Reading corporate tea leaves (i.e., press releases) is never easy. So it is with Monday’s corporate reorganization announcement from Beam Global Spirits & Wine.
For one thing, you can bet that the words used to sell it in the board room are not the same words that appear in the press release. At least you hope savvy directors of a multi-billion dollar corporation are not dazzled by sentences like, “In addition to further building a high-performance organization that will enable faster decision-making and sharper focus on customers and consumers, the initiatives will also unlock resources that can be reinvested in driving brand growth.”
Although ‘unlock resources’ is corporate-speak for cost-cutting, the rest is gobble-dee goop.
But this part is interesting. The brand portfolio is being realigned into three groups. One of those groups is bourbon, just bourbon. One presumes rye is included, blends as well, though it’s not surprising they aren’t mentioned as neither amounts to very much business.
Beam’s bourbon portfolio includes Jim Beam, Maker’s Mark, Knob Creek, Booker’s, Baker’s, Basil Hayden, Old Grand-Dad, and Old Crow.
The other two brand groups are ‘mixables’ (rum, tequila, vodka and cordials) and ‘classics’ (cognac, scotch and Canadian whisky).
That this realignment involves brand management is to be expected but the three groups will also have their own finance, operations and human resources functions, with profit-and-loss responsibility. Presumably, ‘operations’ includes production, i.e., the distilleries. All this suggests that the groups will not be simply marketing divisions, but more like wholly-owned and self-contained subsidiaries.
Sales will be separate and will sell all three groups. The U.S. sales organization will be distributor-specific. It and the three brand groups will report to Bill Newlands, president of Beam Global’s U.S. business.
Internationally, Beam Global will merge its two current European regions into one, resulting in three groups based on geography: Europe, Asia/Pacific, and Emerging Markets/Travel Retail. The international units will report to Donard Gaynor, senior vice president and managing director – international.
Newlands and Gaynor will report to Matt Shattock, president and chief executive officer of Beam Global.
Beam Global has had a fascinating history to this point. It traces its origins to the Beam family and specifically to Jacob Beam, who started to make and sell whiskey in Kentucky in the late 18th century. It was a Beam family-owned business until 1920. After Prohibition, a group of Chicago investors owned it. After World War II, the son of one of those investors bought the others out. He and then his son-in-law ran the company, which made and sold Jim Beam Bourbon Whiskey and very little else. They sold it to American Tobacco Company, makers of Lucky Strike and Pall Mall cigarettes, in 1967.
Even though they no longer owned the company, members of the Beam family continued to have a major role at its two Kentucky distilleries, and in marketing its bourbons, as they do to this day.
It continued to be essentially a one-brand company; run, in very top-down fashion, by the tag team of Barry Berish and Rich Reese. Along the way, American Tobacco changed its name to American Brands, then sold its tobacco assets and changed its name again to Fortune Brands.
In 1987, Beam acquired National Distillers, a larger but poorer company. Although it was billed as a merger, Berish and Reese remained in charge.
But the National merger did change the company by making it a player in most distilled spirits categories, not just bourbon. This was crucial, considering the state of bourbon sales in 1987. Although the National deal netted three whiskey distilleries and such venerable brands as Old Grand-Dad and Old Crow, the real prize in Beam’s eyes was DeKuyper, whose Peachtree Schnapps had become a million-case brand.
Reese got the top job in 1997 when Berish retired. Reese himself retired in 2003. Reese was an interesting guy, who came to Beam as a salesman after a 12-year Major League Baseball career, at first base and in the outfield, mostly for the Minnesota Twins. He is perhaps best remembered as the batter who gave Nolan Ryan the single-season strikeout record in 1973.
In 2005, the Beam company transformed itself again. It helped Pernod Ricard buy Allied-Domecq, then the world’s #2 distilled spirits company. They split the spoils between them, giving Beam control of Maker’s Mark, as well as Canadian Club, Teacher’s Scotch, and several other major brands. The deal elevated Beam to the top rank of worldwide spirits companies. This time, unlike in 1987, senior management of the acquired company came on board in key positions.
The reorganization announced yesterday is further fallout from 2005. It is the first major move by new CEO Shattrock, who was hired in April from outside the company.
Although the faces change, Beam has always been a very smart company. They don’t make many mistakes. That’s why, from the narrow vantage point of the bourbon enthusiast, yesterday’s announcement should be regarded as good news. In effect, Beam has set-up an independent company just to look after its American whiskey assets, a company that is free to compete aggressively against its own stable mates in the scotch, Canadian, and other spirits categories. It will also have to live or die by its own success, more or less.
You can’t know for sure if this realignment will work, or even take, but considering Beam’s track record you probably should not bet against them.