Narrow and deep or broad and shallow? The spirits industry’s dilemma
Trying to be all things to all consumers carries great risk for brand owners. Spirits category commentator Richard Woodard asks: How far can you stretch things before they snap?
What really caught my eye about November’s unveiling of a redesigned bottle for Diageo's Gordon’s gin brand wasn’t so much the revamp itself - like many of these repacks, it was a ‘spot-the-difference’ tweaking, rather than a radical overhaul - but the image chosen to illustrate the new look. Back in the day, we had the standard green Gordon’s bottle, and then the export version with the yellow label, which everyone picked up on holiday because it was so much stronger and tastier than the 37.5% abv UK bottling. And, that was it.
But not now.
Eight variants - eight - feature in the current line-up, from the standard and alcohol-free SKUs with their green glass through a rainbow of flavour hues: Sicilian Lemon, Mediterranean Orange, White Peach, Spot of Elderflower (possibly not the most enticing product name ever), Sloe and Premium Pink.
For once, I’m going to park my prejudices about all that fannying around with faintly nauseous flavour and colour combinations, instead of focusing on what gin does best (juniper) and acknowledge, if somewhat begrudgingly, the success of gin’s continued proliferation and diversification. The strategy has successfully maintained the momentum of the early years of the gin boom, broadening the sometimes narrow appeal of the juniper-forward spirit and embracing new consumption occasions and opportunities. For every juniper purist out there (like me!) in the world’s bars and retailers, there’s someone else equally happy to sip something pink, sweet and fruity that just happens to have the word ‘gin’ on the label.
Beverage brand owners are eschewing the ‘narrow and deep’ approach in favour of something much broader (but also shallower)
The risk - as I’ve stated before - is that in trying to be all things to all consumers and chasing whatever constitutes the current zeitgeist, you lose sight of your USP, dilute your identity and sacrifice long-term stability at the altar of short-lived gains.
But, again, let’s park that, because there’s a deeper philosophy at work here that runs way beyond the confines of the gin category. Increasingly, beverage brand owners are eschewing the ‘narrow and deep’ approach in favour of something much broader (but also shallower). To torture a familiar analogy, the more eggs you’ve got in the more baskets, the more you spread your risk, helping to preserve some semblance of stability even during crises of the magnitude of the COVID-19 pandemic.
You can see this way of thinking, or a version of it, in the recently-announced Heineken/Distell merger. It’s a neatly complementary deal in all sorts of ways – markets, categories, brands, company strategy – but also a huge step for the Dutch brewer, which will soon have a majority stake in a company that makes wine, brandy and whisky, as well as cider and beer.
Not everybody wants to be a total beverage alcohol operation, but many are beginning to edge in that direction
Quite apart from benefiting Heineken’s strategy of expansion across Africa, the deal begins to turn the company into a more diverse business not wholly reliable on categories (beer and cider) that have their issues in some parts of the world, and which have been badly impacted by COVID lockdowns and on-premise closures.
Similar moves are visible elsewhere in the industry, from Molson Coors Beverage Co selling spirits, RTDs, soft drinks and cannabis beverages, to The Coca-Cola Co dipping a toe into alcohol via Topo Chico hard seltzer. And those are only two out of many more examples. Of course, not everybody wants to be a true total beverage alcohol operation like Distell, but many are beginning to edge in that direction.
Contrast this with the approach of Roust Group and its Polish vodka subsidiary, Central European Distribution Corporation (CEDC), which it recently agreed to sell to local food group Maspex for PLN3.89bn (US$1bn), some eight years after acquiring CEDC out of virtual bankruptcy. CEDC imports a range of products into Poland for third parties such as William Grant & Sons and Campari Group. In brand terms, however, the business is a pony with worryingly few tricks – a stable of vodka brands such as Żubrówka, Soplica, Absolwent and Bols. The very definition of a ‘narrow and deep’ approach.
Is that such a bad thing? Roust can point to a pretty solid tenure with CEDC, more than doubling the company’s share of the Polish vodka market from 22.7% to 47% since its takeover in 2013. The emblematic Żubrówka, meanwhile, overtook Absolut in 2020 to ascend to number three in the global vodka rankings, selling 10m cases in the process.
If the Roust/CEDC combination illustrates the potential benefits of going narrow and deep, it also hints at its limitations. Success in Poland can hardly be said to be mirrored elsewhere, with only 10% of CEDC’s sales occurring overseas. And, once you’ve cornered almost half of your domestic vodka market, just how much more scope for expansion can there be without looking further afield?
In some respects, Roust’s strategy with CEDC brings to mind the private equity approach: pick up a struggling, underachieving business, give it a good shake-up and polish (no pun intended), make it successful and, when you’ve done pretty much all you can with it, sell it on. Whether that will be good for the long-term future of the CEDC brands - now under the ownership of a food group with regional, rather than global, capabilities - is open to question.
In cold financial terms, it doesn’t look like a bad bit of business.