Edrington Group profits up 19%

The Famous GrouseThe Edrington Group is one of Scotland’s success stories. The whisky company’s latest results confirmed that with turnover up by 18.2% from £468.3m last year to £553.4m now. Its profits too are up from £118.6m to £141.5m today, a rise of over 19%. The figures show that both the dividend and shareholders’ earnings have risen as well. But who actually benefits?

Edrington’s shares are not listed on the stock market. They’re owned by The Robertson Trust which ensures the firm’s independence. This private ownership has allowed the business to develop a consistent, longer-term approach to brand building and investment. It doesn’t take investment decisions based on the demands of City analysts and brokers.

When it took the strategic decision to sell Tamdhu single malt on Speyside to rival Ian MacLeod Distillers for an “eight-figure sum” (a deal completed a few days ago), it wasn’t flashed up on dealing-room screens across the country. This was the second distillery sold to the same firm with Glengoyne changing hands in 2003. Tamdhu had been mothballed since last year and the new owner plans to re-open it with the creation of ten jobs.

At the same time, Edrington’s acquired a brand – Cutty Sark. This is now mainly an export blend, popular in southern Europe and the USA. Right from the start, the new acquisition was profitable in its key markets. This means that there will be additional investment in the brand this year, targeting new markets around the world with new packaging.

Then there was the decision three years ago to take a major share of Brugal, a rum producer based in the Dominican Republic. The Caribbean firm has over 80% of its local market and is one of the largest international golden rum brands in the world. It’s also the fastest growing rum brand in Europe from its international sales and marketing base in Spain.

The significant factor about this partnership was the similarity in ownership and ethos. They have a common approach to corporate social responsibility. The Brugal Foundation and The Robertson Trust both use the companies’ profits to make substantial charitable donations in their own countries, in both cases done quietly and privately.

In Scotland, the Group is best known for a number of key brands – The Famous Grouse, The Macallan and Highland Park. In the latest results, all three have contributed to the company’s growth in key markets around the world. Highland Park in particular has the accolade of being “the best whisky in the world”, an award given by Whisky Magazine Founder and Publisher, Damian Riley-Smith and Park Avenue Liquor Shop Vice President, Jonathan Goldstein.

But the group insists that its strategy involves the long term development of all its brands. The Caledonian Mercury recently looked at the growing number of new blends under the “Grouse” banner. However, the company argues that such brand initiatives are “focussed strongly on the consumer and sustained with programmes that innovate within our categories”.

Chairman Sir Ian Good stresses that “our size and independence allow us to act in ways that other companies cannot. In every aspect of what we do, we can use innovative and different ways of solving problems – or gaining a competitive advantage.”

One of the keys to its success is control of the “route to market”. As part of this, the firm created a joint venture with Beam Global Spirits, a distribution company called Maxxium. Earlier this year, they took control of distribution in China and Hong Kong giving them control through much of South East Asia through one office in Shanghai.

This same approach has been adopted throughout Northern and Central Europe where it manages distribution operations in Sweden, Norway, Finland, Denmark, Germany, Switzerland and Austria from a major office in Stockholm. The Group is also currently in the process of opening a regional office in New York to support brand growth in America.

All this reinforced the company’s reputation as an international business headquartered in Scotland. It now employs over 2,300 worldwide, with over 60 per cent located overseas.

According to Ian Curle, the Group’s chief executive, the company is continuing “…to make good progress and we have further improved Edrington’s strategic position and business performance during 2010/11. Our strong financial performance was supported by brand growth, increased earnings and improved cash flow. “

He stressed that the brand growth in particular had “been driven by increased investment and improved economic conditions in many of our markets. We have continued to invest behind our premium brands despite the difficult trading conditions in mature markets in recent years. This investment is now paying off as we see stability returning to many western markets.”

The Group expects the current trend to continue through a consistent investment strategy. It intends to invest in its premium spirits portfolio. It policy is also to invest in and develop the various routes to market, increasing the number where it has full ownership. And it fully intends to continue investing in people, pointing out that its acquisitions and marketing strategies have “increased the talent available to Edrington and provides us with an opportunity to future growth.”