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Does Cuervo Have Shot at Getting Bushmills Off the Rocks?

Published on Nov 4 2014 8:18 PM in Drinks

Does Cuervo Have Shot at Getting Bushmills Off the Rocks?

While Bushmills has been around almost two centuries longer than rival Jameson, it lags behind the younger distiller in the growing Irish whiskey market -- highlighting the challenge facing its new owner, Jose Cuervo.

 

Closely held Jose Cuervo, better known for tequilas, said yesterday it’s taking over Bushmills from Britain’s Diageo Plc. The new Mexican owners will want to capitalize on what they called a “legendary brand” -- first awarded a distilling license by King James 1 of England and Ireland in 1608.

It won’t be easy catching up with Jameson, a distiller founded in 1780 and now owned by Pernod Ricard SA.  Jameson outsold Bushmills more than 5-to-1 in the US last year, where it benefited from aggressive marketing that has incorporated social media such as Facebook Inc.

“Bushmills is so far behind Jameson that it’s quite difficult to see how they would close that gap,” said Nicolas Ceron, an analyst at Societe Generale SA in London. “Bushmills’ marketing isn’t working for some reason, it’s very difficult to judge why. Diageo did try, and failed.”

Jameson sold more than 4.45 million 9-litre cases of Irish whiskey last year, compared with 779,000 for Bushmills, according to researcher IWSR.

Jameson has experienced particularly stellar growth in the US, where sales volumes rose by an average of 22 per cent a year between 2008 and 2013, higher than any of the other top-10 whiskey brands on sale in the country, IWSR said. Bushmills has been lacklustre by comparison, recording average annual volume growth of 3.8 per cent over the same period.

Spicy Finish

That performance may explain why Diageo was willing to dispense with the brand.

“We have tried hard over the years to get it into growth, and we’ve struggled,” Diageo Chief Executive Officer Ivan Menezes said in July.

Bushmills comes from a town of the same name in County Antrim, in Protestant Northern Ireland. Its taste is “vanilla, honey with a spicy finish,” according to food blog Urbanspoon. Jameson’s distillery is based in County Cork, Ireland, and has a “wood, honey peppery finish,” Urbanspoon said.

Concern about the US did little to damp the enthusiasm of the Beckmann family -- Cuervo’s owners -- for their newly-acquired asset. The deal is the “most important” in Cuervo’s history and will strengthen its non-tequila offerings, according to CEO Juan Domingo Beckmann. It will also bolster the company’s business in the US and UK, he said.

Some analysts, including Chris Wickham of Oriel Securities Ltd., say Bushmills will be better off with an owner that gives it more attention than London-based Diageo, which is more focused on bigger-selling Scotch such as Johnnie Walker and J&B.

Ireland, Russia

“It’ll be cared about a lot more, but as with any small organization, Cuervo doesn’t quite have the same reach,” said London-based Wickham. “It can be difficult if you’re not part of a big brand, but you can’t be dismissive. If you get the marketing and distribution right, it can be a powerhouse.”

And while Bushmills can’t compare with Jameson in the US, it has put in a much stronger showing elsewhere, notably in Ireland and Russia, where volumes sold rose by 21 per cent and 48 per cent respectively, in 2013.

Diageo “got rid of a good brand,” said Phil Carroll, an analyst at Shore Capital. “It missed the explosive curve of Jameson. That was a very well-invested brand that got bigger than the category itself. There was decent potential on Bushmills that was never fully exploited.”

Bloomberg News, edited by Hospitality Ireland

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