Brown-Forman executives: Mark McCallum, Paul Varga and Jim Bareuther BROWN FORMAN BRAND BUILDING AT ITS BEST

Text by Kristen Wolfe Bieler ■ Photograph by Andrew Kist

Off recent success, this 137 year-old company launches new go-to-market game plan

Last year was Brown-Forman’s best. Sales hit ty to make some big changes to our organi- an all-time high at nearly $2.4 billion and zation. It is much easier for a company to the company’s driving brand – Jack Daniel’s realign when it’s strong and performing – outperformed any previous year. With well,” says Paul Varga, Brown-Forman’s business going so well, it may seem an CEO, and only the third in the company’s his- unlikely time to completely overhaul corpo- tory not to be a member of the Brown family. rate infrastructure, change sales and market- Brown-Forman’s most significant new ing strategy and appoint a new CEO, but strategy was to combine its spirits and wine this is exactly what Brown-Forman did. portfolios. A reorganized and unified sales “We have tremendous momentum right and marketing organization went into oper- now, and we feel that gives us an opportuni- ation in July 2006. Jack Daniel’s at the top “Size has its advantages, but when it of Its Game comes to building brands with the It is almost hard to conceive of a brand more powerful than Jack trade and targeting consumers, the Daniel’s. With a rich and long history, individual brands require undivided it resonates more than ever with con- sumers today. Last year the brand hit attention. For example, if Don Eduardo an all-time high at 8.5 million cases worldwide. “We joke all the time that wants to compete against Patron, it Jack Daniel’s is consumed by ‘young legal drinking age consumers to had better be focused.” those damn near dead.’ People come – Paul Varga, CEO, Brown-Forman to this brand and stay with it,” says John Accardo, head of Brown-Forman’s eastern sales division. “And, much of this is driven by our continued ability to be relevant across a broad spectrum of consumers, both male The newly designed organization will fy the target consumer for that brand.” and female. Jack Daniel’s has transcended allow Brown-Forman to utilize its full In addition, removing “wine” and the category. While it is a whiskey, to con- portfolio breadth and strength in “spirits” categories will allow Brown- sumers it is first and foremost just ‘Jack.’” partnering with distributors and retail Forman to cross market in more effec- The brand isn’t bulletproof, however, and customers, while also creating tive ways. “Sonoma Cutrer is about as experienced a decline in the mid-1990s, stronger focus on brand-building different from Bolla as it is from Jack along with most other brown spirits. Brown- activities directed to consumers,” Daniel’s,” observes Bareuther. “And it Forman started supporting the brand in new explains Varga, who believes the new is probably more similar to Woodford ways, and thanks to the “unwavering support structure gives the company the best Reserve when it comes to consumer of retailers,” says chief operating officer Jim of both worlds. “We are able to use appeal and message. We think about Bareuther, the brand has continued to grow the benefit of our size to get influence our products as brands, not as part of a for the last 14 consecutive years. The cock- where it is important, while allowing certain category.” tail craze added fuel as well. “Consumers our employees to split off and act like Coming from a consumer goods used to look at Jack Daniel’s as harsh entrepreneurs. Size has its advan- background, Mark McCallum, Brown- whiskey to drink on its own,” says Chris Burt, tages, but when it comes to building Forman’s chief brands officer, says he head of Brown-Forman’s western sales divi- brands with the trade and targeting “struggles to even believe that brown sion. “But now Jack Daniel’s-based drinks consumers, the individual brands versus white is a relevant segmenta- like Lynchburg Lemonade, which really require undivided attention. For tion.” When people talk about brown speaks to women, are giving consumers new example, if Don Eduardo wants to spirits declining, McCallum points to ways to drink it.” compete against Patron, it had better brands like Captain Morgan, Crown Today, Jack Daniel’s has an entire brand be focused.” Royal, Jack Daniel’s and Southern team behind it, executing promotions like the Comfort; some of the hottest brands tremendously successful sponsorship of in the industry that are growing at NASCAR, as well as Western lifestyle events THINKING BRANDS, double digit rates. The craze over like rodeos and bull-riding. “We have been white spirits and vodka, according to quite active over the last couple of years in NOT CATEGORIES Varga, has more to do with a “move the Hispanic market too,” In many ways, this new business model towards mixibility” than anything says Accardo. “I think reflects a way of thinking that has long else. And mixibility is a trend working the core to our success been part of Brown-Forman’s brand- for brands across the color spectrum, has been a continued building mantra: disregarding category particularly “Jagermeister, Jack rigorous focus on con- definitions and constraints in order to Daniel’s, and Cuervo Gold,” he observes. A more useful segmentation sumer experiential mar- focus on brand strength. “If we were to might be premium versus value keting and activation, in be driven by categories, we would have brands. “The majority of low and pop- terms of really dealing exited the brown goods category in ular priced brown spirits are struggling with the consumers 1994,” says Jim Bareuther, chief oper- because of the consumer trend towards one-on-one.” ating officer. “We’ve never marketed categories; we build brands and identi- premiumization,” says McCallum. Finlandia: Brown-Forman’s Most Global Brand Finlandia is a two million-plus case brand, earning its place as the world’s 6th largest vodka. Unlike most of Brown-Forman’s other brands, however, the vast majority of Finlandia’s volume is coming from non-U.S. markets, which, according to McCallum, spells untold opportunity within American borders. “Only 320,000 cases of Finlandia’s 2.2 million sells in the U.S. Yet, it is the mar- ket we are most excited about for this brand,” he says. “Finlandia is in that premium vodka category that Absolut really created, and we think there will continue to be strong growth in this segment.” The vodka category remains Brown Spirits Leaders: ruthlessly competitive and cluttered, and recent growth for the brand is Early Times, Old attributed to “a multi-year process of enhancing the package,” according to Bareuther, as well as new flavor introductions – Wild Berries and Grapefruit, Forester, Canadian Mist which join Lime, Mango, Cranberry and Redberry – and a new ad campaign and Woodford Reserve which speaks to the quality of the product. “The brand team has done an amazing job in the past three years of really discovering the essence of the While Brown-Forman resists the brown- brand and the notion of real natural purity,” says Accardo. versus-white category distinction, it is impossible to deny their skill at marketing and selling spirits of color. Their whisky portfolio cuts across multiple price cate- gories, with leaders like Early Times (bour- bon) and Canadian Mist (Canadian The benefits of Brown-Forman’s advantages to being medium-sized, whisky) at the lower end and Woodford new mode of operation is already evi- even as the larger players consolidate. Reserve at the high end. denced in the marketplace, believes Varga – who frankly states the compa- “The Midwest and Southeast are very John Accardo, head of Brown- ny doesn’t “obsess about our size” – strong, old-line Bourbon markets for Forman’s eastern sales division. While sees the industry around him expand- brands like Early Times; they have a very he sees the obvious advantage of a uni- ing, not shrinking: “Consumers are strong consumer base with great brand fied portfolio from a distributor and drinking more and paying more for loyalty,” says Accardo. “We’re continuing retailer relationship standpoint, noth- wine and spirits. This is a major evolu- to build on the strength of those standard- ing can replace a hand-sell when it tion, which has been steadily building priced, middle-tier kind of brands, utilizing comes to the consumer, and that is since 1997 and there is no evidence to mixology and creating cocktails,” he adds. exactly what the new in-market brand suggest that small and mid-size compa- Old Forester, the company’s founding activation teams provide. “We know nies can’t compete.” Such expansion brand, was recently repackaged and its from years of experience that direct and opportunity means that compa- reserve vintage bottling, Old Forester contact between a brand spokesperson nies have to “elect” to take themselves Birthday Bourbon at 96 proof, is widely and consumers as well as key influ- out of business, he says, as many have. adored by critics. Fueled also by an inno- encers on- and off-premise is the most But few companies cherish their inde- vative package redesign, Canadian Mist – effective way to build a brand,” says pendence as fiercely as Brown- still the 13th largest distilled spirit brand Accardo. “We weren’t trying to fix a Forman. “If you look at a list of the top overall – continues to buck the category problem with this new structure; we 10 wine and spirits’ companies in the trend, with steady peformance. “Based on made changes that are visionary and last 50 years, there are only two com- our consumer research, Canadian Mist is forward-looking.” panies that have remained on that list for the last six decades: Brown-Forman very drinkable, mixable and approachable. and Bacardi,” says Bareuther. We’ve been working to remind consumers Big companies don’t enjoy a dis- that it’s not necessarily something your AN EXPANDING proportionate concentration of the father drank.” business either, adds Varga; the top And, on fire since its launch in 1996, MARKETPLACE three companies combined account Woodford Reserve remains a leader in the Surrounded by big companies getting for less than 40 percent of the total small-batch boutique bourbon renaissance, even bigger, Brown-Forman’s execu- industry volume. hitting 80,000 cases in fiscal year 2006. tive team firmly believes there are A Nickname and a If anything, Brown-Forman has or jump on the hottest brand,” he Lime Spell Growth its eye on a different sort of competi- says. “We’re after long-range, sus- tor. “I fear that if we were to obsess tainable growth.” for Southern too much about who is bigger than This mentality has likely moti- Comfort us, we’d be beaten by those who are vated some of Brown-Forman’s Today’s Southern Comfort con- smaller. Some of the greatest brand- recent acquisitions. While bigger sumer knows the brand as “SoCo”; building in this country in the last 20 companies were fighting over mas- a simple twist in terminology that years has gone on by smart, driven sive brands, Brown-Forman was care- has translated into major growth. entrepreneurs; just look at the entire fully acquiring brands in key cate- While Brown-Forman can’t take premium vodka business.” Baruether gories with tremendous long-term any credit for the nickname, they agrees: “If you look back at our growth opportunity. In the liqueur have since worked to reinforce it, industry, all the significant new arena “which has been a really excit- as it clearly resonates with con- growth has not come from big play- ing area in the last five years,” says sumers. “Think about how power- ers, but from smaller companies.” He Varga, Brown-Forman has added ful nicknames like ‘Jack’ and lists Grey Goose, YellowTail and Tuaca and Chambord “two brands ‘Captain’ are in the young adult Hypnotiq as highly successful exam- that we think will do really well in consumption segment,” says ples. “I’m confident this trend will our hands.” Over the last decade, McCallum. “This is the first time continue,” says Bareuther. Brown-Forman’s portfolio has also Southern Comfort had a nick- Brown-Forman likely thinks grown with the addition of Sonoma name.” The introduction of SoCo about trends in a different way than Cutrer, Finlandia, Stellar Gin and Lime has also boosted sales, working well in other companies. Because of their Don Eduardo tequila. “We are taking long drinks and as shots in the on-premise. 137-year history, the company has a our portfolio in a premium direc- “Our association with music is strong, and rare perspective that few competitors tion,” Varga explains. “We haven’t our ‘fun with friends’ messaging works quite possess. “For us, brands like been introducing a lot of products at well,” says Burt. “We’re seeing some of the best Finlandia or Don Eduardo that are the Early Times or Canadian Mist less than 35 years old are still in their price point; most of our new activity growth we’ve had in years.” The company’s infancy,” says Varga. “Our two driv- has been at the high end, where we research has revealed that the brand represents ing brands have a combined age of see the consumer moving.” incremental sales for retailers, because when about 275 years, and they both just An illustration of just how bull- consumers go into retail outlets, over half of concluded their best years. That is a ish the company is about the premi- those who purchase it were not planning to. “It very long life-cycle. We think um tequilia category, Brown-Forman represents an additional item in the basket. Brown-Forman is still early in its life recently acquired Herradura and El We’ve proven that when the brand is on the cycle.” In many ways, says Bareuther, Jimador tequilas, retailing for $40 floor, it moves… and it doesn’t have to be dis- Brown-Forman is the opposite of and $20 respectively per bottle. The counted. So what’s key to us is getting it on the trendy: “One of the most telling brands will join Pepe Lopez and floor and getting it in the hands of consumers,” things in our portfolio is that we are Don Eduardo tequilas in Brown says McCallum. not trying to catch the latest trend, Forman's portfolio.

Amarula: The World’s Number 2 Cream comes from, how it’s made, and what it’s made of.” Liqueur Winning Fans in the U.S And it’s growing. Brown- Forman has leveraged the While the world is very familiar with the the last few years followed by a bit of a romance of South Africa creat- South African import, Amarula – it is the shake-out with many new brands disap- ing safari-themed displays and number two liqueur globally – it is still pearing,” says Accardo. Amarula stands advertising. “Our displays are very being discovered in the U.S. since out, he says, because it is made from the scaleable for both large and small Brown-Forman introduced it in 2002. famed South African Amarula fruit with a stores, where we can show off “The cream category is in a bit of an one-of-a-kind taste profile. “It isn’t just safari chairs and host grand tast- upheaval. Baileys remains the over- another Irish Cream, a cheap knock-off or ings. Amarula is one of those prod- whelming category leader, but there have a ‘me-too’ product. We have a really ucts that once a consumer tastes it, been many new product introductions in unique brand story in terms of where it they love it.” Right Place, “When you look at building brands, we’re Right Time: becoming more specialized in what we do. Appleton This means increased equity and viability Estate of our brands, which in turn, creates Appleton was perfectly positioned to take added pull, which is good for the retailer.” advantage of growth in the premium dark rum – Jim Bareuther, COO, Brown-Forman category. “We continue to do very well with Appleton, growing in the mid-double digit liqueur with a higher price point,” range, primarily led by the MASTERS OF McCallum explains. VX brand, in the $15 to $20 price Before Brown-Forman began market- range,” says Accardo, who is confi- BRAND RENOVATION ing Finlandia in the mid-1990s, many in In general, however, Brown-Forman dent the premium sector will see the trade had essentially “given up” on the seems more interested in creating organ- even more growth in the future, fol- brand, recalls Varga. Today it is in a very ic growth within their existing portfolio. lowing the pattern of premium positive growth trend and holds steady as The company has proven to be a deft vodka and tequila. “It’s growing the world’s 6th largest vodka. Even Jack handler of brands in need of rejuvena- nicely and we believe it will explode Daniel’s hit a low point between 1991 and tion or a little dusting off. “We’ve found eventually,” he says. The Jamaican- 1995. Thanks to a successful restoration there’s as much value in getting people to made rum encourages consumers effort, sales in fiscal year 2006 were up to think ‘new’ about old brands as it is for to trade up with the tagline, “Raise 8.5 million cases versus 4.7 million in fiscal people to think about new brands,” your rum.” “Our emphasis with year 1995. “We’ve learned that if we put Varga has learned. “And if you’re suc- Appleton is more in the off-premise, the right sort of support behind our brands, cessful with it, you have a head start.” and while the strongest markets are we usually find existing equity,” says Varga. Consider Southern Comfort. When those with large Caribbean commu- Having what the Brown-Forman team Brown-Forman acquired it in 1979, it had nities – New York and Florida – we would consider to be a “manageable” not sold above 1.2 million cases. By the see them influencing other con- number of brands allows each one to year 2000, it sold over 2 million cases, and sumers.” The brand’s ultra-premium receive the concentrated effort to reach after a major recent renovation to help 21 year-old bottling is for rum con- its potential. “We don’t have 150 brands; the brand target its 21-34 year-old audi- we have just over 30 in the U.S. and we noisseurs and sells out immediately ence, the brand sold 2.4 million cases in have aspirations for each one. We want to upon release. 2005. “We’ve repositioned it as high-end build great brands,” says Varga.

HOW THE RETAILER WINS Bringing New Momentum to Chambord Change isn’t taken lightly at 137 year-old Few things get the Brown-Forman team as excited as the mention of Chambord. companies, and Brown-Forman had been The company’s most recent acquisition, Chambord is “a true jewel, a planning their reorganization for years, one-of-a-kind brand, both on its own and with the mixability it largely based on input from distributors represents,” Accardo believes. Expect to see lots of Chambord and retailers. “We’ve reevaluated our cocktails, creative programming, and bartender-driven promoting entire go-to-market strategy based on for the brand. The biggest effort will be just getting the word out. where we see the retail market headed, “There are Chambord lovers, and then there are folks who have and how we could better serve the retail- er,” explains Bareuther. “When you look never heard of it. Our focus will be getting it in front of consumers at building brands there are ways for us to and talking to bartenders about how to use it. This isn’t about reach out to the consumer and create national advertising campaigns; it’s more about getting a added pull. We’re becoming more spe- buzz going,” says McCallum. “The company that previ- cialized in what we do. For the retail- ously owned this brand did an amazing job, but they er, this means increased equity and were a four-man team. Imagine putting this brand in viability of our brands which will the hands of our 500 sales people and the distributors draw consumers.” we work with.” The Tuaca The new Brown-Forman works with retailers in very different ways from the old, Success Story says Chris Burt, head of Brown-Forman’s western sales division. “We used to walk A little-known vanilla-orange fla- into accounts with more of a one-size-fits-all formula, whereas now we evaluate our vored Italian liqueur, Tuaca had customers’ needs and create ideas and strategies that fit their unique businesses.” been in this country for 35 Regionally imbedded national account groups and the new Trade Marketing Group, which researches retailer needs, drives this effort. A great example of this model in years before Brown-Forman action is the activity surrounding Woodford Reserve’s sponsorship of the Kentucky got their hands on it. Big play- Derby, McCallum describes. “Our local team worked with on- and off-premise ers like Seagram and Allied licensees to activate Woodford Reserve Derby promotions in really creative ways. It Domecq all took a shot at the was brilliant because it was Brown-Forman people doing the work in concert with brand, yet it had never sold the distributors.” The successful Jack Daniel’s sponsorship of NASCAR was handled more than a modest 25,000 the same way, with as many as 15 brand “specialists” working for the brand with on- cases annually. premise accounts across the country. “This represents a significant evolution of the Today, Tuaca is approach- way Brown-Forman goes to market in the U.S.,” adds McCallum. Varga is incredi- ing 125,000 cases. How did bly confident that “retailers will get a more direct, efficient and effective relation- Brown-Forman do it? ship with Brown-Forman, as a result of these changes.” “We took latent, existing brand equity and built volume over time,” Varga describes. “We realized this was a bartender’s brand, so we WHERE TO NEXT? slowly developed our geographic expansion “Most companies have conversations about the next five or ten years, but we have conversations about the next 25 years,” says Bareuther, which he believes is a reflec- program, primarily on-premise.” But the tion of the company’s culture and longevity. Though a publicly traded corporation, secret weapon in Tuaca’s arsenal is the Brown family members hold a majority stake in the company, giving the executive Shots Chiller Machine which has been a big team “complete support from the shareholder base and the latitude to plan for the success in bars. Brown-Forman’s executive long-term,” Bareuther attests. “We’re free from somebody trying to position the team has a particular fondness for the company for sale. Instead, we can position the company for consistent long-term brand, which also can’t hurt. “Tuaca is going growth. That is the most important metric for Brown-Forman.” In other words, gangbusters, and has become a major asset Brown-Forman has retained the best parts of being a family-run, medium-sized com- for us,” explains McCallum. “We’ve done pany without being shackled by some of the most common constrictions that many huge volume in Colorado, Texas and other public companies face. Maryland, and the brand is spreading. It has “There is a real long-term commitment to making this place succeed, thrive and very creative programming on-premise, as endure,” says Varga. “People always ask me what our ‘end game’ is. I answer that our well as lots of bartender training.” end game is to make sure that the game never ends.” ■

Taking the Wine Industry in a New Direction

Among Brown-Forman’s many wine brands, Other exciting new wine brands include none are as revolutionary as Bonterra (made by the recent introduction of Little Black Dress Fetzer Vineyards). One of the first organic wines Wines from California, which consists of a to be mass marketed, the brand has quickly Merlot, Chardonnay, and Pinot Grigio, and become the organic brand of choice in targets the 34 million female wine drinkers in American markets and abroad, illustrating the the United States. Brown-Forman’s partner- vast potential of the organic wine category. “The ship with Sir Richard Branson of Virgin to organic segment is way beyond Whole Foods, create Virgin Vines has also been a success. where you kind of naturally think about that sort “It’s making wine easy. At $10 neither of of thing,” says Accardo. “The organic cate- these new lines are at entry level price gories in places like Wal-Mart and Safeway are points, but they’re not at oppressive price up approximately 20 percent and they continue points, either. They are fun and approach- to increase. Being an early entrant in the organ- able, and we’ve been very pleased,” says ic game has really benefited us.” McCallum.