I was chatting with James Espey the other day and the subject of Baileys Irish Cream came up. For those of you who don’t know him or of him, suffice to say that James is a legend in the spirits industry as a very senior manager that has successfully run companies, categories and brands. In addition to creating the Keepers of the Quaich (see Sept. 28, 2010 posting) James’ innovation history includes the invention of Malibu, significant involvement in Baileys and much more.

He is still at it with a range of new and unique ventures including Last Drop Distillers among other ventures.

Anyway, the subject turned to what it takes for a brand to withstand the naysayers (generally corporate types who are risk adverse and would rather buy than create) and the prognosticators (the self proclaimed experts at prediction of success and failure). James told me the story of a well known industry observer who took one look at the Baileys idea and proclaimed, “that s**t will never sell.” Well, the forecast was wrong but never mind, that gent went on to make millions in the industry anyhow.

The Baileys story I had heard came from the late Jerry Mann (former Seagram CEO) right after I took over new products. His advice began with a typical Jerry Mann comment. “Listen pal,” he said between puffs, “in this business, you just never know what will sell and what won’t.”

It seems that when Jerry was running a distributor operation in California a friend called and asked for a favor, which was to buy some 5,000 cases of this new cream liqueur. He thought it was doomed for failure but a friend asked a favor and Jerry complied. As he put it, “we stuck the crap in the back of the warehouse and forgot all about it.” Then one day out of the blue, a sales manager called and informed him that retailers were clamoring for “that crap at the back of the warehouse.”

7 million cases per year later, despite ups and downs, lower priced knock-offs and diet and weight concerns, Baileys is still going strong and a true global brand.

According to James, it was launched using a well thought out new product approach, a strong dedicated team, management commitment and an understanding of consumer needs and wants. Which I believe gave the brand its momentum. Once you get momentum, boys and girls, even a large bureaucratic behemoth can’t slow you down.

Just ask Seagram’s 7 Crown.

I no sooner posted the piece below on South America when my inbox lit up with stories about the possible sale of Jose Cuervo International.

(In case you don’t know, the brand(s) are owned by the Beckmann family and distributed worldwide by Diageo.)

Both Buffalo Trace Newsletter and Wine and Spirits Daily had special additions on Sunday reporting that the Beckmann family was in talks to appoint Barclays to explore a possible $2 billion sale of all or part of the Jose Cuervo brand.

I heard from a wide range of people who know the brand and the players well. Their opinions on the matter were all over the place, but very interesting.

Some wondered about the low price…

“As recently as a few years ago, they bragged about a $5 billion price tag …$2 billion must be for part and not the production or for limited worldwide distribution…seems crazy.”

The more cynical views had to do with the historic combative nature of the relationship between Cuervo and Diageo…

“I once heard a senior Diageo executive say that if Patron were available, they would gladly overpay for it in order not to have to deal with the Beckmanns any longer.”

“Diageo’s recent poor performance on the brand now looks like a strategy to keep the value low in order to buy the Beckmanns out.”

My own view is that it could be (as WSD suggests) based on a preemptive move against the possible sale of Sauza, although count me among those who think Beam Global will remain in tact and flourish in the future. Perhaps it’s a warning shot to Diageo to pick up the pace since their contract comes to an end in a few years.

What I can’t understand is where Proximo (also owned by Beckmann family members) fits in the equation. They are doing well and could easily handle the addition of Cuervo to the portfolio. But, their strength is strictly in the US. So, perhaps the low price tag is for international distribution.

One thing for sure is that the Beckmanns are shrewd and unpredictable so who knows what they have in mind.

When the music stopped during the never-ending corporate version of musical chairs, he found himself with the glorious (or was it to be inglorious?) title of Executive Vice President Marketing and Strategy, Americas. A mouthful. Sounds better than it was.

From Canada to Chile, as he liked to say, he learned about the international side of the business, cultural differences, people and working style differences. In fact, Canada was a dream. Despite the business and profitability constraints, the Canadian operation was top of the game.

South America was another matter.

The Americas was run by a South American ex-pat who was smart and hard working but a micro manager with an occasional reluctance to pull the trigger. In other words, tough to work for.

But, all in all, the experience was terrific. Where else but in Latin America are the following expressions a life principle?

It’s better to apologize than ask permission.

A red traffic light is merely a suggestion.

All things are possible (said while rubbing the thumb, index and middle fingers).

But then, and even more so now, security while traveling was an important issue. On one of the first trips, for example, he was met by a driver/security person just outside of immigration who chastised him for putting his passport into the breast pocket of his jacket. He was informed that he wouldn’t get out of the building without having his pocket picked.

Big deal he thought. A friend had his wallet picked on the streets of Paris.

He heard about a French colleague mugged during daylight in Sao Paulo. Another had his computer ripped out of his hands in Mexico City. Most of his South American associates lived in gated communities but, unlike the US, the gatekeepers had machine guns.

So what, he thought, I grew up in Brownsville, Brooklyn, NYC and the world is a tough place. “Don’t rain on my ‘salad days,’”[1] was his motto.

Then one fine day he got a wake up call.

The Swedish partners decided to concentrate on expanding the business in Latin America and wanted to have a conference to discuss brand development issues in the continent.  The marketing folks wanted the meeting to be held in Bogota, Columbia. He wasn’t pleased but, whatever… never been there, how bad could it be?

To go there he needed a visa and had to go through Corporate to get things arranged. That’s where the story begins…

He comes into his office one day and Mary, his assistant, says, “You can’t go to Bogota because Leo won’t let you go.”

The scene shifts to Leo McGillicudy – the nicest and most decent person he had ever met at the company. Head of security and a former former FBI agent, Leo was a friend and someone he respected and admired.

“What the hell?” he said to Mary. “I’ll call him,” knowing full well if Leo said no, it was no.

He: “’Hi Leo. How’s the family?” (Pause) “Great…listen Leo, what’s this about my not being able to go to Bogota?”

Leo: “Are you nuts? Do you read the papers? It isn’t safe and I can’t let you go.”

He: “ Come on, it’s my job, how bad can it be?”

Leo: “Are you listening? The last thing I need at this point in my life is to go to Bogota and save your sorry ass.”

He: “What am I am suppose to tell my boss…”

Leo: “Whatever you want. You aren’t going.”

He: “But he’s from Latin America and I’m new on his staff…what’s he going to think when I tell him I’m not going?”

Leo: “I don’t give a s**t. Tell him I said he can’t go either.”

The meeting was held in Aruba.

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[1] Refers to a person’s heyday when somebody was at the peak of his/her abilities

And now, on to the foremost industry show of the year, at least in my opinion. The Wine and Spirits Wholesalers of America (WSWA) 68^th annual convention is in Orlando at the beginning of April. Once upon a time this was a key meeting point between suppliers and wholesalers. Speakers, exhibitors, award presentations were all a sideshow to the supplier-wholesaler hospitality suite meetings and dinners. Brands and lines were awarded and lost at this event. Friendships were made and solidified. Animosities were seeded and blossomed. All in all, it was one of the events that drove the business.

But there may be problems this year.

Last week, Wine and Spirits Daily reported as follows:

“WSD had heard rumblings that some DISCUS members will not be attending the WSWA’s annual convention this year. Initially we supposed this was due to disagreements over the CARE Act, but a number of distiller sources we have spoken to say the issues are unrelated and that it is a commercial decision.”

A commercial decision?  WSD closed the piece with:

“Our conclusion?  While we don’t doubt DISCUS’ reasoning for bowing out, it’s likely that disagreements over the CARE Act sped up the process.”

Ah, the CARE Act (aka H.R. 5034) – let me see if I can simplify the issue.

The CARE Act aims to clarify that states have primary authority to regulate alcohol. I can go on and on with details about letters to congress, lobbying rationales, assorted fine print gobbledygook and each side’s arguments and counter arguments.  But it’s simple — the wholesalers want to protect and solidify the three-tier system and the suppliers want to make inroads and cause some erosion.

So, back to the WSWA –

I don’t believe the attendance will be down. I also don’t buy the argument that “we see the wholesalers on a frequent basis already so why go to the event?” Because, it’s called relationship building. Because, the size of the line alone is not the answer for “winning the hearts and minds” of distributors and their salespeople.

As for the wholesalers, if the big boys don’t show in the same numbers as in the past, perhaps they will spend more time in the exhibit area and get to know the smaller suppliers and the new brands and players that may become the powerhouses of the future.

It’s fascinating to see each of the oligopolies battle each other. I guess it’s called the “irresistible force” meets the “immovable object.”

The Nightclub and Bar Show opens this week in Las Vegas. It’s considered by many to be the foremost trade (on premise) show in the business. That is, for those who can recollect what transpired while they were at the show.

Seriously, my own experiences with the show have been good. From a supplier’s standpoint, it’s an opportunity to showcase new products, new drinks and other innovations. It’s also a chance to see and mingle with the trade and get a first hand sense of the state of the bar business and what’s on their mind.

So, a supplier’s presence among the nation’s bar and nightclub owners and managers is a bit like chicken soup – it may not help the business but it certainly won’t hurt. There’s much to be said for a presence at this event. Probably explains why there are more large suppliers there this year.

In any event it’s “Vegas,baby.”

Which brings me to a show I attended last week at the Javits Center in NYC, The 3^rd Annual New York Wine Expo. It’s a wine tasting event for consumers who paid roughly $75 for admission, less with a discount. Regardless of what they spent, all attendees were determined to get their money’s worth in sips.

I’m amazed that it survived the first 2 years. Consumers, who staggered from exhibitor to exhibitor, seemed less interested in learning about the wines shown than in comparing the alcohol effects from one country to another. So I couldn’t understand why the wines bothered to exhibit. “It’s about the last day and the trade,” one exhibitor told me. So I went on the last day and to my surprise, it seemed like some business was being done. Lesson learned for me – only go to trade shows.

Next posting: The Wine and Spirits Wholesalers of America (WSWA) convention. Any stories to share?

In my never-ending desire to bring items of interest to the attention of my readers (all 3 of you), here are a few things I came across in the news about the industry.

From Mark Brown’s Buffalo Trace Newsletter….

Former ‘MADD’ Chapter President Busted for DUI

Source: KTLA, February 25, 2011

The former president of a Gainesville, Fla. chapter of Mothers Against Drunk Driving, or MADD, is facing DUI charges, according to the Gainesville Sun.

48-year-old Debra Oberlin was pulled over last week after officers reportedly spotted her driving erratically.

She blew a .234 and a .239 on a pair of breathalyzer tests, the Sun reports, well over Florida’s .08 legal limit.

Oberlin apparently told officers she’d had four beers.

Oberlin has not commented.

She was the president of Gainesville’s MADD chapter for three years. The chapter closed in 1996 due to a lack of funds.

All I care to say is that 3 times over the limit on 4 beers? I’ll leave the other punch lines to you.

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From boozenews.com (no relation)….

A Tangle of Corkage Laws Around The Nation

Virginia and Maryland debate whether to overturn bans on restaurant BYO; a Wine Spectator survey finds laws around the country remain a confusing tangle.

As more Americans drink wine regularly with meals, more are asking their favorite restaurants that perennial question: Can I bring my own bottle? Like most practices created in the aftermath of Prohibition, corkage laws are a jigsaw puzzle of arcane, contradictory and confusing rules that vary from state to state and even from town to town. But whether they call it “corkage,” “BYOB” or “brown-bagging,” most wine drinkers want the freedom to bring a bottle of wine from their personal collection into a restaurant.

This year, some states with longstanding corkage bans have begun to reconsider. Last week the Virginia state Senate passed a bill allowing corkage; the House is voting on it today. Groups in Maryland are pushing to end their state’s ban as well.

A Wine Spectator survey of all 50 states, plus the District of Columbia and Puerto Rico, found that 25 of these allow corkage in restaurants with a license to sell wine; some also permit the practice in unlicensed restaurants, though individual municipalities—and, of course, individual restaurants—can often elect to outlaw or limit the practice. Fifteen states forbid corkage outright, and an additional 12 have more convoluted regulations.

Everyone clear on these rules and regulations?

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And, finally, Mike Bacco brought this to my attention….

Coke to ramp up Seagram’s distribution

Atlanta Business Chronicle, February 28, 2011

The Coca-Cola Co. is looking to capitalize on a partnership with Seagram’s made back in 2002.

Atlanta-based Coca-Cola (NYSE: KO) said it is expanding availability for the full line of Seagram’s Ginger Ale and mixers across the country. Coca-Cola gained the rights to the Seagram’s business in 2002, but distribution for Seagram’s brands has been limited within the Coca-Cola system. Now, Coca-Cola Refreshments and other bottlers are combining the Seagram’s brand with the Coca-Cola distribution system to boost availability of Seagram’s Ginger Ale, Club Soda, Seltzer and Tonic Water in retail outlets.

See…brands do have a life of their own. I guess after nearly 10 years they thought it was a safe thing to do.