Speaker 1: This is Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Stenebek on Bloomberg Radio.
Speaker 2: Well, I want to start big. Broadly, the global luxury
Speaker 2: wines and spirits market is driven by factors such as
Speaker 2: the growth and interest in premium and unique products, the
Speaker 2: rise in demand for organic and sustainable products, and the
Speaker 2: popularity of experiential and it generated more than two hundred
Speaker 2: and twenty nine billion in twenty twenty one, anticipated to
Speaker 2: generate nearly four hundred and fifteen billion by twenty thirty one,
Speaker 2: a compound annual growth rate of about six point two
Speaker 2: percent from that tier time period, or from twenty twenty
Speaker 2: two to twenty twenty thirty one. That's from Allied Market Research.
Speaker 3: So big market.
Speaker 2: We know we all drank a lot during the pandemic.
Speaker 2: We're still kind of figuring out what normal is post pandemic.
Speaker 2: So let's get to it. Because we have a perfect
Speaker 2: guest who is a front seat to this industry, delighted
Speaker 2: to have with us, Anne Mckergey. She is CEO of
Speaker 2: Perno Ricard North America. And as I said, joining us
Speaker 2: here in studio, welcome.
Speaker 3: Welcome, welcome, great to be here.
Speaker 2: Carol. I love your background. I didn't even know this
Speaker 2: term FMCG fast moving consumer good space. So you've worked
Speaker 2: at Craft Foods, Sales, Marketing, General Management, PepsiCo SG SC Johnson.
Speaker 2: Excuse me, really, Senior Roles, Global Chief Marketing Officer, Global
Speaker 2: Chief Commercial Officer at SC Johnson, Present Global Snacks and
Speaker 2: Global inside of PepsiCo. What the heck makes something a
Speaker 2: fast moving consumer good? Like I get it with alcohol, baby.
Speaker 3: Perfect, But what makes it that?
Speaker 1: Well, what's interesting is alcohol is actually not FMCG, it's
Speaker 1: just CpG. Fast is like stuff that just flies off
Speaker 1: in a grocery store, like lazed potato chips. A thousand
Speaker 1: units per store per week.
Speaker 3: That's fast.
Speaker 2: Oh my god. So it's how do you then think
Speaker 2: about like something marketing sales that kind of a good
Speaker 2: or do you even have to because it just moves
Speaker 2: so quickly.
Speaker 1: It would just move so quickly, yeah, whereas it in
Speaker 1: Spirits we don't move a thousand units for store per week.
Speaker 1: But you know, but we have very high price points.
Speaker 1: So even we might move not that fast, we make
Speaker 1: a lot of money.
Speaker 4: And I got to cut right to the chase. Screwball, whiskey.
Speaker 4: I'm fascinated with you for those who are unfamiliar, it's
Speaker 4: peanut butter flavored whiskey. I picture a commercial. You know
Speaker 4: you got whiskey, my peanut butter. You got peanut butter.
Speaker 4: Now I know you guys acquired the brand. I can't
Speaker 4: help but think though, if an R and D person
Speaker 4: in your company had come up with that, what your
Speaker 4: reaction would because it doesn't sound like something that would
Speaker 4: be a success, kind of a surprising success exactly.
Speaker 1: It's like nobody thought people needed wheels on suitcases, but
Speaker 1: here we are.
Speaker 3: We're all using them. So you know, Screwball Whiskey.
Speaker 1: First of all, it's what an incredible gem, right, it
Speaker 1: was before we bought it the third fastest growing independent
Speaker 1: brand behind Tito's and Casa Zuol.
Speaker 3: It's amazing. Yeah, And the.
Speaker 1: Founders, who are amazing people, right, They gave their heart
Speaker 1: and soul into that brand. And the reason that the
Speaker 1: brand even exists did was the founder Steve. He is
Speaker 1: from Cambodia and came through refugee camps et ceterater. I'm
Speaker 1: gonna make a long story short.
Speaker 2: No, no, it's a really facing, beautiful story.
Speaker 1: So it comes from Cambodia. He has polio. His parents
Speaker 1: do everything to get him here. They live in refuge
Speaker 1: refugee camps. Finally they come to Houston and the very
Speaker 1: first thing they give him is a peanut butter sandwich,
Speaker 1: and for him, peanut butter represents freedom, and so he
Speaker 1: has this passion about peanut butter, and you know, then
Speaker 1: he gets into the restaurant business and he just he
Speaker 1: takes Jamison coincidentally and takes peanut butter and like puts
Speaker 1: the two together and creates Screwball. And this thing is
Speaker 1: it's it's electric. It went on fire and if and
Speaker 1: the reason why is because the United States consumer a
Speaker 1: loves flavored whiskey number one, number two. We have a
Speaker 1: very sweet palette versus the rest of the world. So
Speaker 1: when people drink peanut butter whiskey with screwball, they're like
Speaker 1: and then they put in their mouth and they.
Speaker 3: Go, oh, my god, that's amazing.
Speaker 4: That was my raction. You hear about it and you're like,
Speaker 4: wait what, and then you try it and it's like, oh,
Speaker 4: we had.
Speaker 2: We had the founders of Duke and Dame salted caramel
Speaker 2: whiskey and the same thing. We're like, I don't get it.
Speaker 2: They actually brought us some like r I'm just gonna
Speaker 2: put it out there, but no, no, no, but it
Speaker 2: was really interesting. I take no, no, no, no. I
Speaker 2: don't like whiskey. I like I like bourbon, but I
Speaker 2: don't like whiskey, and like that just what it did
Speaker 2: to the tone. And that's exactly what you were talking about.
Speaker 2: So people are playing is it easier to acquire versus
Speaker 2: play around in a lab?
Speaker 1: You know, we do both, right because the other you know,
Speaker 1: flavored whiskey that's been a huge success for us has
Speaker 1: been Jamison orange and this whole trend around old fashions
Speaker 1: and citrus and whiskey and and unlike other kind of
Speaker 1: flavored whiskeys, jamison is very whiskey forward. But when you
Speaker 1: smell it, you smell the rind of the orange you
Speaker 1: put in your mouth. You taste that whiskey and that
Speaker 1: orange after to it's just heaven. So there's becoming more
Speaker 1: kind of I would say, artisan, more invention around flavored whiskey.
Speaker 3: So we do both.
Speaker 2: What's the premium on acquisitions right now? Because I feel
Speaker 2: like these specialty liqueurs and people who are experimenting coming
Speaker 2: up with something different they're in people want them companies
Speaker 2: want them.
Speaker 3: They really do. And I will tell you it's kind
Speaker 3: of all over the board. And I would tell.
Speaker 1: You because tequilas have exploded some of the recent acquisition.
Speaker 3: It's huge, no offense.
Speaker 2: Celebrities love you. George Clooney loved you. But I mean
Speaker 2: it feels like everybody's creating a tequila.
Speaker 1: They are And what's really matters is quality tequila. That's
Speaker 1: where we are now, right, That's what's going to win
Speaker 1: in the end. So we just bought Codigo, which is
Speaker 1: a very high end, super premium. It's got this Rose
Speaker 1: believe it or not, Rose tequila. Oh wait till you
Speaker 1: put it in your mouth. So it's it's now about.
Speaker 2: It doesn't have to go to margarita.
Speaker 1: No, it does not actually tell you about what could
Speaker 1: go into a margarita that you wouldn't expect. But I'll
Speaker 1: come to that in a second.
Speaker 4: Is it peanut butter?
Speaker 1: No, it's mescal, oh Dell mcgae mescal, which is the
Speaker 1: number one mescal Jazaars. But you make a margarita with it,
Speaker 1: and it's got that little extra smoke, it's unbelievable.
Speaker 2: I have to get it from my brother.
Speaker 3: He's a great Margarita make.
Speaker 1: Oh yes, and so I will tell you now is
Speaker 1: the time for I mean, people just love to experiment.
Speaker 1: That's post COVID, right because people like they were, you know,
Speaker 1: makings at all experiential. It's all about the experience, and
Speaker 1: so having that right portfolio, making sure you're on the
Speaker 1: trend of all the things that are growing is really
Speaker 1: really critical, you know.
Speaker 4: And over the years, consolidation has been such a big
Speaker 4: theme in the beverage industry. You know, all the beer
Speaker 4: companies getting rolled up until we have two majors. I'm
Speaker 4: kind of surprised to see this Brown Foreman news today.
Speaker 4: They're selling the Finlandia vodka brand.
Speaker 3: Do you want it?
Speaker 2: Would you want it to know?
Speaker 4: Okay, we have absolutely no I but but are the
Speaker 4: big is the big deal making in this space? Has
Speaker 4: it run its course? Have all the big deals that
Speaker 4: can be done have they been done? And now it's
Speaker 4: it's looking for these new growth, small batch type of things.
Speaker 1: Well, no, I think you're going to see it in
Speaker 1: both areas. So it did not surprise me about the
Speaker 1: deal today with Coke. You have to understand both Coke
Speaker 1: and Pepsi, right, having worked at PepsiCo you know, these
Speaker 1: are much narrow margin businesses. A lot of the carbonated
Speaker 1: soft drinks business is declining, so these people are looking
Speaker 1: for new profit pools. So you're seeing a lot of
Speaker 1: these companies try to get into the alcohol business. And
Speaker 1: you know, Coke went early with Topa Chico and you know,
Speaker 1: and so Pepsi's gone with Mountain Dew, and so they're
Speaker 1: not it makes.
Speaker 4: Sense to you to bold on liquor onto a soft
Speaker 4: drink company.
Speaker 3: So let me put it this way.
Speaker 1: I I love competition.
Speaker 3: Okay.
Speaker 1: We're about to do absolute Ready to Drink with Ocean
Speaker 1: Spray like it. It's like the biggest thing every retail I.
Speaker 3: Went Ready to Drink.
Speaker 2: I want to talk about that when we.
Speaker 3: But here's the thing.
Speaker 1: The reason they're getting into it is because they need
Speaker 1: more profit, they need more margin. And what's interesting about
Speaker 1: vodka right now in the industry is it's declining. The
Speaker 1: only thing that's growing is too it's declining. Anything that's
Speaker 1: white is declining. Jin vodka, rum all declining, okay, And
Speaker 1: so what's happening is you've got the Spirit company saying, oh,
Speaker 1: I don't want to be in there, and so but
Speaker 1: you got these these you know, software companies are like,
Speaker 1: I want to get in what I would say because
Speaker 1: I'm about to take over as chairman of Discus, which
Speaker 1: is the trade association, and I've said this to some
Speaker 1: of my friends of PepsiCo.
Speaker 3: Do it responsibly.
Speaker 1: I cannot tolerate, under any circumstances brands coming in, you know,
Speaker 1: and using kid packaging, advertising in the kids aisle. It's
Speaker 1: unacceptable and it you know, we have a responsibility as
Speaker 1: an industry.
Speaker 2: We've seen it with electronic cigarettes. Right, come on, folks
Speaker 2: like own it app do the responsible thing. Talking with
Speaker 2: Anne mccergey, she is Ceopronovercard North America. She's in our
Speaker 2: Bloomberg Interact Broker studio, and I was thinking about, I mean,
Speaker 2: your brands. I had a list here and I should
Speaker 2: just have you do it absolute Jamison, Kolua, hard liquor, spirits, Champagne.
Speaker 2: I mean I'm leaving out a lot. I think there's
Speaker 2: two hundred and forty brands overall. We just talked about Screwball,
Speaker 2: super Premium peanut butter flavored American whiskey. How do you
Speaker 2: think about changes to the portfolio and whether it's expansions,
Speaker 2: getting rid of how do you think about it?
Speaker 1: So you know what's great about our portfolio is it's
Speaker 1: very premium and we have and you want to keep that,
Speaker 1: and we want to really keep that because if you
Speaker 1: look at the two buck check, no, well you know,
Speaker 1: good for train jows. Okay, So but what I tell
Speaker 1: you is when you think about consumption of alcohol, right,
Speaker 1: we all don't drink the same thing.
Speaker 3: Every time we drink.
Speaker 1: When we want to celebrate, we want to drink champagne, right,
Speaker 1: we want to just relax and unwined. We might want
Speaker 1: to glass a bourbon.
Speaker 3: Right.
Speaker 1: When we want to impress somebody, we might want to
Speaker 1: take out a very high end cognac.
Speaker 4: Right.
Speaker 1: Nobody drinks the same thing. Why they drink is the
Speaker 1: context in which they're in. So when you have the
Speaker 1: right premium portfolio that goes across all these different occasions,
Speaker 1: you actually have an advantage. And our strategy for no
Speaker 1: Recard is literally to activate more brands than our competition
Speaker 1: with the same cost to serve. So, but you have
Speaker 1: to do that if you know the science behind the demand,
Speaker 1: which brand belongs in which occasion, so you don't cannibalize yourself.
Speaker 3: So that is.
Speaker 2: Certain brands are really out front and center at certain
Speaker 2: times of the year, if you will.
Speaker 1: So for instance, during Saint Patrick's Day, it's Jamison. Right
Speaker 1: in the summer, you're drinking Malibu, right, So there are seasons,
Speaker 1: there are occasions. Sometimes some occasions are year long, right,
Speaker 1: So you have to then devise a portfolio, and that's
Speaker 1: how you decide which brands you buy and which ones
Speaker 1: you sell.
Speaker 4: Your business model. It's like that Humble Wamba song. You know,
Speaker 4: you got a whiskey drink. But at the same time,
Speaker 4: you know, we all do drink different drinks at different
Speaker 4: times for different occasions. But also just in general, I
Speaker 4: get the impression that liquor consumers are a fickle group.
Speaker 4: You know, one year it's craft beer is the hot thing,
Speaker 4: the next year it's Seltzers, the next year it's fine wine.
Speaker 4: So how do you get ahead of that as an
Speaker 4: executive in this industry.
Speaker 1: So we actually monitor the trends around how people are
Speaker 1: drinking in segments. So on average, in any given month,
Speaker 1: a consumer will drink about forty five drinks. Okay, that
Speaker 1: includes everything, Okay, a month a month, right.
Speaker 2: So now Friday night, I am mega No, I'm a
Speaker 2: mega lightweight, but.
Speaker 1: What we've seen this is on average, right, some people
Speaker 1: drink wait less. So what you see on average is
Speaker 1: before the pandemic, forty five of those drinks were twenty
Speaker 1: of them were beer. Okay, after the pandemic, they've lost
Speaker 1: two whole drinks. There's only eighteen of them now for beer.
Speaker 1: And what gained was your spirit RTDs, spirits themselves.
Speaker 3: Wine also lost.
Speaker 1: Yeah, it's on fire. It's on fire because people are
Speaker 1: walking away from beer. Then they went to malted RTDs.
Speaker 1: But they're like, eh, taste isn't so great?
Speaker 2: How much is that growing? The rtd my god, for
Speaker 2: you guys.
Speaker 1: For us, it's exponential growth. It's like fifty percent, Like
Speaker 1: it's huge every year. Yeah, it's huge, but off a
Speaker 1: small base, off a small base, a small base.
Speaker 2: Okay, could it be a bigger base.
Speaker 3: It could very much a bigger base.
Speaker 1: I mean, we have RTDs in absolute, we have it
Speaker 1: in Malibu, Jamison and an Absolute. We're just about to
Speaker 1: launch our ready to drink with Ocean Spray. You know,
Speaker 1: so you think about you know, we were talking about
Speaker 1: the you know, the wonderful cocktail that we're all used to,
Speaker 1: which is the Cosmo and so it's here's the big thing.
Speaker 1: Consumers post pandemic want cocktails conveniently period.
Speaker 3: That's what it is.
Speaker 2: Yeah, I'm not a good I know people who are
Speaker 2: really into it and they get the gear and they're
Speaker 2: like love it. I'm like, just give me the bottle,
Speaker 2: let me throw it over some ice.
Speaker 1: I'll tell you a great example. So this helps you
Speaker 1: understand the occasion. Women will get together, call it once
Speaker 1: a week, they'll have book club, whatever, They'll drink their
Speaker 1: glass of Chardenay.
Speaker 3: And that's fine because it's easy to pour.
Speaker 1: You know, after week, after a week of shardin, you're like,
Speaker 1: I really want a cocktail, but nobody wants to make
Speaker 1: a cocktail. So we launched Ready to Drink Altos margarita
Speaker 1: and literally all you do is pour it like you
Speaker 1: would wine, and it's an instant margarita. And I'm telling you,
Speaker 1: this thing is bar quality. And so now we're sourcing
Speaker 1: from wine as a as a tequila.
Speaker 2: It's pretty wild, Like you just get your head around it.
Speaker 2: But I sampled some over this summer and was really
Speaker 2: surprised at how good they were. Listen, we'd be remiss,
Speaker 2: We're Bloomberg Booze great leading indicator, especially because you play
Speaker 2: into the premium side of things of how the luxury
Speaker 2: market is going. Right now, how are the numbers in
Speaker 2: terms of this economy and then going into.
Speaker 3: Next year, how would you describe it? How are you
Speaker 3: seeing it?
Speaker 1: Yeah, so you know, well, we're getting past COVID, right,
Speaker 1: and COVID was a big boom. People were stocking up,
Speaker 1: et cetera, et cetera. The economy has been tough. We're
Speaker 1: seeing retailers actually bring down their inventories a bit because
Speaker 1: it's the cost of capital with interest rates is really
Speaker 1: really hard.
Speaker 3: That's interesting.
Speaker 1: We have the whole we have that whole global supply
Speaker 1: chain crisis.
Speaker 3: Now that's over.
Speaker 1: So what's what's happening is we're seeing resiliency in consumers drinking,
Speaker 1: so you know, the sellout and what people are consuming.
Speaker 1: But now the inventory situation is kind of, you know,
Speaker 1: kind of settling out. So when you look at the numbers,
Speaker 1: you know, from a net sales or a shipment's perspective,
Speaker 1: it's lower than actually what people are buying because there's
Speaker 1: a little bit of over inventory in the industry.
Speaker 3: But if you ask me.
Speaker 1: Long term, you said, those numbers in the beginning of
Speaker 1: the program, like about six percent kagger right, right, pre pandemic.
Speaker 1: That's we were going four or five percent every year.
Speaker 1: In the pandemic, it was double digits.
Speaker 3: Right.
Speaker 1: This is now the post COVID kind of shakeout, and
Speaker 1: I think as you move forward, you're going to go
Speaker 1: right back to that forty five percent.
Speaker 2: I love hearing about this. You've given us a snapshot
Speaker 2: on the economy. You and I and Mike we're talking
Speaker 2: the break about drinking responsibly. You guys have a campaign.
Speaker 2: We have about forty five fifty seconds left here, just
Speaker 2: talk to us about that.
Speaker 3: Yeah.
Speaker 2: So I feel like you can't do one without the other.
Speaker 3: Yeah.
Speaker 1: So we believe on return on responsibility as much as
Speaker 1: return on investment. Everything from working with the government to
Speaker 1: get the Halt Right Act, to get breathalyzers and cars
Speaker 1: so you cannot drive if you are drunk. We do
Speaker 1: a safe Nights program. We actually donated something called Engage
Speaker 1: Responsibly to stop hate online.
Speaker 3: And you know, we.
Speaker 1: We're trying to do everything that we can to be responsible.
Speaker 1: And you know, this call out to all my other competitors.
Speaker 1: Let's we're working together. Let's work together. Let's make it
Speaker 1: the right thing.
Speaker 2: I love it. So cars are going to be equipped
Speaker 2: you cannot start your car if you have alcohol. When
Speaker 2: do we get this?
Speaker 1: It's a law and now the car companies are trying
Speaker 1: to figure out can get it done exactly?
Speaker 2: Got the UAW out of the way. Let's get this together.
Speaker 2: I know that that is a very important issue for you,
Speaker 2: and we so appreciate you coming in. This was fine.
Speaker 3: Thank you. I promise with champagne you got it.
Speaker 1: Next time I will be I'm kidding, I'm kidding.
Speaker 2: This was a great way to wrap up. It's been
Speaker 2: so far a pretty crazy week. Ann Mckerzey. She is
Speaker 2: CEO pronober Card North America. In her Blueberg Interactive Brokers studio,
Speaker 2: Carol Master Mike Reagan, this is Blueberg