Edrington sells Bunnahabhain & Glengoyne
wooster
The Herald (Glasgow)
April 17, 2003
GLASGOW distiller Edrington has sold two more venerable whisky brands
as it continues an 18-month-old strategy of focusing on its core
products.
Ian Macleod & Co, a subsidiary of family-owned Broxburn spirits firm
Peter J Russell group, is buying the Glengoyne distillery between
Strathblane and Killearn, in Stirlingshire, together with the unpeated
single malt Glengoyne and the premium blend Langs, for a price thought
to be between £8m and £10m. Edrington is shedding non-core brands to
concentrate its marketing efforts on its four biggest sellers: the
Famous Grouse and Cutty Sark blends, and the Macallan and Highland
Park malts.
Last week, the company sold Scotch blend Black Bottle and the Islay
single malt Bunnahabhain, together with the Bunnahabhain distillery,
to Burn Stewart (whose parent company is Trinidad-based conglomerate
CL Financial, owner of Angostura and part-owner of U.S. rum producer
Todhunter).
Peter J Russell was founded in 1934 as a whisky broker and now sells
more than 15 million bottles of spirits a year. Brands include the
Isle of Skye blend, the Chieftain's and Dun Bheagan ranges and London
Hill Gin.
The acquisition gives the firm its first distillery, which includes a
visitor centre attracting 35,000 people a year.
Leonard Russell, managing director, said: "The acquisition fulfils our
objective to become a fully-integrated distiller, blender and
bottler."
Whisky specialist Alan Gray, an analyst with Edinburgh stockbroker
Sutherlands, described the deal as a "shrewd move" for Macleod. He
said: "There are cost benefits to owning your own distillery and
having greater control over the supply chain."
The deal will not affect Macleod's relationship with Speyside
distiller J&G Grant, owner of single malt Glenfarclas, with which it
jointly owns Broxburn Bottlers.
Ian Macleod now has three operations in Scotland employing around 150
people. No redundancies are planned as a result of the deal.
wooster
MALT WHISKY AND WIDE BRAND BASE TANTALISES MACLEOD
Ian Fraser reveals what is behind expansion moves by distillery owner
Sunday Herald (Scotland)
11 May 2003
IAN Macleod & Co has clarified its plans for the Glengoyne single malt
and Langs blended Scotch whisky brands which it acquired from
Edrington Group last month in a deal worth £8 million to £10m.
Owned by independent family-owned whisky bottlers and brokers, Peter J
Russell, Broxburn-based Macleod & Co already markets a range of
spirits brands including Isle of Skye eight-year-old, Hedges & Butler,
Chieftain's and Watson's Trawler rum.
Following a decision to reduce its exposure to the UK's own-label
whisky market -- where margins became wafer-thin following the
takeover of Asda by Wal-Mart in 1999 -- it has been strengthening its
brand portfolio. It bought the Hedges & Butler brand from Bass for £1m
and Watson's rums from Allied Domecq for £3m.
However, in recent months Macleod & Co, which was founded in 1936 by
Leonard Russell, grandfather of the present managing director, also
became keen to get its hands on a single Highland malt brand. Malt
remains the fastest growing segment of the Scotch market growing by 9%
per annum globally in 2002. The company also saw strategic sense in
becoming more vertically integrated through the ownership of a
distillery.
Ian Macleod's managing director Leonard Russell said: 'What we are
getting from [this deal] is extraordinarily exciting. Glengoyne is a
fantastic distillery but the brands had to play third or even fourth
fiddle to Highland Park when it was owned by Edrington Group.
'We will be placing greater emphasis on both the Glengoyne single malt
and Langs blend brands, which effectively become our core brands.'
It seems likely that Macleod & Co will continue to use the current
international distributors and agents to market the former Edrington
brands overseas although this may be reviewed in time. It may also
take a more pragmatic approach to positioning the brands to match its
markets.
Macleod & Co already sells 60% of its £20m a year sales overseas and
has an existing network of distributors. Its other products include
King Robert II (a blended range) and Chieftain's (single malts). They
sell in France, Germany Belgium, Japan and the US.
Russell said: 'We'll be aiming to increase sales of the Glengoyne from
the current level of 450,000 litres to one million litres next year.'
Russell, who has won plaudits for his business acumen in what can be a
somewhat stuffy industry, added that the acquisition has parallels
with Macleod & Co's purchase of Watson's Demerara Rum and Watson's
Trawler rum from Allied Domecq in 1999.
'It's part of our strategy of putting greater emphasis on brands. We
have been able to give more focus and more tender loving care to [the
rum brands] than Allied was able to do. At the end of the day, it was
more interested in Captain Morgan and Lamb's.
'We also use sufficient malt whisky to justify owning our own brand
and Glengoyne -- a medium-sized distillery -- has about the right
capacity for us.
'It uses very traditional production methods and is one of Scotland's
most beautiful distilleries attracting around 35,000 visitors per
year, which is something we are aiming to increase.'
He said he was pleased to discover that the average spend per visitor
to the distillery, situated at Drumgoyne on the edge of the Campsie
Fells between Glasgow and Loch Lomond, is high at around £25. This is
because many visitors combine their visit with lunch or dinner ... and
many who sample it end up also buying a bottle of Glengoyne.
The distillery has been described as Scotland's most beautiful and
whisky has been produced there since 1833. The barley is dried using
air as opposed to peat smoke, which creates a more subtle whisky than
Islay's malts.
Russell believes Macleod & Co will be able to build on Glengoyne's
strong following among whisky aficionados.
He said: 'We're going to be launching some limited edition single
casks, and will allow the stillmen to choose vintages that they
believe to be exceptional. Glengoyne 17-year-old won a best of the
best award in a Whisky magazine tasting last year.'
But what about Langs? 'Langs' blend used to sell 250,000 cases three
or four years ago, but volumes have slipped and sales are currently
below 200,000,' said Russell. 'We are aiming to raise this again to at
least 250,000.'
wooster
By William Lyons
The Scotsman
June 5, 2003, Thursday
WORKERS at Glengoyne's distillery, in Stirlingshire, have a lot to be
thankful for.
Following April's £2m purchase by Edinburgh whisky firm Iain Macleod,
everyone has been assured their jobs are safe.
Leonard Russell, Macleod's managing director, says that tradition,
skill and experience are enviable and desirable qualities at the
moment in a Scotch whisky industry that just seems to be growing from
strength to strength.
"We are not in the business of bringing new people in, we want
Glengoyne people to run the Glengoyne distillery," he says. "After
all, the still man and the mash men have been there for more than 30
years. "There is far more they can tell me about the production of
single malt whisky then I can tell them."
Macleod now plans to double production of the new single malt.
"The distillery is operating at 45 per cent of its capacity producing
450,000 litres of alcohol a year. We're going to take that up to
900,000 to a million," he says.
Macleod's acquisition and expansion of Glengoyne is emblematic of what
is happening in the industry at the moment - and it's been a whirlwind
year so far.
At the beginning April, Glasgow's Edrington Group sold its
Bunnahabhain and Black Bottle brands for £10m to Trinidad-based
conglomerate CL Financial and just a week later it surprised the
market with the £8m sale of Glengoyne and Lang's to Macleod's.
Ian Good, chairman of Edrington and of the Scotch Whisky Association
(SWA), says: "There is a great deal of consolidation taking place
within the industry at the moment. People are disposing of their
non-core brands and focusing more and more resources behind the brands
that are profitable."
And for the most profitable buys, read single malt.
Figures published by the SWA show that in 2002, £2.3bn worth of whisky
was shipped to more than 200 countries. But as Russell observes, "the
real growth sector is in single malts and we had to get on board".
The figures speak for themselves - in 2002 the blended whisky export
market fell by 6.9 per cent to 943.4 million bottles. Look further
back and, for the decade from 1992 to 2002, blends have had negative
growth in the UK. For export, which is vitally important for revenue,
it has grown only 0.9 per cent, giving a mean growth of just 0.5 per
cent.
But in contrast, last year single malt whisky increased its export
volume by 9.3 per cent to 46.5 million bottles with value growing 11
per cent to £268m.
Figures from Sutherlands Scotch Whisky Industry Review show single
malt sales have grown in the decade 1992 to 2002 by 8 per cent in the
UK and 4.7 per cent in exports, giving a mean growth of 5.3 per cent.
And the latest figures from HM Customs and Excise show that in the
first two months of this year, total exports for single malts have
risen by an astonishing 46 per cent.
Recurrent predictions that Scotch would be washed away by a tidal wave
of vodka and other trendy tipples have clearly proved premature.
Good reckons that whisky is still the world's favourite drink, but can
malt whisky continue to fight its corner as rival drinks continue to
flood the market? "Malt whisky," he says, "seems to attract younger,
more upscale drinkers, and they also deliver wider profit margins.
It's a winning combination."
Although malt represents only 5.9 per cent of total bottled Scotch
whisky sales, Good predicts its share will climb even in markets like
the US and Japan, where overall whisky sales have declined steadily
over the past decade.
"Malts and premium brands are the way we need to go," he insists.
Look a little further back, and again the figures show a dramatic rise
in popularity in the more expensive malts. In less than 30 years the
single malt market has grown from virtually zero in the 1960s, when
most of it was sold to the big blenders, to one worth £269m in sales
last year.
As well as higher margins, malts have also continued to grow in
popularity overseas, especially among high net worth individuals in
the rapidly expanding Asian markets.
Two of Asia's hottest markets are South Korea, where sales of whisky
last year surged 18 per cent to £196m, and Taiwan where the market
increased 16.5 per cent to £58m.
"It's a market that sells on quality," says Russell who sells 20,000
cases a year in Taiwan. "The Koreans don't balk at paying top prices
for top Scotch."
One further challenge for the industry is to find a new Spain, a
market that last year bought £256m worth of Scotch. Spain is the
industry's second largest market by value and volume, taking 109
million bottles a year.
While overall Scottish exports to Spain fell last year, bottled malt
whisky exports increased by 7 per cent in value to £29.7m.
One possibility for growth is India, where Scotch whisky currently has
only 1 per cent of an 80 million case market.
It's a market Macleod can't wait to get its hands on.
Russell says: "Currently the major Indian producers are lobbying the
government to protect their industry because they do not want Scotch
to come in. But sooner or later the Indian government will have to
reduce the duty rates."