, Anheuser
formed a partnership with Busch. In addition to producing beer, the new
partnership started bottling and marketing it, transforming Budweiser into
the ¬rst U.S. brand to be distributed nationally. This strategy was supported
by innovation in the production of a pasteurized beer that could travel long
distances without losing its ¬‚avor and also in the creation of an effective
distribution network in which Busch got directly involved.4
But brands may also become successful due to the role of entrepreneurs
within the ¬rm who were not its original creators. These can be other family
members, descendents of the creators of the brands, or distributors. The
leading scotch whisky brand, Glen¬ddich, owned by the family ¬rm William
Grant is an example. Launched in 1887, the brand remained a regional one
exclusively sold in Scotland until the early 1960s.5 It was essentially drunk
by local consumers involved in sports such as shooting, hunting, and ¬shing,
as malt scotch whisky was considered to be unsuited for people living in
southern climates with sedentary occupations.6
The increase in competition in the early 1960s, however, led two members
of the Grant family to seek new arenas for the growth of their business. One
involved launching Glen¬ddich outside Scotland under the slogan: “Now
you know your Scotch, taste what came before.” The ¬rst market targeted
in 1964 was England and, subsequently, Continental Europe in 1966.7 Being
the prime movers in this market segment of pure malt whiskies gave William
Grant an enormous advantage over companies such as Distillers Company
that until then only marketed blended whiskies.
Another example of a brand whose success cannot be attributed to its orig-
inal creator is Absolut vodka, which was principally developed by its distrib-
utor. Absolut was launched in 1879, and was owned by the Swedish state
monopoly Vin & Sprit. In 1980, Absolut was still a tiny brand. Research
conducted at that time in the United States had pointed out a number of
liabilities for the brand. The name was seen as too gimmicky; the bottle

4 Ronald Jan Plavchan, A History of Anheuser-Busch, 1853“1933 (New York: ARNO Press,
1976).
5 Francis Collinson, The Life and Times of William Grant (Dufftown: The Firm, 1979).
6 However, the trademark registration of Greenless Brothers Malt Whisky suggests that at
least some malt whisky was sold in England in the late nineteenth century. Board of Trade,
Trademark Registrations, 1876, volume 1, numbers 102, January 3 [PRO 82/1].
7 Interview with David Grant, family member of William Grant and Marketing Director, Lon-
don, 7 January 2004; Collinson, The Life and Times of William Grant.
151
The Life of Brands
shape was ugly and bartenders found it hard to pour; its appeal was limited
as there was no credibility for a vodka made in Sweden.8 But in the early
1980s, Michel Roux, President of Carillon Importers (then owned by IDV)
became the importer and distributor of Absolut in the United States, and
TBWA from New York became Absolut™s advertising agency. Fortuitously,
this happened when America was boycotting Russian products, including
vodka. Despite coming from a country not recognized for its vodka, and the
trend toward drinks with lower alcohol content, Vin & Sprit jointly with
Carillon built a marketing strategy that used the oddities of the brand “ its
quirky name and odd bottle shape “ to create a “personality” relying on
quality and style in a series of creative print ads. Each ad in the campaign
visually depicted the product in an unusual fashion and verbally reinforced
the brand image with a simple headline using few words. For example, the
¬rst ad showed the bottle prominently displayed, crowned by an angel™s
halo, with the headline: “Absolut Perfection” appearing at the bottom of
the page. Follow-up ads explored various themes (such as seasonal, geo-
graphical, celebrity artists), but always attempted to put forward a fashion-
able, sophisticated, and contemporary image. By 1991, even though Russian
vodkas were available again, Absolut had become the market leader of the
imported vodka sector in the United States, with sales of 3.7 million cases.9
Like Absolut, many successful brand names created in the twentieth cen-
tury have origins other than the name of the original founder. They invoked
special occasions or dates, or created associations with speci¬c meanings,
being in that way evocative.10 For example, the bourbon Crown Royal
(owned by Diageo) was launched by Seagram in 1934 to celebrate the visit
of King George VI and Queen Elizabeth, the ¬rst visit of a reigning monarch
to Canada.11 The Mexican brandy, Presidente was created by the Spanish
¬rm Pedro Domecq (later part of Allied Domecq) for the Mexican market
to acknowledge the importance the president has in Mexico.12
A leading brand that relied on evocative imagery is the rum Captain
Morgan. Produced in Puerto Rico by Destileria Serralves, it was ¬rst
launched in 1944 in Canada by Seagram. Seagram named this rum after
an old pirate who had sailed to the Caribbean and become the Governor
of Jamaica in 1673. Seagram was seeking to take advantage of a segment

8 C. Hamilton, Absolut: Biography of a Bottle (London: Texere, 2000).
9 Ibid; Impact International Database.
10 This was actually a very frequent form of branding in the nineteenth and beginning of the
twentieth century. See, e.g., Roy Church and Christine Clark, “The Origins of Competitive
Advantage in the Marketing of Branded Packaged Consumer Goods: Colman™s and Reckitt™s
in Early Victorian Britain,” Journal of Industrial History, Vol. 3, No. 2 (2000): 98“119;
Francois Guichard, Rotulos e Cartazes no Vinho do Porto (Lisboa: INAPA, 2001).
´
¸
11 Seagram Collection, Hagley Museum and Library.
12 Interview with Jos´ Isasi-Isasmendi, former chairman of Pedro Domecq and family member,
e
Madrid, 17 July 2000.
152 Global Brands
of the Canadian alcoholic beverages market at a time when it was expand-
ing very rapidly and had very few competitors, Bacardi being clearly the
leader.13 Despite its success in North America, Captain Morgan remained
essentially a local brand until 1983, when Seagram introduced the line exten-
sion, Captain Morgan Original Spiced Rum, which became more successful
than the original brand. Being both very easy to drink and very masculine
were the keys to its almost instant success. Even though the combination of
rum and cola make it the sort of very sweet drink that is usually associated
with women, the brand imagery that associated the beverage with Captain
Morgan made it a very masculine beverage. Another reason for the success
of Captain Morgan Spiced Rum is its unpretentious imagery in the United
States, its major market. This is related to the location where the brand ¬rst
became successful. Unlike most premium brands that in the United States
tend to have been launched in the most sophisticated markets of the East
and West Coast, Captain Morgan Spiced Rum ¬rst became successful in
Chicago, in the middle of the United States.14
Kahlua, a coffee liqueur launched in 1937, is another evocative brand that
built its personality by associating the beverage with the Pre-Columbian era.
Produced by Kahlua SA, a Mexican ¬rm, its growth dates from 1951, when
Berman, a Southern Californian distributor, bought the rights to bottle and
import the liqueur. Berman built the personality of the brand using Pre-
Columbian terra cotta statues to advertise it. The beverage was initially
marketed as a highly mixable product, pushing recipe ideas such as Kahlua
over ice cream and Kahlua and coffee. In 1965, Berman sold the brand and its
production facilities in Mexico to Hiram Walker, which was later acquired
by Allied Lyons, the predecessor of Allied Domecq.15
Some brands use emblems as a way of differentiating and personalizing
themselves according to the aesthetic ideals of consumers. The world of
whisky is ¬lled with wild, rare, untameable animals used to symbolize the
natural, pure, and authentic character of this alcohol. An example is the
red grouse, symbol of Scotland and a rare bird known for its noble gait
and carriage, chosen as the emblem of Highland Distillers™ Famous Grouse
whisky. Another similar example is the Wild Turkey bourbon brand. The
wild turkey is a stubborn and clever bird that symbolizes the independence of
the United States. Both symbols appeal to a culture of hunting, and The
Famous Grouse adds an aristocratic tone to this (because aristocrats are


13 “Seagram Correspondence,” Seagram Collection, Hagley Museum and Library.
14 Interview with Andy Fennell, President of Global Marketing for Smirnoff and Captain
Morgan, Connecticut, 13 January 2004.
15 “Hiram Walker Past and Present,” Ambassador (Canada: The Company, 1982), Seagram
Collection, Hagley Museum and Library; Allied Lyons, Annual Report and Account
(1986).
153
The Life of Brands
traditionally the hunters in Britain, whereas the common man is in the United
States).
Brand names can also be evocative of special locations that do not coincide
with the real origin of the brand. An example is the liqueur brand Malibu
created by IDV, the wines and spirits division of Grand Metropolitan in
1980.16 When the brand was ¬rst launched it was produced in the United
Kingdom. However, the advertisements associated it with the surfer world
of Southern California beach culture.
There are yet other cases where brands build their imagery around the
country of origin or region where the beverage was actually produced. Jack
Daniel™s owes much of its success to imagery associations with rural Ken-
tucky where it is distilled. The image focuses on the authenticity and cred-
ibility of the beverage. Almost since its acquisition by Brown Forman in
1956, Jack Daniels was managed as a global brand, appealing to U.S. ide-
als of Jeffersonian agricultural individualism and to nostalgic views of the
1950s American lifestyle. This global strategy was particularly innovative in
a period when markets were still perceived as being different and therefore
requiring distinct marketing strategies.17
Historically beer, too, was closely associated with the place where it was
brewed. Bass, for example, was once closely associated with Burton-on-
Trent, where it was made. Although global brands often lose such connec-
tions, as had been the case with Bass, the U.S. beer Coors has retained a con-
nection with the Rocky Mountains. Of course, some beer brands do draw
on national associations for global marketing. Foster™s beer, for instance, is
very popular in Western Europe due to its image as an authentic product
and its associations with Australian masculinity in campaigns such as: “He
who drinks Australian, thinks Australian!”18
The world™s leading brands in wines tend to ignore the region of origin or
terroir, as illustrated in Table A11.1 in Appendix 11. Whereas old wines to
a signi¬cant degree are branded by the region, de novo wines are branded
by individual ¬rms. The former are subject to problems of free riding by
low-quality producers who can damage the status of the region as a whole.
The latter, by contrast, have more control over the perception of their brand.
New branded wines tend to be produced in new world countries such as the
United States, Chile, Argentina, Australia, and New Zealand. The brands
emphasize the grape variety above the region or the date, giving the consumer
an alternative (and easier) way of sorting through the wide variety of brands.
With the old world wines, terroir and date are highly important but highly

16 Grand Metropolitan, Annual Reports and Accounts (1980).
17 Interview with Ian Kennedy, former brand manager of Jack Daniel™s in the United Kingdom,
through the agency contract Brown Forman had with IDV, London, 4 February 2004.
18 “Foster™s Enviable Spread,” Impact International (1 July, 1992).
154 Global Brands
variable. Private brands are thus the most important part of the strategy
used in the marketing of new world wines. These branded wines offer an
accessible starting point for new drinkers, offering some sort of guarantee
that they will get what they are paying for from one outlet and from one year
to the next. For the companies, they offer the prospect of creating consumer
loyalty and hence higher sales volumes and pro¬t margins, and lower risks
from asset speci¬city.
An example of a successful de novo brand is Jacobs Creek, an Australian
wine produced since the nineteenth century, acquired by Pernod Ricard in
1989 when the brand was just beginning to be exported to the United King-
dom. Pernod Ricard™s high levels of marketing knowledge and skill at cre-
ating an imagery for the brand, combined with the vertical integration into
production, allowed a successful domestic brand to become a successful
global brand.
By the beginning of the twenty-¬rst century, the country of origin of the
brands and the country of origin of their owners often did not coincide.
The brands had either changed ownership or had ¬rst been launched and
developed outside the country of origin of the owner.19 The initial develop-
ment of the brands in foreign markets was often achieved through alliances
with local partners or through the creation of wholly owned subsidiaries. A
large number of the world™s most successful brands were now owned by the
leading multinationals in alcoholic beverages. For example in 2002, ¬ve of
those top multinationals owned ¬fty-one of the leading hundred premium
spirits brands, corresponding to 62 percent of the sales volume in that year
(see Table 8.1). This number had, however, decreased as compared to 1990
when these same multinationals (or their predecessors) had a share of about
64 percent. The development of equally successful brands by competitors
largely accounted for this decline in brand concentration.
Sales of the world™s leading brands in wines, spirits, and beer grew at very
high rates between 1990 and 2002, despite the trends toward stagnation of
alcohol consumption from the 1980s and the increase in competition. This
is particularly evident in table wines and ready-to-drink beverages due to the
growing concern with healthier drinking.
In alcoholic beverages, brands coexist with other quality signs. Beverages
with certi¬cation of origin (such as scotch whisky or port wine) provide qual-
ity assurance by protecting a branch of agriculture and the goods produced
in a particular area according to a certain tradition, while at the same time
enhancing the product image by providing a touch of mystery and a sense
of the area™s unique character.
The predominance of long-established brands is related to several char-
acteristics of the industry. One concerns the corporate governance of ¬rms.
Brands that remain in family hands and are not leaders in their product

19 See Appendix 11.
Table 8.1. Leading multinationals™ share of the world™s top 100 spirits in 1990, 1997, 2002, and 2005

2005 2002 1997 1990
Sales
Sales
Sales
Sales
Number (Millions Share of Number (Millions Share of Number (Millions Share of Number (Millions Share of
of 9-L Top 100
of 9-L Top 100 of
of 9-L Top 100 of
of 9-L Top 100 of
of
Cases) Spirits
Spirits Brands
Cases) Spirits Brands Cases)
Cases) Spirits Brands
Multinational Brands

17 76.7 26.7 17 67.9 25.8 19 69.8 17.5 9 32.8 12.6
Diageo (Grand
9 29.7 11.4
Metropolitan/




155
Guinness)
16 42.8 14.9 13 28.2 10.7 6 15.8 4 4 12.4 4.8
Pernod Ricard
12 27.4 10.4 11 26.9 6.7 12 30.6 11.8
Allied Domecq “ “ “
9 22.3 5.6 9 22.6 8.7
Seagram “ “ “ “ “ “
7 31.8 11.1 5 27.1 10.3 3 21.9 5.5 2 24.7 9.5
Bacardi
3 12.8 4.5 4 12.2 4.6 4 11.5 2.9 4 12.4 4.6
Brown Forman
43 164.1 57.2 51 162.7 62.0 52 168.2 42.2 49 165.2 63.4
Total

Sources: Based on data from Impact International and Drinks International Bulletin.
156 Global Brands
categories tend to survive longer because families are willing to sacri¬ce
short-term pro¬tability for long-term survival.20 Another reason relates to
the fact that consumers of alcoholic beverages place tradition and heritage
among the main criteria for expressing a preference for a particular brand.21
Old, established brands that were ¬rst movers in particular product seg-
ments and performed satisfactorily usually created product differentiation
advantages of provenance and heritage. They consequently became the stan-
dard against which subsequent entrants were judged.22 Yet, another rea-
son involves ¬nancial issues. The historical low success rates attained with
launches of new brands, the high investment costs they require, and the
increasing pressure on ¬rms to achieve short-term ¬nancial results, in par-
ticular publicly quoted ones, explains why so few of the leading brands were
launched in recent years.

Recently Launched Successful Brands
There are, however, a few cases of brands launched in the last quarter of
the twentieth century that became the leaders in their beverage categories.
Baileys Irish Cream and Malibu are two classic examples. Other successful
brands launched in this period include Piat D™Or, a French wine, and Croft
Original, a sherry. All these brands were launched in the 1970s by Interna-
tional Distillers and Vintners, after it was acquired by Grand Metropolitan.
In the 1970s, Grand Metropolitan was a publicly quoted company, operating
mainly in the real estate business. Therefore, the attention from sharehold-
ers and ¬nancial analysts was focused on that business, putting less pressure
on the wines and spirits business to generate short-term results. This made
it possible for the top management of the wines and spirits subsidiary of
Grand Metropolitan to encourage innovation among its employees and even
to allow some mistakes.23 Each of these four brands has its own story.
Baileys Irish Cream was launched in 1974 by Gilbey™s Limited of Ire-
land, not as a direct response to a consumer opportunity, but as a business

20 Geoffrey Jones and Mary B. Rose, “Family Capitalism,” Business History, Vol. 35, No. 4
(1993): 1“16; Jonathan Brown and Mary B. Rose (eds.), Entrepreneurship, Networks and
Modern Business (Manchester: Manchester University Press, 1993); Mark Casson, Enter-
prise and Leadership: Studies on Firms, Markets and Networks (Cheltenham: Elgar, 2000);
Andrea Colli, The History of the Family Firm (Cambridge: Cambridge University Press,
2003).
21 “Global Brand Essence and Positioning” (2002), Diageo Archives.
22 R. Schmalensee, “Product Differentiation Advantages of Pioneering Brands,” American Eco-
nomic Review, Vol. 72, No. 3 (1982): 349“65; G. S. Urban, T. Carter Gaskin, and Z. Mucha,
“Market Share Reward of Pioneering Brands,” Management Science, Vol. 32 (1984): 645“
59.
23 Interview with Chris Nadin, former Marketing Manager at Grand Metropolitan, London,
10 December 2003.
157
The Life of Brands
opportunity. This was a period when the Irish government was encourag-
ing exports and when, simultaneously, traditional market segments in alco-
holic beverages such as gin, whisky, and vodka were maturing rapidly in
the Western world. Consumption was moving toward lighter alcohol prod-
ucts, and there was an increase in the number of women drinking alcohol.
Coincidently, Grand Metropolitan had two interests in Ireland. It owned
Gilbey™s Limited Ireland, a small and successful wines and spirits business,
and also Express Dairies, which produced dairy products and had excess
milk production arising from Common Market subsidies and high tariff
barriers. To a large extent, Gilbey™s Limited of Ireland controlled the wines
and spirits business in that market with brands such as Gilbey™s Black Velvet
gin, Smirnoff vodka (produced under license for Heublein), Red Breast Irish
whiskey, and a range of wines. This very strong position in the Irish market
together with the incentives for exports by the Irish government created the
need to develop alternative uses for cream, and an opportunity for Gilbey™s
Limited to develop a new export brand that mixed milk with a spirit.
In addition, the biggest alcoholic beverages brand exported out of Ire-
land at that time was Irish Mist, which was a liqueur whisky produced by
D. E. Williams. The performance of this brand gave Gilbey™s Limited man-
agers the idea of moving into the liqueurs business, which was then diverse
and relatively underdeveloped, with no really strong brands. Hence, liqueur
promised to be an easy and inexpensive kind of product to introduce. More-
over, most existing liqueurs had a low use up rate (which is the speed at
which a product is consumed), were high proof, and dif¬cult to drink and
therefore took a long time to ¬nish.
Baileys Irish Cream took several years to develop, but when launched
became almost an immediate success. It was an instantly palatable liqueur
that invited rapid consumption. Being a ¬rst-mover in its market segment
and having developed a patented process that involved a revolutionary tech-
nology for mixing milk with alcohol, it created a very strong barrier to entry
by competitors for several years.24
Malibu liqueur is another success story. It was ¬rst launched in the 1970s
by Grand Metropolitan in South Africa under the brand name Coco Rico,
and was aimed at competing with a local brand, Coco Ribe. In 1980, Grand
Metropolitan decided to launch the brand in the United Kingdom, changing
its name from Coco Rico to Malibu (the trademark Coco Rico was already
registered by another ¬rm), and the level of alcohol content lowered (to
respond to local consumer preferences). The new brand name conveyed the
image of “a product that came from paradise and tasted like heaven,” which


24 Interview with Peter O™Connor, Brand Manager of Baileys Irish Cream, London, 22 January
2004.
158 Global Brands
was believed to appeal to the public™s expectations and social and cultural
fads at the time.25
Piat D™Or, a very successful red wine launched in the early 1970s was
the result of thorough consumer research. Grand Metropolitan owned a
business called Piat de Beaujolais, based in France, specializing in Beaujolais
wines. There was an opportunity in the market to sell to nonspecialists, as
consumption of wine had started to grow very rapidly. IDV (then the wines
and spirits subsidiary of Grand Metropolitan) found that people loved the
sophistication of drinking red wine, but preferred the taste of white wine.
Diageo created a wine that tasted like white wine, but was red in color.26 It
was marketed as a relatively cheap wine, using an established icon of quality “
the famous Piat. The marketing strategy led to the creation of a distinctive
brand. The proposition was strong, the bottle was distinctive, the wine was
blended, and the retail price was low. The advertising campaign underlined
the heritage of the proposition “the French Adore le Piat D™Or,” suggesting
the French drank this beverage (even though the brand was never sold in
France), and providing a guarantee for those people that were starting to
drink wine that it was good value for money.27
The wine branded as Piat D™Or was acquired from local French producers
and then blended, bottled, and branded by IDV and sold in markets outside
France. It became the number one wine in the United Kingdom in its product
category. It was subsequently launched in other markets outside the United
Kingdom, in particular in Canada and Japan, but never had the same level
of success. This was a period of great competition, as other ¬rms such as
Paul Masson and Barton & Guestier had recognized the same opportunity
and entered this market segment. Over time, as British consumers became
more knowledgeable about wines, they started drinking other brands that
had come into the market and proved to have a preferred combination of
price and quality.28
In recent years, Diageo has relaunched Piat D™Or, introducing different
wine varieties, new labels, and different bottle shapes. The relaunched brand
did not achieve the same success as previously, mainly because the way in
which ¬rms compete in the standard quality wines segment had changed.
Brand recognition in standard wines is less important than in quality wines,
as other factors come into play, for example, price, special deals, mood, point
of purchase, shopping channel, and time pressure at point of purchase.29

25 Interview with James Espey, Brand Manager responsible for launching the brand interna-
tionally, London, 2 February 2004.
26 Interview with Steve Wilson, former Brand Innovation Manager at IDV, London, 17 February
2004.
27 Interview with Chris Searle, Brand Manager who launched Piat D™Or, London, 22 January
2004.
28 Ibid.
29 BNP Paribas, “Global Wine Industry” (January 2003).
159
The Life of Brands
This is why supermarkets™ own brands and promotions have become major
competitors of standard wines such as Piat D™Or.
Croft Original was another successful innovation by IDV during this
period. It was based on thorough consumer research that detected a whole
new niche in the drinks market. At that time, the vodka brand Smirnoff had
achieved a high level of success in the United Kingdom, being particularly
popular with young people. The British sherry market was also very large, but
was populated by an ageing market segment. This market was dominated by
sherry brands such as Harveys Bristol Cream and Domecq™s Century. Croft
Original was distinctive, as it was light in color and looked like a dry sherry,
but tasted like a sweet sherry. Young consumers could enjoy the beverage
and still look cool and different from their parents, who drank brands such
as Harveys Bristol Cream. Over time, the brand started to fade in part due
to changing consumer tastes and to the very strong competition of suppliers™
own brands. The brand was sold in 2002 to the Spanish family ¬rm Gonzalez
Byass.
There are also some examples of very young brands, innovations that
focus on very particular niches. Ciroc is a premium vodka brand launched
by Diageo in 2003 in the United States to meet customers™ growing interest in
more healthy products. Being the ¬rst vodka made from grapes, the imagery
associated with the brand relied extensively on provenance and heritage,
considered to give credibility to the brand. For that purpose, it used the
provenance from the wine business and grapes from the Champagne region
in France.30


Building Portfolios of Successful Brands
The number of brands in the portfolios of the world™s largest multination-
als in alcoholic beverages varied substantially during the last forty years of
the twentieth century. From the early 1960s to the late 1980s, these portfo-
lios tended to grow very rapidly. This was mainly achieved through mergers
and acquisitions of ¬rms, the creation of line extensions, and the inclusion
of agency brands in those portfolios that were the result of alliances with
competitors. The merged or acquired target ¬rms tended to own success-
ful brands and cover types of alcoholic beverages in which the acquiring
¬rm yet had no presence. They could also involve competing brands in the
same product category, which were successful in different market segments.
Alliances with competitors involved low risk and enabled ¬rms to enlarge
their portfolios of brands in the short term. Through these alliances, ¬rms
were able to produce and market the brands in particular markets for estab-
lished periods of time. Line extensions were a distinct way of enlarging the

30 Interview with Steve Wilson, Global Brand Innovation Manager, Diageo, London, 17 Febru-
ary 2004.
160 Global Brands
portfolios of brands as they used existing brand names and applied them to
other beverages.
From the 1990s, the number of brands in ¬rms™ portfolios has stagnated if
not decreased. Firms started to concentrate on those brands that were most
successful and offered the highest pro¬t. With these brands, ¬rms widened
further the geographical scope of their operations, using global marketing
strategies. The very high success of a few brands led to the development of
a new form of transaction in this industry, which involved the acquisition
of brands independently from the ¬rms that owned them, almost as if they
were pieces of intellectual property.


The Case of LVMH
Louis Vuitton Mo¨ t-Hennesy (LVMH; formed in 1987) and its predecessors
e
in alcoholic beverages, Mo¨ t Hennessy and Mo¨ t & Chandon, provide a
e e
good illustration of how multinationals build their portfolio of brands over
time.31 Table 8.2 lists the portfolio of wholly owned brands by these ¬rms in
1977, 1987, 1997, and 2002. It does not consider, however, agency brands
obtained through alliances.
In 1997, Mo¨ t & Chandon owned 18 brands. Some of these brands had
e
been obtained through the acquisition and absorption of direct competitors,
other champagne houses such as Mercier in 1970 and Ruinard in 1973.
Others resulted from investments in different kinds of sparkling wines such
as Proviar in Argentina 1960, Chandon Munich 1970, Domaine Chandon
winery in Nappa Valley, California, in 1973, and acquisitions such as Provi¬n
in Brazil in 1974. Mo¨ t Hennessy also invested in other beverage types such
e
as Roz´ s in 1978, which owned successful brands in champagne and port
e
wine.
The merger between Mo¨ t Hennessy and Louis Vuitton in 1987 meant that
e
the portfolio of brands owned by the ¬rm expanded even faster, now involv-
ing not only new types of beverages but also more brands in each type. New
¬rms that owned successful brands were merged and acquired; new alliances
with competitors, producers of complementary beverages, were formed; and
new line extensions were created. Examples of important acquisitions are the
champagne houses Pommery in 1990 and Veuve Cliquot in 1994, owners of
successful brands.
LVMH only started systematically using line extensions to grow its port-
folio of brands in the 1990s. These line extensions were essentially new
products (beverages with different characteristics) that demonstrated the
contemporary relevance of the brand, meeting modern expectations and
matching new consumer needs. The line extensions took advantage of the

31 Hennessy was not included in this table as there was no information available about the
number of brands owned by the ¬rm prior to the merger with Mo¨ t & Chandon.
e
161
The Life of Brands

Table 8.2. Portfolio of wholly owned brands of LVMH
and its predecessors in 1977, 1987, 1997, and 2002

1977 1987 1997 2002

18 34 126 57
Total number of Brands
➯By Type of Beverage
4 7 42 11
Champagne
2 3 13 17
Other sparkling wines.
7 11 35 17
Cognac
1 18 14
Still wine “
2 1 6 0
Port wine
1 1 0
Other forti¬ed wines. “
2 2 2 1
Brandy
1 1 1 1
Vodka
1 1 1 0
Gin
1 2 1 0
Liqueur
1
Whisky “ “ “
6 1
Other spirits “ “
5 10 72 38
Of which total line extensions
(excluding the original
brand)
➯By Type of Beverage
26 2
Champagne “ “
3 5 16
Other sparkling wines. “
5 7 28 10
Cognac
5 8
Table wine “ “
5
Port wine “ “ “
1
Other forti¬ed wines. “ “ “
1
Brandy “ “ “
Vodka “ “ “ “
Gin “ “ “ “
Liqueur “ “ “ “
1
Whisky “ “ “
2
Other spirits “ “ “

Sources: Based on Annual Report and Account Mo¨ t-Hennessy (1977, 1987,
e
1997, 2002); Canadean; Barclays de Zoete Wedd, LVMH (1988).


reputation and personality of already successful brands. For example, in the
1970s, Mo¨ t Hennessy developed the brand M. Chandon, used in sparkling
e
wines produced in Brazil and Germany. Despite having a different country of
origin, these sparkling wines bene¬ted from the association with the cham-
pagne brand name Mo¨ t & Chandon, its heritage and imagery of luxury. M.
e
Chandon wines targeted new market segments, notably young people with
lower incomes than the typical Mo¨ t & Chandon customer, but who had
e
the potential to later become consumers of the main brand.
162 Global Brands
Over time, the portfolio of brands owned by LVMH varied substantially.
For instance, it increased from 34 brands in 1988 to 126 in 1997, and
decreased to 57 in 2002. The increase in the creation of line extensions in the
1990s meant that the ¬rm went from ten line extensions in 1988 to seventy-
two in 1997. They relied on successful brands such as Mo¨ t & Chandon,
e
Mercier, Hennessy, and Hine. The creation of line extensions also allowed
these old established brands, which were starting to show declining sales,
to be rejuvenated. The smaller size of LVMH™s portfolio of brands in the
beginning of the twenty-¬rst century was the result of a strategy of rationali-
zation and concentration on global brands.

Extending Brands
The high costs and risks involved in launching new brands, the already
high level of success achieved with certain brands, and the changing trends
in consumption of alcoholic beverages are among the main determinants
that lead ¬rms to extend existing brands to market beverages that satisfy
new consumer preferences. Line extensions are not entirely new brands as
they use established brand names for new offerings in the same product
categories.32 They can either be beverages of the same category with different
characteristics such as age, be the result of the mix of the original beverage
with a nonalcoholic juice, or refer to a completely different type of alcoholic
beverage. While the ¬rst kind of extension has been standard practice in the
industry, the other forms are more recent.
Johnnie Walker provides an illustration of how the ¬rst kind of line exten-
sion was used to target different segments. The scotch whisky brand Johnnie
Walker was launched in 1820 even though the trademark was not registered
until 1877. Line extensions were launched very early, with the introduction
of labels Red, Black, and White, referring to whiskies with different ages.
In the 1920s, Walker concentrated on the blends Black and Red, and over
the years introduced other line extensions such as Johnnie Walker Swing (in
1932 to be sold in the North American market) and Johnnie Walker Old-
est (introduced in 1988 as a ¬‚agship brand), which became later Johnnie
Walker Blue Label (in 1992). Another line extension was Johnnie Walker
Gold, launched in Japan as a 15-year-old blend.33
In the 1980s, the imagery of Johnnie Walker Red was quite distinct ac-
ross markets. In Latin America it was considered to be tasteful and quite

32 S. K. Reddy, S. L. Holak, and S. Bhat, “To Extend or Not to Extend: Success Determinants
of Line Extensions,” Journal of Marketing Research, Vol. 31 (1994): 243“62.
33 “List of Trade Marks registered from 27 July to 2nd August 1877,” Trade Mark Journal
(8 August 1877); “Advert for Johnnie Walker & Sons,” The Graphic (12 May 1906); “Min-
utes of Meeting of Directors,” Johnnie Walker & Sons Ltd., London, 5 April 1916, UD
Archive, Diageo; T. Boyd, “History of the House of Walker,” D.C.L. Gazette, April 1930,
UD Archive, Diageo.
163
The Life of Brands
passionate. In Continental Europe, it was a cool drink considered to be the
reward at the end of the day. After the creation of Diageo, the new board
of directors decided that Johnnie Walker was going to be a global priority
brand with a consistent imagery, irrespective of the fact that it was Black,
Red, or Blue. The imagery involved “inspiring personal progress.”34
There are multiple examples of other sorts of line extensions created in
recent years. Some mix the original beverage with a nonalcoholic juice.
Bacardi Breezer, Smirnoff Mule, and Smirnoff Ice are some examples. In beer
also, there are many examples, including Bud Light, Miller Light, and Coors
Light.35 Innovations aimed at extending beer brands into light beer started in
the 1960s. However, the early light beer brands failed.36 The success of light
beer is attributed to Miller Light beer, ¬rst introduced in the market in 1972.
However, the trend toward lighter and milder beer became common prac-
tice during the 1980s when consumption of alcoholic beverages, especially
of beverages with high level of alcohol content, started to stagnate.
The trend for consumers to drink beverages with lower alcohol con-
tent was signi¬cant in the spirit industry, too. The rum brand Bacardi, for
instance, had known uninterrupted growth from the 1950s until the 1980s.
It had targeted young consumers in the United States, who drank rum and
cola as an easy, fun alternative to the bourbons, martinis, and scotches drunk
by their parents. During the 1980s, there was an onset of “cola fatigue,” and
juice-based drinks grew in popularity. The “mixable” crown had been lost
to vodka, and Bacardi faced stiff competition in its own market. The launch
in 1990 of Bacardi Breezer was a successful response to these changes in the
environment and in consumer needs.
Smirnoff is another brand that has been used in the creation of several line
extensions. In 1992, when the sales of Smirnoff were maturing in the British
market, Grand Metropolitan launched a line extension called Smirnoff Mule.
It was a ready-to-drink beverage that reconstituted a cocktail prepared in the
1940s by bartenders in the United States, who mixed the vodka brand with
imported ginger ale and with lime. This cocktail was called “Moscow Mule”
and greatly contributed to the establishment of Smirnoff as a vodka brand
on the West Coast of the United States.37 The idea belonged to the managing

34 Interview with Peter Dee, Global Marketing Director for Johnnie Walker, Diageo, London,
14 January 2005.
35 Firms also created brand extensions, which use an established brand name to enter a new
product category. Brand extensions are seen as a more cost-ef¬cient and lower-risk method of
launching new products. Examples of brand extensions include Hiram Walker ice cream and
Bacardi rum cakes. P. Barwise and T. Robertson, “Brand Portfolios,” European Management
Journal, Vol. 10, No. 3 (1992): 278; David A. Aaker and Kevin Lane Keller, “Consumer
Evaluations of Brand Extensions,” Journal of Marketing, Vol. 54 (1990): 27“41.
36 Victor J. Tremblay and Carol Horton Tremblay, The U.S. Brewing Industry “ Data and
Economic Analysis (Cambridge, Mass: MIT Press, 2005): 140“43.
37 Moscow Mule was ¬rst created in 1941, Heublein archive, Diageo.
164 Global Brands
director of Heublein™s, who thought he could teach Americans to use vodka
in mixed drinks. Moscow Mule eventually became a very popular beverage
in bars all over the United States. The launch in 1992 of Smirnoff Mule in
the United Kingdom as a ready-to-drink beverage was aimed at responding
to the problems cocktails raised by taking preparation time at the bar and
by varying according to the capacities of the bartender. This frequently led
consumers to drink beer instead. However, Smirnoff Mule was unsuccessful.
It did not have suf¬cient appeal to the target market, and the bottle, which
was too sophisticated, did not correspond to the content of the beverage.
This was in fact IDV™s second unsuccessful attempt to enter the ready-
to-drink market. It had previously launched Saint Leger, a California Wine
Cooler, an alternative to wine and beer. The product failed because the com-
pany had not transferred the knowledge from its wine and spirits business
to the beer market, and had not done suf¬cient consumer research.38
These unsuccessful ventures were, nonetheless, very useful as learning
experiences for the subsequent launch in 2002 of Smirnoff Ice, which turned
out to be very successful. Smirnoff Ice™s imagery was very different from that
of Smirnoff Mule, being much less sophisticated and more connected with
the spirits brand. The success of Smirnoff Ice was such that it regenerated
consumer interest in the core brand.
The third possible path of line extension occurs when brands are used in
different types of beverages. An illustration is Gilbey™s Green Label, which
was extended from gin to Indian whiskey in 1995. Grand Metropolitan was
a late entrant in the Indian whiskey market, which was already quite large.
As part of its marketing strategy, the ¬rm used a renowned brand name,
Gilbey™s, which relied on the imagery and heritage of the original brand. The
brand took the name of an importer of wines and spirits from England in
the nineteenth century. The success achieved with the brand helped Gilbey™s
Green Label whiskey become a leading brand in the Indian market.39 The
brand was subsequently sold to UB Group (a leading Indian alcoholic bever-
ages ¬rm) as part of Diageo™s strategy of focusing on a small group of global
brands.
In the process of creating line extensions, the new rejuvenated brands
often become more important than the original brands, surpassing them in
their contribution to the total turnover of the ¬rm. In some cases where
the ¬rm used an umbrella brand name for all its products, the difference
between launching new brands and line extensions is not clear. One example
is the beer brand Asahi Super Dry, which succeeded Asahi Draft beer. It was
launched in 1987 by Asahi Breweries, during a period when the Japanese beer

38 Interview with Chris Nadin, former Marketing Manager at Grand Metropolitan, London,
10 December 2003.
39 Impact International; Interview with Richard Watling, Scotch Whisky Global Marketing
Director for Diageo, London, 8 March 2004.
165
The Life of Brands
industry was suffering a variety of demographic, dietary, social, economic,
and distribution changes that affected the demand for beer. Whereas con-
sumers traditionally exhibited strong brand loyalty and conservative taste,
the modern drinkers were eager to try new types of beer.40 This was also
a dif¬cult period for the ¬rm, which was on the edge of bankruptcy and
was therefore suf¬ciently desperate to risk a frontal attack on the industry
leader, Kirin. Asahi Super Dry targeted an unexploited niche of the Japanese
market koku-kire, “rich in taste and yet also sharp and refreshing.” The level
of sales not only surpassed those of any other brand owned by the ¬rm but
led Asahi Breweries in 2002 to become Japan™s largest beer supplier for the
¬rst time since 1954.41
Launching line extensions may be easier and less risky than launching
completely new brands, but it nonetheless requires very careful consumer
research and planning, even when the extension refers to the same kind of
product as the original brand. J&B Rare Jet is an example of a line extension
launched in 1996 that, despite relying on a top whisky brand J&B Rare,
only achieved limited success. The aim of this 12-year-old whisky was to
compete with Johnnie Walker Black, just as J&B Rare competes with Johnnie
Walker Red. However, there were several problems with the launch. First, the
12-year-old scotch category was not very large, and there was considerable
consumer loyalty toward existing brands. Second, in order to compete with
Johnnie Walker Black and Chivas Regal (then owned by Seagram), very
high investments in marketing were required. And third, the investments
in maturing stock were very high. The brand was progressively withdrawn
from most of the markets beginning in 1999, except for South Korea, where
it was a huge success.42
In the brewing industry, line extensions have become the most common
way for ¬rms to innovate. The success of many long-established brands
means that it is dif¬cult for new ¬rms and new brands to enter the market. In
recent years, new opportunities appeared in market segments such as women
and light beer consumers. Line extensions provide a way for rejuvenating
brands and keeping them “forever young.”


Brand Portfolios
From the early 1990s, the globalization of the industry accelerated. Trade
in brands independent of ¬rms increased. Multinational ¬rms rationalized

40 Asahi Brewery, Annual Report and Accounts (1988); Tim Craig, “The Japanese Beer Wars:
Initiating and Responding to Hyper-Competition in New Product Development,” Organiza-
tion Science, Vol. 7, No. 3 (1996): 302“21.
41 Kirin, Annual Report and Accounts (1966); “Asahi Pushes Kirin out of Pole Position,” Finan-
cial Times (21 February 2002).
42 Impact International.
166 Global Brands
their brand portfolios focused on those that were most successful and eas-
iest to turn into global brands. The aim was to achieve economies of scale
and scope at various levels of the value-added chain, including advertising
and distribution. Turning renowned domestic brands with a history of past
success into global brands assured consumers of the universal quality and
reliability of the beverages. Table 8.3 lists the top brands at the beginning of
the twenty-¬rst century for ¬ve leading multinationals in premium spirits “
Allied Domecq, Bacardi, Brown Forman, Diageo, and Pernod Ricard.
For each ¬rm Table 8.3 shows the top brands, the number of markets
covered by each, and the concentration of sales of those brands in terms of
number of markets. For that purpose, it uses the number of equivalent ¬rms
(1/H) calculated as the inverse of the Her¬ndahl index (H).43 It also illustrates
the number of line extensions for each of the leading brands. Finally, the table
provides information on the type of beverage and the total number of other
brands owned by the multinational in that beverage category.
By the beginning of the twenty-¬rst century, the most successful brands
owned by the world™s leading multinationals were sold in many geographical
markets. However, as illustrated by the column containing the index (1/H)
with the concentration of markets, most of the sales of these brands were,
in fact, in a small number of markets. For example, Jack Daniels, owned
by Brown Forman, was sold in 142 markets but the sales were essentially
generated in 3 markets, the United States being the most important one.
Even Johnnie Walker Red, considered to be a good illustration of a global
brand, had its sales concentrated in about 27 markets, despite being sold
in 169. Table 8.3 also illustrates the importance of line extensions for the
¬rms™ most successful brands. The high number of mergers and acquisitions
led ¬rms to own several brands in the same beverage type.

Trading Brands
Whereas in the past, brands were usually bought as part of the purchase of
the ¬rms that owned them, more recently a trade in brands independently of
¬rms has increased. Some brands also achieved partial independence when
their owners formed alliances “ often, remarkably, with direct competitors
for the production and/or distribution of these brands in speci¬c markets.44
In the beer business, the independence of brands was achieved mainly
through alliances both in distribution and production. For example,
Guinness, while part of Diageo, was distributed either through wholly owned
channels, or through alliances with direct competitors such as Interbrew

43 The number of equivalent markets (1/H) is the inverse of the Her¬ndahl Index (H), frequently
used in industrial economies to measure the concentration of industries. In this case this index
is adapted to measure the concentration of sales in terms of markets of destination by each
¬rm.
44 See Chapter 5.
Table 8.3. Portfolios of top alcoholic beverages brands for some leading multinationals in spirits in 2002
Number of Number of Range/ Number of
Markets for Concentration of Line Extensions for Brands by Type of
Multinational Top Brands Each Top Brand Markets (1/H) Top Brands Type of Beverage Beverage
49 5.21 4 44
Allied Domecq Ballantines Scotch whisky
52 1.10 1 30
Presidente Brandy
50 1.92 2 57
Canadian Club Canadian whiskey
52 2.03 1 75
Kahua Liqueur
52 1.87 5 17
Sauza Tequila
96 9.29 19 9
Bacardi-Martini Martini Range Vermouth
51 4.01 36 14
Bacardi Breezer Brand line extension
124 5.71 36 18
Bacardi Carta Blanca Rum
4 1.21 36 14
Bacardi Silver Brand line extension
117 3.96 4 6
Dewar™s White Label Scotch whisky
142 3.09 9 10
Brown Forman Jack Daniel™s U.S. whiskey
24 1.55 0 7
Fetzer Still wine
16 1.04 2 2
Canadian Mist Canadian whiskey




167
95 2.55 4 5
Southern Comfort Liqueur
140 14.63 5 4
Finlandia Blue Vodka
1 1 9 5
Jack Daniel™s Country Cocktails Brand line extension
35 3.50 12 27
Diageo Smirnoff Ice Brand line extension
153 5.10 12 31
Smirnoff Red Vodka
169 26.60 10 92
Johnnie Walker Red Scotch whisky
147 3.99 11 92
Baileys Liqueur
145 9.35 19 19
Guinness Beer
145 10.80 0 29
J & B Rare Scotch whisky
19 1.30 0 6
Pernod Ricard Ricard Anis/pastis
58 1.00 2 13
Seagram Coolers Other ready to drink
4 1.18 0 6
Chivas Regal Scotch whisky
58 1.11 1 11
Larios Gin Gin/Genever
58 1.59 1 23
Pastis 51 Aniseed
58 6.85 1 39
Suze Bitters / spirit aperitifs

Sources: Based on data from Canadean and Impact International.
168 Global Brands
(later Inbev) in France, Carlton-United Breweries in Australia, and Lion
Nathan in New Zealand.45
The depth and length of these alliances may, however, vary. On the one
hand, they are dependent on the type of activity being shared “ production,
distribution, marketing, or a combination. When they involve the market-
ing of the brand, independence is facilitated. The alliance formed in 1990
between Scottish & Newcastle and Foster™s Brewing through which the lat-
ter licensed to the former the rights to produce and distribute Foster beer
in Europe for an inde¬nite period of time, is an illustration. The economic
dif¬culties of Elder™s/Foster™s in the late 1980s were behind the creation of
this long-term agreement that gave the sales of such an important market in
terms of alcohol consumption to another company. These long-term alliances
often result in the acquisition of one company by another. An example is the
alliance formed in 1956 between Heublein and Grand Metropolitan for the
production and distribution of Smirnoff in Ireland and the United Kingdom.
The success Grand Metropolitan achieved with this brand in Europe led to
its acquisition of Heublein in 1987.46
Smirnoff is in fact a good illustration of a brand with a very long and
independent life characterized by multiple alliances and ownerships. First
launched in Russia in 1864, it became very successful in the 1870s when it
was chosen by the court of the Russian royal family. With the Revolution of
1917, the ¬rm ceased operations and the Smirnoff family emigrated. Some
years later, a son of the founder set up a distillery in Poland and started
producing Smirnoff using the original family recipe and selling to eastern
European countries and Scandinavia. In 1933, his company formed a con-
tract with Rudolf Kunnett, a former supplier of the Russian ¬rm Smirnoff,
who had emigrated to the United States. This contract granted Kunnett the

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