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exclusive rights and license to manufacture and sell all Smirnoff alcoholic
beverages in the United States, its territories, Canada, and Mexico. In the
same year, Ste Pierre Smirnoff Fils of New York was incorporated. In 1939,
the licensing rights were sold to Heublein, a U.S. alcoholic beverages ¬rm
that made the brand very successful. In 1951, Heublein bought the rights to
Smirnoff outside the United States.
In 1987, Smirnoff changed hands again. Heublein was in ¬nancial dif¬-
culty and was acquired by the British multinational Grand Metropolitan,
which had the rights to distribute the brand in Europe. The ownership of
the brand Smirnoff was in fact the main reason for this acquisition. In 1988,
the brand was valued in Grand Metropolitan™s balance sheet at £588 million
(US$1,047 million).47 The global success of the brand led the newly formed

45 Diageo, Annual Reports and Accounts (2003).
46 Interview with Sir George Bull, former Chairman of Grand Metropolitan and Diageo,
London, 19 December 2003; Heublein, Annual Report and Accounts (1986), Grand
Metropolitan, Annual Reports and Accounts (1988).
47 Grand Metropolitan, Annual Report and Accounts (1988).
169
The Life of Brands
Diageo to keep Smirnoff in its portfolio and manage it as one of its global
priority brands, that is, the brands receiving the most investment in terms of
resources (management and capital) and which derive their economic pro¬t
from several countries.
In the 1990s, the increasing concentration of the industry involved a tighter
control by the antitrust authorities in different countries, which, in concert
with the mergers and acquisitions underway, indirectly encouraged further
the trade in independent brands. Strategies for the rationalization of portfo-
lios also played a major role in creating independent lives for brands. Some
brands became targets for acquisition by multinationals. Others, even when
successful within particular markets, were disposed to smaller ¬rms, because
they did not ¬t with ¬rms™ strategies for the creation of global brands.
The merger between Guinness and Grand Metropolitan that formed
Diageo in 1997 raised important antitrust concerns. The European Of¬ce
of Fair Trading ruled that the newly merged ¬rm had to sell some of its
most successful brands because the combined company had too high a share
in some product categories and in some markets. For example, in scotch
whisky they ruled that J&B Rare and Dewar™s jointly had too large a share
of the market in the United States and in some European countries. This led
to the sale of Dewar™s to Bacardi in 1998. Diageo kept J&B Rare as it had a
broader international presence and was number one in Spain, where scotch
whisky was growing strongly.
Another example is the sale of Bombay Sapphire by Diageo to Bacardi,
which resembled the sale of a piece of intellectual property as it involved only
transfer of stocks, the recipe, and the trademark. There were no physical pro-
duction facilities involved “ while the brand was owned by Grand Metropoli-
tan, it was distilled by a third party, G. and J. Greenall in Lancashire. After its
acquisition, Bacardi maintained the essential components of the brand: the
very distinctive bottle (made of blue glass), the recipe, and the ingredients.
However, major changes were introduced in the speed of distribution. Invest-
ments in advertising and prices also rose in step with the premium image
of the brand.48 Sales of Bombay grew from 0.5 million bottles in 1998 to
1.4 million bottles in 2004.49
Interbrew™s acquisition of Whitbread and Bass in 2000 and 2001 was
another case contested by the European Monopolies and Restrictive Practices
Commission. After the failure of several appeals by Interbrew, the ¬rm had to
sell the brand Carling, Britain™s largest-selling beer, to Coors in the beginning
of 2002 for £1.2 billion (US$1.7 billion).50
The sale of Seagram to Vivendi in 2001 caused more brands to take on an
independent life. Vivendi was principally concerned with Seagram™s media

48 Interview with Chris Searle, Global Marketing Manager for Bombay Sapphire “ Bacardi,
London, 22 January 2004.
49 Impact International “ Database.
50 “Coors Agrees to Buy Carling,” Financial Times (27 December 2001).
170 Global Brands
companies. Consequently, it sold the alcoholic beverage business of Seagram
to Diageo and Pernod Ricard. The breakup of Seagram™s brands became an
important moment in the trade of independent brands. Owing to the scale of
the sale of Seagram and the size of the acquiring companies, this transaction
raised antitrust concerns in several countries. Consequently, Diageo was not
allowed to buy Chivas Regal as it would have a too high share of the market
of scotch whisky. The transaction also raised issues with third parties with
whom Seagram had long-term agreements and alliances. One, for instance,
concerned the transfer of ownership of Captain Morgan to Diageo. This
was contested by Destileria Serralves from Jamaica, the exclusive producer
of the brand since its launch. Destileria Serralves claimed it had ¬rst rights
of refusal in the case of changes in the ownership of the brand. They did
not, however, want to exercise their right to purchase, but rather wanted the
brand to go to Allied Domecq, with whom Serralves had an alliance. This
dispute was settled with the acquisition of Captain Morgan by Diageo and
the sale of Malibu to Allied Domecq for £560 million (US$796 million) at
the beginning of 2002.51
The increasing independence of brands in recent years has led to the emer-
gence of new phenomena in brand lives. Some brands have been divided.
For example, the Croft brand was sold by Diageo in 2001 to two ¬rms:
the port business to the Portuguese port wine group Taylor (later renamed
Quinta Vineyards Bottlers) and the sherry business to the Spanish sherry ¬rm
Gonzalez Byass. This splitting up of the ownership and management of the
brand is quite an innovation. Previously such divisions had only occurred
when brands were sold in different geographical markets where having dif-
ferent brand strategies could not be so easily detected. The existence of dif-
ferent brand management strategies for distinct markets, in fact, evolved in
a similar way as trade in alcoholic beverages, where distribution agreements
gave autonomy to local distributors.


Rationalization of Portfolios
From the early 1990s, rationalizing their portfolios of brands became part
of most companies™ growth and survival strategies. In 1993, Allied Lyons
sold several brands that had come to its domain through the acquisition of
Harveys in 1966. These brands included Tio Mateo sherry, Eminence and
Catador brandies, which were sold to Estevez Group in Spain for 500 million
pesetas (US$3.9 million).52 In 1999, after its creation, Diageo sold several
brands, including Cinzano to Campari of Italy for an undisclosed amount,

51 “Diageo Talks With FTC Likely to Focus on Malibu” and “Seagram Bidders Hit by Rum
Hangover,” Financial Times (24 October 2001); “Malibu Auction Attracts Drinks Compa-
nies,” Financial Times (18 February 2002).
52 Allied Lyons, Annual Report and Accounts (1994).
1. Amstel, international advert, 1970s
2. Artois “Le Bon Bock” advert, 1930s
3. Bacardi “Uncle Sam Goes to Cuba” advert, 1919“1933
4. Bass Pale Ale label, designed in 1855
5
5. Brahma “No Curve” advert, 2005
6. Captain Morgan advert, North America, late 1950s
7. Carlsberg Pilsner advert, 1952
8. Foster™s, Paul Hogan campaign, Continental Europe, UK, and USA, 1981
9. “GLOBAL” illustration from Diageo annual report 2003
10. Guinness “After Work” advert, United Kingdom 1961
11. Heineken “Most Served at the Bar” advert, 1960s
12. Hennessy cognac international advert, 1959
13. J&B Scotch Whisky, “Pours More Pleasure” advert, USA, 1971
14
14. Johnnie Walker “Time Marches On” advert, USA, 1948
15. Martini “Sleek and Stylish” advert, 1950s c 2007 Artists Rights Society (ARS),
New York/SIAE, Rome
16. Mo¨ t & Chandon “Giant Strides” advert, USA, 1903
e
17. Pernod “C™est la Vie!” advert, 1981
18. Ricard “Bientot la Caravane,” advert 1956
19. The original Sandeman “Don” poster, 1928
20. Smirnoff “A New Cocktail Epoch” recipe booklet, 1930s
21. Suntory Whiskey Red advert, fund-raising for Tokyo Olympics, Japan 1964
22. Tuborg “The Thirsty Man” advert, 1900
171
The Life of Brands
Asbach of Germany and Metaxa of Greece to Bols, the Dutch group, for
US$200 million. Vecchia Romagna, the leading Italian brandy, was sold to
Montenegro, a Bologna-based private company. In the same year, the ¬rm
also sold eight Canadian whiskeys to Canandaigua (later renamed Constel-
lation Brands) and four bourbons and other U.S. drinks to a consortium of
three companies, the two sales raising £218 million (US$353 million).53
Pernod Ricard only became a global ¬rm with the acquisition of part of
Seagram brands in 2001, marking this achievement by saying, “local roots“
global reach.”54 It disposed of many brands that were not considered a
strategic priority. In some cases, the sales involved no future connection
of the brand with Pernod Ricard. One example is the sale of Four Roses
(bourbon) to Kirin. In other cases, Pernod Ricard created alliances for the
distribution of the brands disposed, becoming their distributor in major inter-
national markets. The alliance formed with the Portuguese leader in wines,
Sogrape, where Pernod Ricard kept the exclusive rights for the distribution
of Sandeman port worldwide, is an example.
There were yet other small brands that were sold by Pernod Ricard in
groups and through auction. Some of these small brands were sold almost
as pieces of intellectual property. Ren´ Briand and Piave Grappa were two
e
trademarks owned by Seagram although the company neither produced nor
distributed them. The producer and distributor of these products, which had
no prior ownership in the brand, then acquired them.
Despite rationalizing their portfolios, the multinationals still had compet-
ing brands. In some cases this was an indication of a certain fragmentation
of markets, as many ¬rms were able to sell competing brands in particular
markets. In other cases, where heavy competition and relatively high con-
centration prevailed, competing brands within a portfolio indicated that the
¬rms were pursuing sophisticated segmentation and marketing strategies that
targeted their apparently competing brands to different niches. For instance,
after the absorption of Seagram™s brands, Diageo had four different whisky
brands in South Korea: Johnnie Walker, J&B Rare, Dimple, and Windsor.
The four brands were marketed according to Diageo™s global segmentation
study, which mapped brands™ appeal to consumers according to functional
bene¬ts and consumer preferences.55
At early stages in the development of markets, as preferences tend to be
quite similar, segmentation strategies tend to focus on the functional bene¬ts

53 “Cinzano Sale Completes Diageo Disposals,” Financial Times (30 September 1999); “Diageo
Close to $200 Deal With Bols,” Financial Times (27 September 1999); “Diageo in $186m
Sale of Whiskies,” Financial Times (23 February 1999); “Diageo Sells More Spirit Brands
in $171m Deal,” Financial Times (25 February 1999).
54 Interview with Julie Massies, Business Development Manager, Pernod Ricard, Paris, 11 June
2003.
55 “Brand Building Opportunities for Diageo in the Alcoholic Beverages market in Korea,”
Taylor Nelson Sofres (May 2002).
172 Global Brands
and characteristics of consumers. As consumption grows, tastes become
more re¬ned and differentiated and new competitors enter the markets, seg-
mentation based on emotional bene¬ts and motivations becomes more sig-
ni¬cant. For example, when a market ¬rst develops in the scotch whisky cat-
egory, the main motivation for consumers to drink is status. As new brands
enter the scotch whisky category, consumers start to want to look different.
New status categories emerge. Brand management then has to appeal to dif-
ferent interests in order to differentiate brands from those of competitors. In
South Korea, for instance, Diageo™s Johnnie Walker Black Label is directed
toward ideas of sophistication, Windsor to a concept of boldness, J&B Rare
to young consumers in Western bars, and Dimple to slightly older consumers
and professionals who go to hostess bars.56


From Adaptation to Standardization
Over time, the way multinationals managed their portfolios of brands has
also varied widely. At early stages in the life of ¬rms, they have tended to use
different strategies, adapted to each geographical market. Later, they used
standard marketing strategies targeting the global marketplace. However, the
timing for such changes varied. After Jack Daniel™s whiskey was acquired
by Brown Forman, the company used a standardized marketing strategy,
building the pivot of its brand on its distillery and tradition. This led to a
remarkably stable imagery for the brand over time and across countries that
is evident in its advertisements. Even though Brown Forman works with
different agencies in different countries, its commercials are similar in terms
of the message they aim to convey.
Other global brands such as Ballantines and Johnnie Walker started to be
advertised globally at only the end of the twentieth century. Until the mid-
1980s, Johnnie Walker™s imagery was very different across distinct markets,
re¬‚ecting distinct power groups within the company, on the one hand, and
the character of the local managers and distributors, on the other. For exam-
ple, before the creation of Diageo, Johnnie Walker Red Label projected a
very status-enhancing and quite passionate image in Latin America. In con-
trast, in the United States it had a very serious and “Wall Street”-like image.
In European countries such as Greece, the brand was viewed as a cool drink,
seen as a tasteful reward at the end of the day.57
Glen¬ddich, too, adapted its imagery to local markets™ tastes. When the
brand was relaunched in England and Continental Europe in the late 1950s,
it targeted different types of customers in distinct markets. In England, it
¬rst targeted consumers who had already tried it when they were in Scotland.

56 Ibid; Interview with Richard Watling, Scotch whisky Global Director Marketing, Diageo,
London, 5 February 2004.
57 “Global Johnnie Walker Review Update,” Consumer Scope (June 2003).
173
The Life of Brands
Thus, it was perceived as a very Scottish drink, appealing to values of authen-
ticity and tradition. In Continental Europe, in countries such as France and
Italy, where whiskies were seen as deluxe beverages, the image of Glen¬ddich
was one of luxury in the jet set. Over time, some common trends emerged
in those markets where it was most successful, driven by consumers™ prefer-
ences. By 1969, feeling the strain that comes when a brand is perceived in
different ways in different markets, the company began to create a global
image for the brand. The imagery was rede¬ned to appeal to younger gen-
erations.
Yet another example is the vodka brand Smirnoff. When ¬rst sold in the
United States before World War II, it was advertised as a product with no
taste or smell, dif¬cult to detect on the breath.58 In the early 1950s, the
advertisements of Smirnoff still emphasized these features. However, a new
feature of excitement was added by the slogan “it leaves you breathless.”
Not only did the slogan hint that the drink was so fantastic you lost your
breath, it also taunted whisky lovers for the strong smell of their drink.
The fact that the beverage was mixable with others was also emphasized.
Smirnoff began running a famous series of surrealistic advertisements, shot
in Egypt, the Mojave desert, and other unusual locations. The ads focused
on the vodka and emphasized the fact that the spirit was “driest of the
dry.”
In the 1960s, realizing that they needed to create an image for the brand
beyond its functionality (“tasteless, odourless and you can mix it with your
favourite drink”), Heublein hired famous personalities such as Woody Allen,
Marcel Marceau, Joan Fontaine, and Zsa Zsa Gabor to build an image
connoting lifestyle and sociability. They also started using women in their
ads despite the fact that this was considered inappropriate by the Distilled
Spirits Institute.
In the 1980s, as other vodkas such as Absolut entered the market present-
ing themselves in very imaginative ways, Smirnoff became more conserva-
tive, emphasizing in its advertisements its long history and status as the drink
of the Russian royalty. While in the early 1990s, Smirnoff™s advertisements
had different proposition statements depending on the market, from the late
1990s the ¬rm developed an aggressive campaign with a global proposition:
“pure thrill.” The aim was to create a compelling idea that could travel
across time and borders and yet be perceived as promoting an intelligent,
unexpected, and audacious brand.59
In extreme cases, conditions of consumption of a beverage may pre-
vent globalization. Ricard, one of the most popular anis/pastis worldwide,
generated 87 percent of its sales in its domestic market in 1997, despite the

58 “White Whiskey” advertisements 1940s, Heublein Archive, Diageo.
59 Graham Hankinson and Philippa Cowking, The Reality of Global Brands (Maidenhead:
McGraw-Hill, 1996): 12“17.
174 Global Brands
brand being sold in multiple markets. The other two markets with some
signi¬cance were Spain and Belgium, corresponding respectively to 9 and
2 percent of total sales.60 In Spain, Ricard was drunk essentially by Algerian-
born French who emigrated to Spain. Indeed, among most Spanish con-
sumers, cocktail-type drinks are traditionally not very common. The drink
also suffers from association with French tourists spending their summer
holidays in Spain. In France, however, the brand is strongly associated with
Provence and holidays. There the brand is designed to project optimism, “the
sun in a bottle.” The same structural dif¬culty prevents any penetration of
Ricard in the United States. Like the Spanish, Americans do not mix water
with alcohol. They drink their whisky or bourbon on the rocks, a drinking
habit that is hardly favorable to Ricard. Consumer worries about the safety
of what they eat and drink (and the related reluctance to mix unbranded bev-
erages with branded ones) has certainly contributed to the persistence of this
habit.
Using standardized and global marketing strategies has several advan-
tages, such as minimizing problems associated with the presence of gray
markets, where suppliers go to other countries to buy the beverages rather
than using the domestic distributors. This evolution from adapted marketing
strategies to global marketing strategies was also accompanied by important
changes in the way ¬rms distribute their beverages. By switching from inde-
pendent distributors to wholly owned channels and alliances, ¬rms were able
to increase their control of the marketing strategies of their brands. Even in
distribution agreements, the trend has been for the owners of the brands to
have more power over the way the brand is managed. This is what happened
to the brand Jos´ Cuervo, owned by a family ¬rm and distributed since 1960
e
by leading alcoholic beverages ¬rms (¬rst Heublein, subsequently Grand
Metropolitan, and ¬nally, Diageo). Over time, the family has increased its
control over how these multinationals manage their brands, by participating
in the marketing decisions.61


Brands in Firms™ Everyday Lives
The importance of global brands led ¬rms to start including the market
value of these brands in their ¬nancial statements. This was another factor
facilitating the purchase and sale of brands independently from the ¬rms that
owned them. Grand Metropolitan was the ¬rst ¬rm in this industry to include
the value of its North American drinks brands. The enhanced strength of
the company™s balance sheet made it easier to ¬nance the takeover of the
food manufacturer and retailer Pillsbury in 1988. Later in the same decade,

60 Canadean Ltd., “Pernod Ricard” (Hants: 1999).
61 Interview with Chris Nadin, former Marketing Manager at Grand Metropolitan, London,
10 December 2003.
175
The Life of Brands
after the acquisition of Arthur Bell and Distillers Company, Guinness also
included the market value of its new spirits brands in its balance sheet.
The strategic signi¬cance of brands led to important changes in the organi-
zational structure of ¬rms. In the early 1960s, ¬rms either managed brands
almost as if they were separate businesses, or organized them geograph-
ically, giving each subsidiary complete autonomy for the management of
its brands. Over time, brand management changed substantially, becom-
ing centralized. In the 1980s, companies started prioritizing brands. Grand
Metropolitan started managing Smirnoff, J&B Rare, and Baileys Irish Cream
as global brands. Other brands, such as Malibu, were considered regional
or local, even though they later became global. This strategy was re¬ned
after the creation of Diageo in 1997, when brands were classi¬ed accord-
ing to three categories: global priority brands, local priority brands, and
category brands. Global priority brands were those considered to have the
greatest current and future earnings potential. They were marketed consis-
tently around the world and included leading spirits brands such as Smirnoff,
Johnnie Walker, Baileys Irish Cream, and Guinness beer. Each global brand
was managed by a different team of managers, with their own strategy for the
brands.
Local priority brands were those in which a great deal of the economic
pro¬t was generated in one or two countries.62 Investment decisions and
management of these brands took place on a market-by-market basis. Unlike
the global priority brands, they did not always have a common marketing
strategy around the world. They included brands such as Bell™s Extra Spe-
cial whisky in the United Kingdom. This category also included brands not
owned by Diageo such as Budweiser and Carlsberg, which were considered
local priority brands in the Irish market. Apart from meeting the preferences
of Irish consumers (considered to be very sophisticated), this also helped the
local subsidiary of Diageo to achieve critical mass.63 Category brands were
those that were neither global nor local, being sold in particular markets.
For example, Black & White was sold in France and Venezuela, and Gilbey™s
Black Velvet gin in the United Kingdom. Any brands that did not ¬t in these
three categories were sold off.
This strategy of prioritizing brands according to their relevance in the
overall portfolio of the ¬rm was also used by brewers. Scottish & Newcastle
has two categories of brands: European brands and local leading brands.
Foster™s and Kronenbourg were classi¬ed as European brands, which meant
that they used common imagery in different European markets, even though
there were still differences in terms of decisions to support advertising at
the market level. Local leading brands included McEwans, consumed in

62 Economic pro¬t is de¬ned as the pro¬t after tax and investment in the balance sheet
(eg. maturing stock).
63 Interview with John Potter, Guinness Global Brand Manager, London, 21 January 2004.
176 Global Brands
Scotland, Courage in England, and Beamish Irish Stout in Ireland (where it
is an alternative to Guinness), and Sagres in Portugal.64


In Search of an Independent and “Eternal” Life
Brands are not static but dynamic phenomena, adapting constantly to chang-
ing environments. They may outlive the entrepreneurs that created them
and even become independent from ¬rms where they were developed, ulti-
mately being traded independently of any other assets, almost as pieces of
intellectual property. They may also achieve eternal lives through the cre-
ation of line extensions and through other innovations and investments in
existing brands involving other variables of the marketing mix such as orig-
inal packaging or advertising. It is worth noting that unlike other kinds of
intellectual property “ copyrights (90 years) and patents (14 years) “ there
is no automatic legal limit to the length of time a ¬rm has monopoly rights
over a brand.
Independence gives the advantage to ¬rms better able to manage a brand
than the original ¬rm that created it. This was the fate of many of the world™s
top brands in alcoholic beverages. Most traveled from smaller to larger ¬rms
or between leading multinational ¬rms that had those capabilities. Yet, in
other cases where brands were successful but did not have the potential to
become global, they traveled from larger ¬rms to smaller ¬rms better able to
keep them alive, or even between smaller ¬rms. An example is Sandeman,
which in recent years was owned by Seagram. The sale of Seagram to Vivendi
in 2000 left Sandeman port and sherry to be acquired ¬nally by Sogrape,
Portugal™s largest wines and spirits ¬rm, and yet a small multinational ¬rm
when compared with the leading ¬rms in the industry.65
The corporate governance of ¬rms and whether they are of large or small
size has had a great in¬‚uence in the lives of brands, helping to explain
their origin, growth, independence, and “eternity.” At early stages in the
lives of brands, “sticky” marketing knowledge proved to be crucial for
creating and building brands, their imagery and reputation. The dynastic
nature of family ¬rms provided the stickiness in the knowledge required
for their development. The managers that run those businesses were not
technically specialized but had very pragmatic and path-dependent market-
ing knowledge transmitted through practice and experience. Even family-
owned ¬rms felt the pressure to bring “smooth” knowledge into their busi-
nesses. However, by keeping the control of the shares, families were still
able to exert control over their top managers, retaining veto rights over

64 Interview with Tony Froggatt, CEO of Scottish & Newcastle, Edinburgh, 11 July 2004.
65 Teresa da Silva Lopes, “Competing with Multinationals: Strategies of the Portuguese Alcohol
Industry,” Business History Review, Vol. 79, No. 3 (2005): 559“85.
177
The Life of Brands
strategies that were too focused on the short term. In addition, their long-
term horizons meant that they gave brands time to grow and survive, even if
that implied accepting losses at the early stages in their development. Family
¬rms are also good at rejuvenating brands and creating eternal lives for them.
The knowledge required to generate successful line extensions and create
innovative marketing strategies is essentially “sticky,” path-dependent, and
pragmatic.
In contrast, ¬rms with shares spread over a vast number of shareholders
tend not to be as good at creating and growing brands in the initial stages of
their lives. Their marketing knowledge, mainly of a “smooth” nature, tends
to be obtained through hiring professional managers to run the businesses
and manage brands. The high levels of personnel turnover and a reward
system that usually encourages top managers to achieve short-term results
do not provide the opportunity for ¬rms to create and build brands for long
periods of time.
However, when ¬rms reach maturity and need to become global, the
increasing importance of “smooth” knowledge means that they are better
managed by professionals. Even brands that were ¬rst-movers require invest-
ments in marketing to ensure that consumers do not perceive rival brands
as acceptable substitutes.66 In the beginning of the twenty-¬rst century, the
world™s leading multinationals tended to have professional managers run-
ning their businesses and managing their brands. These hired professionals
had management degrees and marketing knowledge of a broad nature that
could be applied to the management of diverse kinds of brands.67 The shift
to generalist brand managers facilitated in turn the acquisition of brands
independently from ¬rms.


Conclusion
The initial success of brands tends to be associated with entrepreneurial ini-
tiatives, either by their creators, family members, descendants of the creators,
or by third parties such as the distributors of those brands. At early stages
in their lives, brands tend to be owned by family ¬rms, which provide ideal
environments to nurture those brands. Families tend to look at the long-term
implications for their decisions and accumulate “sticky” marketing knowl-
edge, which is pragmatic and path dependent, allowing consistency in the
way brands are managed over time. Once brands achieve a certain level of
success indicative of their potential to become global, then it is important that

66 T. Watkins, The Economics of the Brand (Whitstable: McGraw-Hill, 1986): 3.
67 Alfred D. Chandler Jr., The Visible Hand (Cambridge, Mass: Harvard University Press,
1977); Sherley P. Keeble, The Ability to Manage: A Study of British Management, 1890“
1990 (Manchester: Manchester University Press, 1992).
178 Global Brands
they be managed by ¬rms with high levels of “smooth” marketing knowl-
edge. This kind of knowledge can be applied to the management of different
brands, even when ¬rms have no previous experience in the management of
those speci¬c brands. “Sticky” marketing knowledge is no longer suf¬cient
to develop successful local brands into successful global brands. This helps
explain how brands may become independent from the ¬rms that created
them.
“Sticky” knowledge is nonetheless suf¬cient to explain the “eternity” of
brands. Rejuvenation of brands can be successful if ¬rms have accumulated
high levels of “sticky” marketing knowledge about those brands, for exam-
ple, knowing what exactly is the appeal behind the brands, and what the
right market segments (either demographic or geographic) to target are. This
argument, in fact, modi¬es existing theses, such as that of Alfred Chandler,
that principally focus on capital-intensive manufacturing industries in the
United States, and claimed the supremacy of the managerial enterprise over
the family ¬rm.68 By looking at an image-based industry and multiple coun-
tries with different national systems of governance, this study demonstrates
the sectoral and geographic limits of that thesis.
The generalizations provided in this chapter might also be applied to the
analysis of the life of brands in other industries, in particular in consumer
goods. The trend in such industries is for marketing knowledge to become
increasingly “smooth” and for brands to behave as pieces of intellectual
property that can be freely bought and sold. There are, however, some dif-
ferences between brands from distinct industries, or businesses within the
same industry. For instance, wine brands are less independent than beer and
spirits brands. Emphasizing the region of origin of the brand rather than the
name of the ¬rm made wine brands dependent on the speci¬city of the loca-
tions. Consequently, it became more dif¬cult to achieve a scale that made
them global and independent.
If the trend of brands to become pieces of intellectual property is con-
¬rmed, the twenty-¬rst century will be characterized by freely ¬‚oating
brands. Such a scenario will very likely induce several trends in the dynamic
evolution of industries. There will be pressure on family owned and con-
trolled ¬rms “ if they want to grow and survive “ to hire professional man-
agers to run their businesses. The increase in global competition will lead
to further rationalization of portfolios of brands with the disposal by lead-
ing ¬rms of brands with less relevance in their portfolios. For the surviving
brands in companies™ portfolios, the trend will be to widen their scope by
rejuvenating them through line extensions.
Given these trends and the characteristics of the industry, the marketing-
based multinational of the future will switch from a relatively pragmatic view
of management of brands to a more broadly based view in which the impact

68 Alfred D. Chandler Jr., Scale and Scope (Cambridge, Mass: Harvard University Press, 1990).
179
The Life of Brands
of the entrepreneur/manager is fully recognized. These trends provide the
rationale for claiming that studies on the life of brands provide an alternative
way to analyze the dynamic evolution of industries, taking into account
the complexity and changes in the environment in which brands operate,
the different experiences of individual brands over time, and the relationships
of competition and co-operation that they create.
9

Conclusion




Growth and Survival
This book has examined the evolution of the world™s largest multination-
als in alcoholic beverages from 1960 until the beginning of the twenty-¬rst
century. In identifying the importance of multinationality in the growth and
survival of ¬rms, the work ultimately became a study of brands, marketing
knowledge, and distribution. During the period discussed, the alcoholic bev-
erages industry underwent several major changes. In particular, there was a
profound concentration, with multiple mergers and acquisitions among lead-
ing multinational ¬rms. As a result, many leading ¬rms disappeared while
others became even bigger. Simultaneously, there was rapid internationaliza-
tion as ¬rms became increasingly global in their strategies. There was also
signi¬cant diversi¬cation as ¬rms invested not only into related but also into
unrelated businesses. Nonetheless, by the beginning of the twenty-¬rst cen-
tury, multinationals had begun to refocus on their core alcoholic beverages
businesses.
Despite the similarities in the patterns of growth and survival followed by
¬rms in this industry, there were some signi¬cant differences in terms of when
these changes took place, depending on whether the ¬rms were involved
principally in beer, spirits, or wines. Concentration and internationalization
were more pronounced in beer and spirits ¬rms. In addition, beer and spir-
its ¬rms were able to grow larger earlier than wine ¬rms and encountered
more adverse conditions related to the globalization of the industry in the
1980s, having to create new, ¬rm-speci¬c capabilities to grow and survive. In
the wines business, industry rather than ¬rm-speci¬c factors still determined
growth and survival at the beginning of the twenty-¬rst century. These busi-
nesses were less global owing to their asset-speci¬c nature that depended on
grapes from speci¬c geographic regions. There are also some spirits, such
as scotch whisky, that were asset-speci¬c. So, while in the late 1960s and
early 1970s, the merger waves had targeted brewers and producers of pro-
cessed wines such as port, champagne, and sherry, by the 1980s, spirits had
become the acquisition target for ¬rms wanting to create global brands. Only
at the end of the twentieth century did similar consolidation start to occur in



180
181
The Life of Brands
the wines business, as technological changes in wine production and ageing
¬nally made global brands and distribution strategies viable.

Levels of Institutional Analysis
This study has combined three levels of institutional analysis “ the country,
the industry, and the ¬rm. These levels are not mutually exclusive. They over-
lap and complement each other, with each level providing important determi-
nants to explain the multinational growth and survival of ¬rms. The country-
and industry-speci¬c determinants are predominantly exogenous, affecting
all the ¬rms in a country or in the industry equally. The ¬rm-speci¬c deter-
minants are endogenous and differentiate one ¬rm from another, promoting
and limiting success. Country-speci¬c determinants include the national sys-
tems of corporate governance in which ¬rms are based. Industry-speci¬c
determinants include the level of competition, consumption, and regulation
in the industry. Firm-speci¬c determinants include brand ownership, mar-
keting knowledge, distribution networks, ownership structures, and man-
agement control systems. While all these levels are considered, the analysis
of the ¬rm-speci¬c determinants of growth and survival remains a central
theme. The patterns of evolution of seventy multinational ¬rms including
their individual histories were analyzed in detail, and an original database
was created to record their activity. The database provides signi¬cant infor-
mation about the size and the general performance of these ¬rms, offers
details of their internationalization and diversi¬cation strategies, and indi-
cates their leading brands. Such wide-ranging historical data allowed the
analysis not only of the evolution of individual ¬rms, but also of a whole
industry.

Building Capabilities
The heritage of the companies that became the world™s leading multina-
tionals in¬‚uenced their development in multiple ways. In the past, it had
been possible for ¬rms to grow and survive without constantly rebuilding
their ¬rm-speci¬c advantages so long as the country- and industry-speci¬c
determinants were not adverse. This was a period when national systems of
corporate governance protected ¬rms from being taken over, consumption
patterns of alcoholic beverages were primarily culture speci¬c, and compe-
tition and the institutional environment in which ¬rms operated were prin-
cipally domestic. As a whole, the industry was fragmented and ¬rms could
therefore survive without having signi¬cant international activity or ¬rm-
speci¬c advantages in relation to foreign ¬rms. Prior to the 1960s, most of
the leading ¬rms from European countries were already highly internation-
alized, mainly through exports, and some through foreign direct investment.
182 Global Brands
This was obviously more common with producers of beverages such as beer,
or spirits such as gin, where production did not depend on any kind of
natural resources speci¬c to one particular region.
Once these country- and industry-speci¬c factors turned generally adverse
beginning in the 1960s, however, ¬rms could grow and survive only by con-
stantly creating or rebuilding ¬rm-speci¬c advantages. This did not neces-
sarily imply that the local environment was hostile, but rather that global-
ization demanded that ¬rms learn how to deal with multiple environments
even if conditions were benign at the level of particular markets. During
this period, there was a convergence of strategies among the world™s lead-
ing ¬rms, and multinationality became a necessary condition for growth
and survival. Mergers and acquisitions of other alcoholic beverages ¬rms
spread to all continents of the world, becoming a preferred mode of interna-
tional expansion. Apart from the obvious advantages they provided “ such
as higher speed for market entry, risk reduction, and ef¬ciency gains in a
period of high competition “ these mergers and acquisitions also gave ¬rms
the ownership of successful brands and international distribution networks
that had the potential to become global.
The main factors behind the growth by merger and acquisition of the
world™s largest ¬rms in alcoholic beverages were brands and marketing
knowledge. These factors not only determine the nature and scope of those
mergers and acquisitions, but also help explain the successive merger waves
that transformed the industry since the 1960s and resulted in the progressive
evolution of the boundaries of the world™s leading multinationals. I employ
the notion of “sticky” and “smooth” marketing knowledge. These concepts
suggest the need to understand not only the role of knowledge and infor-
mation in determining the changing boundaries of ¬rms, but also the type
of knowledge and information used and the way it is acquired, transferred,
and accumulated by ¬rms.
Before the 1960s, when consumption was fragmented and the level of
competition and the institutional environment was local or regional, ¬rms
only entered markets that were culturally, politically, and geographically
close. They acquired brands to serve these local markets and also to supply
their home markets. The levels of sticky and smooth marketing knowledge
were relatively low. Firms preferred to distribute their brands through modes
that minimized risk and uncertainty, even if that meant having no control
over the logistics or marketing of their brands. Beverages were therefore
mainly distributed by agents and local distributors. Once levels of marketing
knowledge grew, ¬rms started to enter markets that were more culturally,
politically, and geographically distant, and acquired and developed brands
that had the potential to be sold globally.
In the 1970s and 1980s when competition increased and became global
and distribution started to consolidate, new imperfections in intermediate
product markets emerged. Since ¬rms had acquired marketing knowledge
183
The Life of Brands
associated with their international experience and success in the management
and distribution of brands, they started using governance structures that
involved a higher control over the management of their brands. They also
tried to obtain certain economies of scale and scope in the logistics of dis-
tribution while retaining control over their marketing operations and mini-
mizing externality costs in distribution. During this period, there was also a
general trend toward vertical integration that was subsequently reversed in
the 1990s when alliances became very common.
Overall, from the 1960s those ¬rms that had not acquired high levels
of sticky marketing knowledge were less likely to survive independently. As
the industry matured, external processes for acquiring marketing knowledge
such as mergers and acquisitions became more common. There were several
processes used to guarantee the absorption of marketing knowledge through
these mergers and acquisitions. One was to keep family members of the
acquired ¬rms on the board of directors of the acquiring ¬rm.

Alliances in Distribution
In addition to being a fundamental factor in promoting collaboration
between ¬rms in an increasingly competitive environment, alliances worked
as mechanisms to secure independent growth and survival. Originating in
the 1930s between ¬rms from Anglo-Saxon countries, these alliances in the
1970s and 1980s had spread to ¬rms from Continental Europe and Japan. By
the beginning of the twenty-¬rst century, they were being formed between
large multinationals as well as between ¬rms of smaller size. It is the fre-
quency of alliances between direct competitors in a strategic activity such
as distribution that makes this study of alliances in this industry so impor-
tant (as alliances in other industries normally target production). Alliances
proved to be a more ef¬cient way to organize distribution than hierarchy,
because they provided the means for ¬rms to reduce risk and uncertainty
while simultaneously obtaining economies of scale and scope.

Diversi¬cation
This background of ¬rm-speci¬c determinants also explains the different
diversi¬cation strategies followed by multinationals as they moved into
related and unrelated businesses. Related diversi¬cation included not only
investments in products similar to those already owned, but also investments
in new geographical markets, in complementary activities (through vertical
integration), and in businesses that, despite not sharing the same physical
resources, made use of the same kind of knowledge. As late as the 1960s,
most alcoholic beverages ¬rms had little or no diversi¬cation. In those cases
where they diversi¬ed, they relied essentially on linkages related to physi-
cal assets. Over time, they diversi¬ed into both alcoholic and nonalcoholic
184 Global Brands
beverages businesses, relying on other types of linkages. Firms also started
to take advantage of the ef¬ciencies provided by knowledge linkages.
By the beginning of the twenty-¬rst century, this situation had reversed,
and the high number of low-diversi¬ed ¬rms re¬‚ected the importance that
product as well as knowledge linkages had for the ef¬cient operation and
long-term survival of these multinationals. Diversi¬cation into nonalcoholic
beverages businesses re¬‚ected more than genuine ef¬ciency gains in physical
and knowledge linkages. It was, rather, a response to the diversi¬cation fads
of the time and to multimarket competition. Most ¬rms had high levels of
internationalization, mainly in alcoholic beverages, even in those cases where
they diversi¬ed into other businesses also.
Diversi¬cation strategies within the alcoholic beverages industry evolved
in distinct cycles, depending on the original businesses of the ¬rms. Again, the
¬‚ows of knowledge acquired in the marketing and management of brands
played a very important role in this process. While beer ¬rms expanded
into wines and spirits, spirits ¬rms only invested in wines, and wines ¬rms
invested in spirits, but modestly. The sequences of diversi¬cation followed by
these ¬rms were also distinct. The last beverage type to become the target of
investment by multinationals was wine. This demonstrates that, ultimately,
marketing knowledge in this industry primarily resides in the management
of beer. This is why beer ¬rms diversi¬ed into wines and spirits, but neither
spirits nor wine ¬rms diversi¬ed into beer.

Corporate Governance
The country of origin proved to be an important but not determining fac-
tor in the development of leading multinational ¬rms. Until the 1980s, the
world™s largest ¬rms were all from the United States, the United Kingdom,
and Canada. In these countries, capital markets were more developed, and
national systems of corporate governance favored mergers and acquisitions.
Once the national systems of corporate governance in Continental Europe
and Japan showed some trends toward convergence during the 1980s toward
those of the Anglo-Saxon countries, the number of large alcoholic beverages
¬rms originally from those countries approached that of ¬rms from Anglo-
Saxon countries.
In this industry, contrary to Chandlerian claims about the predominance
of managerial governance structures, family ownership has always been a
signi¬cant determinant in explaining growth and survival of the large multi-
nationals. While dispersed shareholdings and professional management may
have permitted the investment in the capital-intensive manufacturing pro-
cesses documented by Chandler, success in beverages depended on capabili-
ties in marketing and branding, capabilities which may have been developed
more effectively by continued family involvement in the business. This is
related to the characteristics of an industry in which heritage is linked to
185
The Life of Brands
brand image, products tend to have long life-cycles, and investments in tech-
nological innovation are not very signi¬cant. From the 1980s, when there
was a convergence of strategies in the industry (even though these did not
always result in the most ef¬cient decision or re¬‚ect genuine economies),
those publicly quoted, multinational ¬rms that did not follow these con-
vergent strategies were often acquired by others that did. The ¬rms that
were able to keep their independence were primarily those that were family
owned.
Despite the importance of family ownership in explaining growth and sur-
vival over time, control of decision making did not necessarily remain in the
hands of families. The evidence provided shows that by the beginning of
the twenty-¬rst century, even those multinationals in alcoholic beverages
that were owned by families tended to be managed by professional man-
agers. Because investments in technological innovation are not as relevant
for these ¬rms, it is easier to keep ownership concentrated while still sat-
isfying the ¬nancial commitments required for continual growth. However,
organizational complexity and growing portfolios of brands often in differ-
ent product categories required hiring professional managers.
The predominant governance structures evolved from being entrepreneu-
rial based in the beginning of the 1960s, with direct ownership and per-
sonal management control systems, to being marketing based, characterized
by direct ownership and managerial control systems at the beginning of the
twenty-¬rst century. This evolution is again related to the increasingly impor-
tant role of marketing knowledge and the way ¬rms acquired that knowl-
edge. Before the 1960s, acquisition of marketing knowledge was more prag-
matic and path dependent, and was obtained internally through investments
in brand innovation. As the industry started to mature, external processes
became more common, and marketing knowledge was obtained through
mergers and acquisitions of other ¬rms, and through the hiring of profes-
sional managers with marketing degrees (although this practice still remained
more common in the United States than elsewhere).



The Role of Global Brands

Power of Brands: Imagery and Performance
Global brands that are leaders in the industry developed far beyond their
original connection to a particular product. The dimensions that brands add
to products or services may, however, vary substantially. In some cases such
as in alcoholic beverages, bottled water, and fragrances, brands rely mainly
on associated images. In others, such as automotive and computer brands,
their “personality” draws more on the performance achieved by the product.
Even though there are cases of pure imagery and pure performance brands,
186 Global Brands
most of the times they tend to build their personality around both these
attributes.
Brands, in particular those in alcoholic beverages that work through asso-
ciation, usually take a long time to build, and require continual investment
by the ¬rms that own them. Multinationals are constantly appealing to new
generations of customers who like to try new and different things. Firms often
try to create this appeal by developing line extensions. While line extensions
have been very successful, their sales may never become very signi¬cant in
terms of the overall pro¬tability of the ¬rm. Nonetheless, they play a very
important role in helping to revamp the brand, keeping it alive and looking
“young.”

Multiple Brand Ownerships
This capacity for brands to have independent and eternal lives helps us under-
stand the increasing number of brands that outlive the ¬rms that created and
developed them. Brand capacity to outlive ¬rms and to be better managed
by some ¬rms than others at particular moments in their lives raises ques-
tions concerning corporate governance and the way ¬rms acquire marketing
knowledge. The concept of marketing knowledge used here included a sticky
and a smooth part. The sticky part is more pragmatic and path dependent,
accumulated within the ¬rm over time. The smooth part has a broader appli-
cation and is obtained through hiring professional managers or consultants
with specialist training and general marketing skills. Firms managed and
owned by families with high levels of sticky marketing knowledge tended
to be better at creating successful brands. Firms managed by profession-
als tended to accumulate more smooth marketing knowledge and for that
reason, were better at acquiring and managing independent brands created
elsewhere.
Apart from being able to have independent lives, successful brands also
have the capacity to live “eternally” by being constantly rejuvenated. In this
case, however, the kind of marketing knowledge requires a particular sticky
kind, with the emphasis on the adaptation of brands to a speci¬c market
segment of a new geographical region leading to the creation of brand or
line extensions. Successful brands are considered to be global when they are
sold in each of the major regions of the world (even if most of their sales
are concentrated in a small number of markets), and pursue an integrated
strategy toward this activity. Many of these successful global brands outlive
the entrepreneurs and the ¬rms that create them, having multiple ownerships
during their lives. The different ownerships of brands over time means that
each owner has a particular role in building or developing the brand locally or
globally. While brands are becoming established, they tend to be better man-
aged by the entrepreneurs who created them. When they reach a certain level
of growth and success they are often better managed by other entrepreneurs
or ¬rms with smooth marketing knowledge, larger brand portfolios, and
187
The Life of Brands
global scope of their operations. Sometimes these changes in ownership are
only apparent, achieved through long-term license agreements or through
some other forms of alliances to target particular geographic regions or dis-
tinct product types. In recent years, many brands have changed ownership
as a result of the concentration movements and the need to comply with
antitrust regulations.

Staying “Forever Young”
Brands that become truly global and survive multiple ownerships help illus-
trate the important role they may play in shaping modern consumer society
and economic growth. This is especially true when we are contemplating
the waves of mergers and acquisitions that we read about in the newspapers.
The power of established brands, the dif¬culty of building new ones, and the
capacity for brands to add new dimensions to products, differentiating them
from rivals designed to satisfy the same needs, suggest that brands will change
ownership whenever other ¬rms more capable of managing them exist. These
capabilities are associated with the levels of marketing knowledge within the
¬rms, a function less of the size of these particular ¬rms than of the capacity
of management to ensure that the brand can stay “forever young.”

Beyond Alcoholic Beverages
While growth and survival are probably the most common topics of research
in international business history owing to the prominent role of the ¬rm in
explaining modern capitalism, this book analyzes them in a distinct context “
the global alcoholic beverages industry from the 1960s until the beginning
of the twenty-¬rst century. The innovations in communications and trans-
portation during this period led to rapid and distinct rounds of globalization
waves (in the sense that they involved more and larger-size ¬rms), and inter-
nationalization strategies that tended to focus on ¬rms™ core businesses.
The innovations in communications and transportation also meant that
the types of networks formed by ¬rms around the world were distinct from
those established in the nineteenth and early twentieth century. While in
the ¬rst globalization wave, cross-border networks involved family mem-
bers moving into foreign markets and also cross directorships, the alliances
formed at the end of the twentieth and early twenty-¬rst centuries tended
to take place between direct competitors with complementary capabilities
such as knowledge about their businesses (production vs. distribution) or
knowledge about the target geographical markets. These latter alliances often
involved several brands and products and various geographical markets.
During the period from 1960 until early twenty-¬rst century, family ¬rms
still predominated even though internationalization no longer meant placing
family members in foreign markets as professional managers were hired
instead. Even though marketing-based industries do not tend to be dominant
188 Global Brands
in the economies of major countries (although they still may be representative
in foreign trade), they are global in their scope, and their ¬rms rank among
the world™s largest multinationals. The role of different entrepreneurs in
the life of brands and the ownership structures used in the international
distribution of alcoholic beverages have proved to be central in explaining
the growth and survival of ¬rms.
From the 1960s, brands were the main determinant for mergers and acqui-
sitions in alcoholic beverages. While the characteristics of alcoholic bever-
ages in general make the role of global brands explicit, it is evident that their
importance has not been limited to this or other consumer goods indus-
tries. In other industries such as consumer electronics where technological
innovation is usually considered to be the prime driver, brands also play a
signi¬cant role. Hence, this book shows the enormous potential of brands
to explain the evolution of ¬rms™ strategies and to understand the history
of those strategies. The study has shown how their position changed over
time, as numerous local brands gave way to fewer global brands supported
by massive marketing expenditures.
Inevitably, given the scope of the topic and its hitherto relatively unex-
plored nature, the structures and the sequences of change described in this
book provide no more than a starting point for the analysis of the problems
of any speci¬c situation. It remains to be seen whether these ¬ndings about
the impact of the industry- and ¬rm-speci¬c determinants on the patterns of
growth and survival of ¬rms can also be applied to the study of the growth
and survival of smaller ¬rms that nonetheless operate at a global level. Such
a study would help broaden our understanding of the evolution of other
non“science-based industries that, like alcoholic beverages, are character-
ized by a high level of competition, concentration, and globalization, and
have globally branded products with long life cycles.
In addition, the study of the life of brands in alcoholic beverages might be
applied in the analysis of the life of brands in consumer goods industries such
as beverages like mineral water, instant coffee or colas, branded foods, or
branded cosmetics. Given these trends and the characteristics of the industry,
the marketing-based multinationals of the future in almost every industry will
doubtless switch from a relatively pragmatic view of management of brands
(based solely on knowledge acquired within the ¬rm) to a more broadly
based strategic view in which the impact of the entrepreneur/manager is fully
recognized. It is based on these trends that this book claims that studies on
the life of brands provide an important alternative in analyzing the dynamic
evolution of industries.
Finally, the argument of this book points beyond the compilation and
explanation of the past experiences of alcoholic beverages ¬rms to the dis-
cussion of a broader research agenda for international business history. This
book debates whether or not current day globalization is different from the
¬rst globalization wave that took place from the 1880s until 1929. It also
189
The Life of Brands
challenges the all-inclusive nature of the Chandler synthesis, the complex-
ity of capitalist development, and the different forms it takes. In particu-
lar, it notes the contribution of family enterprises to innovation and the
entrepreneurial capabilities of ¬rms. The book offers new insights on how
certain country, industry, and ¬rm determinants can help explain multina-
tional growth and survival in marketing-based industries.
While not aiming to provide a recipe for leadership, growth, and survival of
multinational ¬rms, this book nonetheless establishes that the past matters,
by providing the empirical evidence on how ¬rms grew and survived, what
¬rm-speci¬c capabilities were determinant in that process, and how these
capabilities and, in particular, global brands developed over a long period of
time. This book is intended to restore a better balance between marketing
studies and histories that focus exclusively on technology. Ultimately, a more
balanced perspective will contribute, I believe, to an improved understanding
of the emergence of the global economy of the twenty-¬rst century.
Appendix 1

Value-Added Chain in Alcoholic
Beverages


This Appendix provides the general characteristics of each beverage “ beer,
spirits, and wines “ and of the value-added chain. By linking the strategically
relevant stages that make up the production and marketing sequence from the
raw materials to the ¬nal consumer, the value-added chain helps explain the
changing boundaries of ¬rms in alcoholic beverages, including their mergers
and acquisitions and alliances.1


Characteristics of the Beverages
Beer is made from fermented malt, water, and yeast, and is ¬‚avored with
hops. It can, however, be fabricated from a variety of raw materials such as
millet, maize, sorghum, barley, wheat, and rice. These raw materials can be
grown in most fertile regions, making it relatively easy to produce similar
beer in different locations. Thus, although Bass Brewery once claimed that
the water from Burton-on-Trent gave it a distinctive character, and Coors
Brewery still makes such claims for Rocky Mountain water, the location of
the breweries today has more to do with the location of consumers than with
the location of raw materials. Nonetheless, in some countries “ Germany in
particular “ beer remains remarkably “local.”
Spirits are made from concentrating ethyl alcohol by distilling an already
fermented product. The term spirit includes many types of beverages such as
whisky, rum, brandy, gin, vodka, and aquavit. The most evident difference
is in color. While whisky, rum, and brandy vary in shade from straw-colored
to the deepest brown, gin and vodka normally are colorless. However, color
is mostly produced by adding coloring to the clear distillate. The real dif-
ference between these drinks lies in the raw materials used. For example,
while rum is made from sugarcane, whisky is obtained from the distilla-
tion of an aqueous extract of an infusion of malted barley and other cereals
that have been fermented.2 Given the relative indifference of both beer and

1 For a de¬nition of value-added chain, see John H. Dunning, Multinational Enterprises and
the Global Economy (Wokingham, Berkshire: Addison Wesley, 1993): 189; Michael E. Porter,
Competitive Advantage (New York: Free Press, 1985): 33.
2 A. H. Rose (ed.), Alcoholic Beverages, Vol. 1 (London: Academic Press, 1977).

191
192 Global Brands
spirits to the place of production, these two types of alcoholic beverages
have proved highly amenable to internationalization and the development
of global brands.
Wine is usually made from the fermented juice of grapes. It also can be
produced from other commodities. In Asia, it is made from rice, and in Africa,
from palm tree sap. There are many different types of grape wines, varying
according to the speci¬c characteristics of the blend of grape varietal used.
These can produce quite distinct ¬‚avors, colors, and chemical compositions.
Processing methods also make major differences in the end product. In most
wine making, the carbon dioxide generated during fermentation is allowed
to escape. In some cases, however, this is prevented and sparkling wines “
most famously, champagne “ result. Similarly, in most cases, fermentation
proceeds until most of the sugar in the grapes has turned into alcohol. In
some cases, however, spirit is added to preserve some of the sugar. This
process results in forti¬ed wines such as port or sherry.3
For each type of alcoholic beverage, the quality of the beverage can vary
widely depending on a variety of factors, including the raw materials and the
age of the beverage. All three types of alcoholic beverages “ wines, spirits,
and beer “ require some time to age, but wines generally require more time
and are more delicate.4
The marketing strategies followed by wine ¬rms naturally vary based on
these differences.5 For example, prices charged for wines are generally cat-
egorized as premium or standard. Standard or de novo wines are predomi-
nantly mass-produced and distinct from premium bottled wines in multiple
ways. They tend to emphasize the blend, not the place of origin. In premium
wines in contrast, appellation of origin and the characteristics of the terroir
(the land where the grapes are grown) and the vintage (the year the grapes
are harvested) are very important. Whereas traditionally wines from the old
world are, to a signi¬cant degree, branded by the region (terroir), de novo
wines are now branded by individual ¬rms. The notion of terroir insists
that particular wine-producing regions have their own distinct characteris-
tics, arising from the soil and the climate. Old wine-producing regions have
long used laws and treaties to protect these regions and the names “ cognac,
champagne, chianti, madeira, port, and so on “ associated with them. The
de novo wine brands, in contrast, do not associate themselves with terroir.
These can in principle be made anywhere suitable grapes are grown. Para-
doxically, whereas regionally located wines tend to be highly variable (as
local conditions vary from year to year), the de novo wines, which may be

3 Rabobank, “The World Wine Business” (1996).
4 Tony Spawton, “Development in the Global Alcoholic Drinks Industry and Its Implications
for the Future Marketing of Wine,” European Journal of Marketing, Vol. 24, No. 4 (1990):
47“54.
5 Datamonitor, “Strategic Review of European Drinks” (1997).
193
Appendix 1
produced in different places each year, tend to be more consistent as the
industrial processes used to produce them can iron out variation. As global
wines, they address global tastes and thus tend to be fruitier, easier to drink,
and cheaper.
Terroir wines are subject to problems of free riding by low-quality produc-
ers, who can damage the status of the region as a whole. De novo wines, by
contrast, have more control over the perception of their brand. Like beer and
spirits, they can be made in different geographical areas, allowing ¬rms to
take advantage of scale and scope economies. 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 from the old world wines, where
terroir and date are highly important, but highly variable. Private brands
are thus a very important part of the strategy used in the marketing of new
world wines.
These constraints of terroir wines inevitably lead to relatively small, inelas-
tic quantities in comparison to standard table wines. As a result, the wines
tend to be expensive and sold in specialty shops for niche customers. In
contrast, because standard wines are easily branded, they tend to offer com-
petitive prices and to be sold in supermarkets and liquor stores.

Description of the Value-added Chain
In Figure A1.1 beer, spirits, and wine businesses are combined into one single
schematic representation of the value-added chain, despite their differences.
The main stages of economic activity are grouped in four categories accord-
ing to their basic function “ procurement, production, marketing and sales,
and complementary services. Marketing and sales make the linkage to the
¬nal consumer.
Procurement includes those activities through which the ¬rm obtains raw
materials for the production of alcoholic beverages. When not integrated
vertically, alcoholic beverages ¬rms procure raw materials from farmers,
cooperatives, or brokers that may serve as intermediaries, selling larger vol-
umes. In beer, apart from water, other important raw materials are malt,
grain, or cereal, and hops, which acts as a preservative. In spirits, depending
on the type of beverage, raw materials can range from fruits, grains, sug-
arcane, or cereals. In wine, there is usually only one raw material, grapes.6


6 For a detailed de¬nition of the various types of alcoholic beverages, see e.g. Christina Marfels,
Concentration, Competition and Competitiveness in the Beverages Industries of the European
Community (Luxembourg: Commission of the European Communities, 1992); Diane M.
Sawinski and Wendy H. Mason, Encyclopaedia of Global Industries (London: Gale Research,
1996).
Procurement Production Marketing and Sales


Raw
Malt grain,
material Grain milling
yeast, hops, Branding
Fermentation Bottling
Beer and mashing
other cereal,
water

Advertising
Raw
Delivered
Finished
material Grain milling
Grain, sugar product
product Final
Spirit and mashing Fermentation Distillation Aging Bottling
cane, fruits.
Consumer
Stockholding
Raw
material Grape
Grapes Fermentation Aging Bottling
Wine mashing Distribution




194
Complementary Services
“ Market research
“ R&D
“ Common support and advisory services
“ ...
a1.1. The value-added chain in alcoholic beverages
195
Appendix 1
Production processes vary according to beverage. In beer, the raw materials
¬rst go through a process of mashing and subsequently suffer a process of
fermentation. In spirits, after the milling and mashing of the cereals or fruits
and their fermentation, the beverages are subject to a distillation process.
For some spirits, like whisky, the quality of the beverage improves with
aging. Again, the aging process varies depending on the beverage and the
quality and characteristics desired, but it may take many years. In beer, the
aging process is brief, corresponding to only a few weeks. In wine, after
the crushing of the grapes the juice is fermented in barrels or stainless steel
containers.7 The aging process for some types of beer and wine spans the
line between production and marketing and sales, as good wine and beer
actually continue to improve after bottling.
The bottling and packaging of alcoholic beverages has changed substan-
tially in recent years as it has become an important way to indicate the quality
and assert the origin of the product. Hence, the scope of the bottling function
has extended to the marketing stage. Decisions about packaging, such as the
type and style of bottle used, are now part of the marketing activity.
Marketing and sales include branding, stockholding, advertising and pro-
motion, and distribution. Branding works as a link between the producer
and the consumer and between the producer and distributor-wholesaler or
retailer. It involves studying the marketing strategy most adequate to dif-
ferent cultural environments, taking into consideration speci¬c regulations
such as those on bottle labeling or alcohol advertising. For instance, in some
states in the United States, the lack of other forms of advertising makes labels
the main means by which ¬rms communicate with consumers.8
Advertising and promotion includes any paid form of nonpersonal com-
munication by an identi¬ed sponsor to promote a product or a company. It
may involve the employment of several speci¬c channels or media, including
direct mail, newspapers, magazines, trade journals, radio, television, cinema,
and outdoor posters. Advertising provides an important key to gaining dis-
tribution by creating consumer demand, which limits the retailer™s choice of
brands to stock. Like bottling and branding, this activity also suffered great
changes in the last forty years of the twentieth century with the globalization
of economies and the developments in transports and communications.9

7 For example, port wine is considered by law to need at least three years of ageing before it
achieves its full capacities. However, most table wines are considered to be in good condition
to be drunk after a couple of months of fermentation.
8 Victor J. Tremblay and Carol Horton Tremblay, The US Brewing Industry “ Data and Eco-
nomic Analysis (Cambridge, Mass: MIT Press, 2005); Francois Guichard, “O Vinho do Porto
¸
e mais Alguns: Gestao da Imagem,” Douro: Estudos e Documentos, Vol. 1, No. 3 (1997):
˜
151“52.
9 Alfred D. Chandler Jr., Scale and Scope (Cambridge, Mass: Harvard University Press, 1990):
150“51; idem, The Visible Hand (Cambridge, Mass: Harvard University Press, 1977); Asa
Briggs, Wine for Sale (London: Bastford, 1985): 46.
196 Global Brands
Stockholding and distribution involve the physical handling and delivery
of the ¬nished product to ¬nal customers. There have been profound changes
in the world™s political and economic environment since the 1960s, as well
as in the modern supply-chain logistics. Consequently, it is worth spending
more time on this stage of the supply chain. These changes have led to
increased concentration in distribution at the wholesale and retail levels and
the shortening of channels between producer and consumer.10
There are several differences associated with the distribution of beer, spir-
its, and wine. Since beer is perishable, when conservation systems had not
been developed, it could only be distributed in very restricted geographical
regions. The development of pasteurized keg beers and refrigeration systems
for containers and trucks led to more consistent, longer-life, mass produced
beers, and also altered the costs of transportation.11
Finally, to return to Figure A1.1, complementary services include the inter-
mediate services that support procurement, production, and marketing and
sales, and, for that reason, tend to occur parallel to the three main stages in
the value-added chain. Such services include market research; research and
development; administrative, ¬nancial, and advisory services; and transport
services, among other activities. These activities may be performed either by
alcoholic beverages ¬rms or by third parties.


Value-added Chain Over Time
The strategic importance of each of the different activities in the value-added
chain changed over time, affecting the level of horizontal and vertical inte-
gration in ¬rms. Traditionally, production was considered the most strategic
activity. Competition was low, distribution was fragmented and regional,
and in beverages like beer, production technology was the central means for
obtaining economies of scale and scope.
As technologies in brewing, distilling, and wine making became wide-
spread and standardized and competition intensi¬ed and became global,
marketing and sales gained increased importance. New forms of distribution

10 N. A. H. Stacey and A. Wilson, The Changing Pattern of Distribution (Oxford: Pergamon,
1965).
11 The main developments were more effective control of malting, brewing, fermentation, and
conditioning, with the use of closed vessels, computer-aided control, among other technolo-
gies; experience with continuous brewing techniques in mashing and fermentation, which
were then modi¬ed to produce accelerated batch and high-gravity systems; improved pack-
aging, particularly in bottling and canning, with much faster process throughputs; and more
effective distribution by road. For a more detailed analysis of this topic, see Terry Gourvish
and Richard G. Wilson, The British Brewing Industry, 1830“1980 (Cambridge: Cambridge
University Press, 1994): chapter 13. In the 1990s there has been considerable innovation,
notably improvements in the automated cleaning of brewing vessels and the emergence of
new beers.
197
Appendix 1
emerged as a response to the development of buyers™ (or retailers™) own
brands, and the concentration of retailing ¬rst in the United States, subse-
quently in Europe, and ¬nally in other parts of the world such as Asia, also
created important threats to ¬rms™ brands.12
Although this shift of competitive importance from production to mar-
keting can be considered to have begun in the 1960s, it is possible to argue
that real structural and attitudinal shifts did not happen until the late 1980s.
In the United Kingdom, for example, the 1989 Monopolies and Restrictive
Practices Commission report led to the creation of a signi¬cant new sector of
the industry, the nonbrewing pub chain.13 This affected the level of vertical
integration by ¬rms as they aimed not only at reducing transaction costs but
also extracting rents.14
In wines, the situation was quite distinct. By the beginning of the twenty-
¬rst century, only a few wine ¬rms overlapped the three basic stages of
the value-added chain. Most linkages between the three major stages were
contracts between wineries and growers, and between wineries and foreign
importers. Understandably, the relative bargaining strength of these eco-
nomic entities was highly unequal. Large wineries were often in a monop-
`
sonistic position vis-a-vis competitive small-scale growers who had limited
or no alternative sales outlets15 .

12 Nicholas Alexander, International Retailing (Oxford: Blackwell, 1997); Bridget Williams,
“Multiple Retailing and Brand Image,” in Geoffrey Jones and Nicholas J. Morgan (eds.),
Adding Value: Brands and Marketing in Food and Drink (London: Routledge, 1994): 292,
306“7; W. G. McClelland, Studies in Retailing (Oxford: Blackwell, 1963): 122.
13 Tony Millns, “The British Brewing Industry, 1945“1995,” in Richard G. Wilson and Terry
Gourvish (eds.), The Dynamics of the International Brewing Industry Since 1800 (London:
Routledge, 1993).
14 Paul Duguid, “In Vino Veritas,” in Martin Kenney and Richard Florida (eds.), Locating
Global Advantage: Industry Dynamics in a Globalizing Economy (Palo Alto, Calif: Stanford
University Press, 2003).
15 John Cavanagh, Frederick Clairmonte, and Robin Room, The World Alcohol Industry With
Special Reference to Australia, New Zealand and the Paci¬c Islands (Sydney: Transnational
Corporations Research Project “ University of Sydney, 1985): 55.
Appendix 2

Brands Owned by the Leading
Multinationals in 2005


This Appendix provides a list of the leading multinationals in 2005, their
country of origin, their main brands at that time, and the country of origin
of those brands. It also shows the dates when those brands were added
to the portfolio of the multinationals. These are either the dates when the
brands were launched by the ¬rms that still own them, the dates when they
were acquired together with the ¬rms that owned them, or when they were
acquired independently from the ¬rms that originally owned them.




198
199
Appendix 2

Table a2.1. Brands owned by the leading multinationals in 2005

Date of
Addition to
Country
the Portfolio
Multinational of Origin Brand (origin)

1876
Anheuser-Busch US Budweiser (US)
1955
Busch Light (US)
1981
Michelob (US)
1982
Bud Light (US)
1988
Bud Dry (US)
1994
Bud Ice (US)
1987
Asahi Breweries JPN Asahi Super Dry (JPN)
2000
Super Malts (JPN)
2001
Asahi Honnama (JPN)
1862
Bacardi Bacardi Carta Blanca (CUB/US)
1990
Bacardi Breezer (CUB/US)
1993
Martini (FRA)
1998
Bombay Sapphire (UK)
1998
Dewar™s Scotch Whisky (UK)
1956
Brown Forman US Jack Daniel™s (US)
1971
Canadian Mist (CAN)
1979
Southern Comfort (US)
1923
Early Times (US)
1847
Carlsberg DEN Carlsberg (DEN)
1970
Tuborg (DEN)
1997
Karhu (FIN)
1997
Tetley (UK)
2000
Pripps (SWE)
2000
Ringnes (NOR)
2004
Holsten (GER)
1994
Constellation US Almaden (US)
1994
Brands Inglenook (US)
2003
Hardys (US)
2004
Robert Mondavi (US)
1759
Diageo UK Guinness (IRE)
1974
Baileys Original (IRE)
1986
Smirnoff (RUS)
1986
Johnnie Walker (UK)
1986
J&B Rare (UK)
1986
Gordon™s (UK)
2000
Captain Morgan (PR)
2000
Cuervo (MEX)
2000
Tanqueray (UK)

(continued)
200 Global Brands

Table a2.1 (Continued)

Date of
Addition to
Country
the Portfolio
Multinational of Origin Brand (origin)

1933
E. & J. Gallo US E. & J. Gallo (US)
Carlo Rossi (US) n/a
Peter Vella (US) n/a
1957
Thunderbird (US)
1966
Fortune US Jim Beam (US)
1987
Brands/American De Kuyper (NL)
2005
Brands Sauza (MEX)
2005
Canadian Club (CAN)
2005
Courvoisier (FRA)
1888
Foster™s Group AUS Foster™s (AUS)
1890
Carlton (AUS)
1907
Victoria Bitter (AUS)
1864
Heineken NL Heineken (NL)
1968
Amstel (NL)
1988
Warka (POL)
1996
Moretti (IT)
1999
Cruz Campo (SPN)
1880
Inbev BEL/BRA Stella Artois (BEL)
1888
Brahma (BRA)
1889
Antarctica (BRA)
1967
Skol (BRA)
1976
Jupiler (FR)
1995
Labbatt (CAN)
2001
Beck™s (GER)
1888
Kirin Brewery JPN Kirin Lager (JPN)
1990
Ichiban Shibori (JPN)
1998
Tanrei Nama (JPN)
1743
LVMH FRA Mo¨ t & Chandon (FR)

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