abhishreshthaa
Abhijeet S
Pan American World Airways, commonly known as Pan Am, was the principal United States international air carrier from the late 1920s until its collapse on December 4, 1991. Founded in 1927 as a scheduled air mail and passenger service operating between Florida (Key West, and later Miami) and Havana, Cuba, the airline became a major company credited with many innovations that shaped the international airline industry, including the widespread use of jet aircraft, jumbo jets, and computerized reservation systems. Identified by its blue globe logo and the use of the word "Clipper" in aircraft names and call signs, the airline was a cultural icon of the 20th century and the unofficial flag carrier of the United States.
Bar patrons in the southern Chinese city of Shenzhen love the free guitar-shape plastic cigarette lighters, the watches that look like drums and the die-cast miniature hot rods. Such gewgaws would not bring tingles of excitement to Western pub crawlers, but they have helped Brown-Forman, maker of 29 booze brands, including Southern Comfort and Canadian Mist whiskey, push 75,000 cases of its leading spirit, Jack Daniel's bourbon, last year in China. That's up from 11,000 only four years ago and zilch in 1994.
In Britain the Louisville, Ky. beverage maker created something called the Student Broadcast Network and fed music programming, sponsored by Jack Daniel's, to London college radio stations. "We had bands come on the show and do a live set," says Garvin Brown IV, the brand director for Jack Daniel's in Europe, Africa and Eurasia, and great-great-grandson of the founder. "The legal drinking age in the U.K. is 18, you know." (Last month, across the pond, the liquor lobby in Washington, D.C. was pummeled by Congress for exposing America's youth to excessive alcohol advertising in magazines.)
But such shenanigans abroad make for very good business--particularly if boozers are paying in pounds sterling or euros or yen or practically anything besides U.S. dollars. Thanks in no small measure to the weak dollar and the company's recent volume gains abroad, Brown-Forman's earnings for the fiscal year ending Apr. 30 should be near $302 million, or $2.47 a share, the latter figure a 48% gain over three years. Brown and his relatives own 73% of the company's voting shares. Since 2002 their total stake in the company has ballooned in value from $4 billion to $6 billion.
Serendipitously or not, Brown-Forman started pushing sales abroad--across Continental Europe, South Africa and Russia--around the time the dollar started dipping in early 2002. Led by the U.K. and Australia, overseas sales are approaching 30% of the total, a ten- point surge from the April 2002 fiscal year. (Besides booze, Brown-Forman sells luggage and china dishes under such brands as Hartmann and Lenox. These diversions account for 23% of sales but only 4% of pretax net.)
With hard-liquor sales in the U.S. just coming out of a coma, most of the future growth lies in developing regions abroad. Yet 135-year-old Brown-Forman--toward the bottom of the world's ten largest spirits producers by sales--didn't take international markets seriously until the last decade. It spent most of the 1990s hiring bodies on the ground on every continent. Sales reps educate bartenders the way drug companies "detail" doctors. On the whole they tend to get more out of throwing parties than airing TV ads.
Most distillers expand abroad by scooping up established labels in new markets. Brown-Forman has taken a different tack, what you could call the Marlboro approach. It is promoting its mainstay, Jack Daniel's, which contributes 65% of beverage revenue, as an American label. The decision carries risk, though. Cowboys are one thing. Would the rest of the world cotton to a distinct--and older--U.S. brand, with its hints of pickup trucks and dungaree-clad folks lounging on the front porch?
Yes and no. In America-friendly Romania, Brown-Forman stirred a following last September with a new company-sponsored event celebrating the birthday of Jack Daniel. (There is debate about whether this historical figure actually established the oldest registered distillery in the U.S. in 1866 at age 17; the company insists that he did.) Well-known Romanian actors entertained a crowd in Bucharest by dressing up as the Tennessee backwoodsman and performing theatrical monologues. In a Prague art gallery last year the company set up an exhibit of 50 years of Jack Daniel's advertising. When Rockwell--London's first bourbon bar, featuring more than 100 brands--opened in the chic Hilton Trafalgar in 2002, Brown-Forman billed as a special guest its own master distiller and southern charmer, Jimmy Bedford, for a rooftop launch party that drew a big turnout.
But the company had hell to pay last year when TV ads touting a similar type of folksy image soured Jack Daniel's with Thai consumers. The spots suggested that drinking the Tennessee export made you laid back, even lazy--a message that clashed with Thailand's work ethic. Brown-Forman killed the ads after just a few weeks.
In some overseas markets Jack can't go it alone. Brown-Forman has to depend on rival Bacardi to distribute bourbon and other liquors in the U.K. On the Continent and elsewhere it co-owns and operates various distributors and sometimes sells directly. Complex though it is, Europe's system is a lot simpler than booze-handling in the U.S., where middlemen still stock retailers' shelves, a vestige of post-Prohibition regulation. The mix of looser distribution deals across the globe cuts costs, "a very important component of how much money we net," notes Phoebe Wood, Brown-Forman's chief financial officer.
Advertising, though, has not been a place to cut costs. The company's beverage advertising has lately been growing at a faster rate than revenues, led by a $27 million worldwide budget for Jack Daniel's, notes Corey Horsch, an analyst at Credit Suisse First Boston. Horsch is impressed by Brown-Forman's penchant for finding what he calls "high-return brand investment ideas," including sponsorships and on-premise giveaways. Of course, it's easier to take the long view with the fourth and fifth generations of the Brown family at the helm. (Garvin Brown's uncle, Owsley Brown II, is chief executive.)
A portion of the ad budget supports research that tells the company how the natives take their Jack Daniel's. In Japan, for example, a dinner group of four or five might split a bottle. But in Australia folks often like to do their drinking at home and seldom prefer Jack Daniel's neat. Hence the creation of a prepackaged mix called Jack and Cola; the 12-ounce bottles and cans are ubiquitous in Aussie food stores. Last year, sales of the ready-to-drink concoction surpassed 1 million cases.
But what moves the spirits Down Under would be a slow dance in the U.K. Many Brits drink Jack and some form of cola but prefer to have bartenders do the mixing. You won't find Jack and Cola in Spain either, where most people drink bourbon straight. In China Brown-Forman learned to adjust to a different habit. Perhaps it's a byproduct of an emerging ownership society: Bar-goers buy Jack by the bottle, slap their names on the bottles and leave them behind the bar so they can return and polish them off whenever they feel like it. "It's definitely an image issue," says Yang Jian, 41, owner and manager of Base Bar in Shenzhen. This in a country where 90% of hard-liquor consumers still drink baiju, a cheap distillate made from sorghum.
Being popular has a dark side, of course. "Counterfeit bottles are a huge problem in China," acknowledges Stuart Beck, head of Asia and Pacific operations for Brown-Forman. The problem will probably worsen even as tariffs on imported spirits, which last year fell to 37.5% from 56%, continue to drop in the Middle Kingdom. Only the elite can discern a blended whiskey from a single malt. If the masses can't taste the difference, it's harder for Brown-Forman to crack down on faux Jack.
Knockoffs can be found in the most unexpected places. An online story on Peru from Inside Out Travel magazine pointed out last summer that capital city Lima "was a bucket o' fun due to the fact that street markets sell everything from imitation Jack Daniel's whiskey to knockoff Nike sweatshirts." In India only 10% of the spirits imported and retailed come through duty-paid channels, according to a 2003 study by market research firm IMRB International, a unit of ad agency WPP. Things got so bad that Brown-Forman struck the equivalent of a plea bargain with consumers in New Delhi: a free bottle of Jack Daniel's to anyone who returns three empty bottles of the brand. The move was intended to help the company learn about how the bourbon was smuggled in. Brown-Forman declines to say what, if anything, it learned.
With nearly half its Jack Daniel's business coming from overseas, Brown-Forman is pushing hard to take advantage of the cheap dollar. Countries like Poland are a perfect target, in part because adoption of the euro is just four years away. Never mind that Poland is now a tiny whiskey market where vodka accounts for 99% of distilled alcohol sales. Just how eager is Brown-Forman? Last year, a reduction of tariffs and excise taxes, related to Poland's entry into the EU, effectively reduced the price of Jack Daniel's by 30%--with the effect of goosing demand. (When rival Altia Corp. of Finland slashed prices on Old Smuggler nine months earlier, sales leaped 500% off a small base.) That the Polish zloty recently traded at its highest level in two years against the euro makes lower prices somewhat easier for Brown-Forman to swallow.
Bar patrons in the southern Chinese city of Shenzhen love the free guitar-shape plastic cigarette lighters, the watches that look like drums and the die-cast miniature hot rods. Such gewgaws would not bring tingles of excitement to Western pub crawlers, but they have helped Brown-Forman, maker of 29 booze brands, including Southern Comfort and Canadian Mist whiskey, push 75,000 cases of its leading spirit, Jack Daniel's bourbon, last year in China. That's up from 11,000 only four years ago and zilch in 1994.
In Britain the Louisville, Ky. beverage maker created something called the Student Broadcast Network and fed music programming, sponsored by Jack Daniel's, to London college radio stations. "We had bands come on the show and do a live set," says Garvin Brown IV, the brand director for Jack Daniel's in Europe, Africa and Eurasia, and great-great-grandson of the founder. "The legal drinking age in the U.K. is 18, you know." (Last month, across the pond, the liquor lobby in Washington, D.C. was pummeled by Congress for exposing America's youth to excessive alcohol advertising in magazines.)
But such shenanigans abroad make for very good business--particularly if boozers are paying in pounds sterling or euros or yen or practically anything besides U.S. dollars. Thanks in no small measure to the weak dollar and the company's recent volume gains abroad, Brown-Forman's earnings for the fiscal year ending Apr. 30 should be near $302 million, or $2.47 a share, the latter figure a 48% gain over three years. Brown and his relatives own 73% of the company's voting shares. Since 2002 their total stake in the company has ballooned in value from $4 billion to $6 billion.
Serendipitously or not, Brown-Forman started pushing sales abroad--across Continental Europe, South Africa and Russia--around the time the dollar started dipping in early 2002. Led by the U.K. and Australia, overseas sales are approaching 30% of the total, a ten- point surge from the April 2002 fiscal year. (Besides booze, Brown-Forman sells luggage and china dishes under such brands as Hartmann and Lenox. These diversions account for 23% of sales but only 4% of pretax net.)
With hard-liquor sales in the U.S. just coming out of a coma, most of the future growth lies in developing regions abroad. Yet 135-year-old Brown-Forman--toward the bottom of the world's ten largest spirits producers by sales--didn't take international markets seriously until the last decade. It spent most of the 1990s hiring bodies on the ground on every continent. Sales reps educate bartenders the way drug companies "detail" doctors. On the whole they tend to get more out of throwing parties than airing TV ads.
Most distillers expand abroad by scooping up established labels in new markets. Brown-Forman has taken a different tack, what you could call the Marlboro approach. It is promoting its mainstay, Jack Daniel's, which contributes 65% of beverage revenue, as an American label. The decision carries risk, though. Cowboys are one thing. Would the rest of the world cotton to a distinct--and older--U.S. brand, with its hints of pickup trucks and dungaree-clad folks lounging on the front porch?
Yes and no. In America-friendly Romania, Brown-Forman stirred a following last September with a new company-sponsored event celebrating the birthday of Jack Daniel. (There is debate about whether this historical figure actually established the oldest registered distillery in the U.S. in 1866 at age 17; the company insists that he did.) Well-known Romanian actors entertained a crowd in Bucharest by dressing up as the Tennessee backwoodsman and performing theatrical monologues. In a Prague art gallery last year the company set up an exhibit of 50 years of Jack Daniel's advertising. When Rockwell--London's first bourbon bar, featuring more than 100 brands--opened in the chic Hilton Trafalgar in 2002, Brown-Forman billed as a special guest its own master distiller and southern charmer, Jimmy Bedford, for a rooftop launch party that drew a big turnout.
But the company had hell to pay last year when TV ads touting a similar type of folksy image soured Jack Daniel's with Thai consumers. The spots suggested that drinking the Tennessee export made you laid back, even lazy--a message that clashed with Thailand's work ethic. Brown-Forman killed the ads after just a few weeks.
In some overseas markets Jack can't go it alone. Brown-Forman has to depend on rival Bacardi to distribute bourbon and other liquors in the U.K. On the Continent and elsewhere it co-owns and operates various distributors and sometimes sells directly. Complex though it is, Europe's system is a lot simpler than booze-handling in the U.S., where middlemen still stock retailers' shelves, a vestige of post-Prohibition regulation. The mix of looser distribution deals across the globe cuts costs, "a very important component of how much money we net," notes Phoebe Wood, Brown-Forman's chief financial officer.
Advertising, though, has not been a place to cut costs. The company's beverage advertising has lately been growing at a faster rate than revenues, led by a $27 million worldwide budget for Jack Daniel's, notes Corey Horsch, an analyst at Credit Suisse First Boston. Horsch is impressed by Brown-Forman's penchant for finding what he calls "high-return brand investment ideas," including sponsorships and on-premise giveaways. Of course, it's easier to take the long view with the fourth and fifth generations of the Brown family at the helm. (Garvin Brown's uncle, Owsley Brown II, is chief executive.)
A portion of the ad budget supports research that tells the company how the natives take their Jack Daniel's. In Japan, for example, a dinner group of four or five might split a bottle. But in Australia folks often like to do their drinking at home and seldom prefer Jack Daniel's neat. Hence the creation of a prepackaged mix called Jack and Cola; the 12-ounce bottles and cans are ubiquitous in Aussie food stores. Last year, sales of the ready-to-drink concoction surpassed 1 million cases.
But what moves the spirits Down Under would be a slow dance in the U.K. Many Brits drink Jack and some form of cola but prefer to have bartenders do the mixing. You won't find Jack and Cola in Spain either, where most people drink bourbon straight. In China Brown-Forman learned to adjust to a different habit. Perhaps it's a byproduct of an emerging ownership society: Bar-goers buy Jack by the bottle, slap their names on the bottles and leave them behind the bar so they can return and polish them off whenever they feel like it. "It's definitely an image issue," says Yang Jian, 41, owner and manager of Base Bar in Shenzhen. This in a country where 90% of hard-liquor consumers still drink baiju, a cheap distillate made from sorghum.
Being popular has a dark side, of course. "Counterfeit bottles are a huge problem in China," acknowledges Stuart Beck, head of Asia and Pacific operations for Brown-Forman. The problem will probably worsen even as tariffs on imported spirits, which last year fell to 37.5% from 56%, continue to drop in the Middle Kingdom. Only the elite can discern a blended whiskey from a single malt. If the masses can't taste the difference, it's harder for Brown-Forman to crack down on faux Jack.
Knockoffs can be found in the most unexpected places. An online story on Peru from Inside Out Travel magazine pointed out last summer that capital city Lima "was a bucket o' fun due to the fact that street markets sell everything from imitation Jack Daniel's whiskey to knockoff Nike sweatshirts." In India only 10% of the spirits imported and retailed come through duty-paid channels, according to a 2003 study by market research firm IMRB International, a unit of ad agency WPP. Things got so bad that Brown-Forman struck the equivalent of a plea bargain with consumers in New Delhi: a free bottle of Jack Daniel's to anyone who returns three empty bottles of the brand. The move was intended to help the company learn about how the bourbon was smuggled in. Brown-Forman declines to say what, if anything, it learned.
With nearly half its Jack Daniel's business coming from overseas, Brown-Forman is pushing hard to take advantage of the cheap dollar. Countries like Poland are a perfect target, in part because adoption of the euro is just four years away. Never mind that Poland is now a tiny whiskey market where vodka accounts for 99% of distilled alcohol sales. Just how eager is Brown-Forman? Last year, a reduction of tariffs and excise taxes, related to Poland's entry into the EU, effectively reduced the price of Jack Daniel's by 30%--with the effect of goosing demand. (When rival Altia Corp. of Finland slashed prices on Old Smuggler nine months earlier, sales leaped 500% off a small base.) That the Polish zloty recently traded at its highest level in two years against the euro makes lower prices somewhat easier for Brown-Forman to swallow.