SB Interviews… Christian Porta

There’s a moment in most interviews when a single comment leaps out of the conversation and makes itself into a headline. No shock, when talking to Chivas Brothers boss Christian Porta, that the moment comes during a discussion of the potential of the global Scotch whisky market.

Christian Porta, CEO of Chivas Regal, spies Poland as a major opportunity for growth

But the subject of Porta’s unbridled optimism isn’t that nirvana for luxury blends, China, or the dynamic Latin American hotspots of Brazil and Mexico. No, we’re firmly in Europe – albeit the New Europe – and Poland.

Poland? “Look at Poland,” says Porta. “We will sell nearly 400,000 cases of Ballantine’s Finest there this year, nearly 10 times what we sold in 2005. Without getting carried away, Poland for Scotch whisky today is what Spain was 25 years ago. It’s a country of 40m people with a culture of drinking spirits – vodka in Poland’s case – it has increasing wealth and the positive effects of European integration.”

The case for Poland is just one element in Porta’s thoughtful dissection of the continent into “the three Europes” – encompassing crisis-hit southern Europe, the steady or moderately buoyant markets to the west and the north, and the huge potential of the east, extending into Russia. Identifying the future Spains for Scotch – especially now that the category’s former glory market has lost its lustre – has been a key part of Porta’s job since he took over as chairman and CEO of Pernod Ricard’s Scotch and gin business nearly a decade ago.

When, that is, he hasn’t been assimilating some of the biggest brands in the sector, following Pernod’s series of game-changing acquisitions: Seagram in 2001 (Chivas Regal, The Glenlivet), Allied Domecq in 2005 (Ballantine’s, Beefeater) and V&S in 2008 (Plymouth).

Since then, the company has rightly made much of its success in the Far East and Europe especially, where brands such as Chivas Regal, Royal Salute and Clan Campbell have secured a strong position for the company.

But discussed in less detail and with less regularity are regions such as the US, Latin America and Africa, where Chivas continues to lag its larger Scotch competitor, Diageo. To his credit, Porta is frank in his assessment of the challenges facing the company as brands such as Passport and Chivas play catch-up against Diageo star performers including Buchanan’s and Johnnie Walker.

“We are not as well represented in Latin America as we should be,” he admits. “I think we have been relative latecomers to that part of the world. But over the last two to three years we have had a strong investment plan behind the Scotch whisky category.”

Porta claims Chivas Regal was a ‘neglected brand’ under Seagram in the ’90s

This renewed focus has been boosted, Porta adds, by a beefing up of the company’s presence in the key spirits markets of Mexico and Brazil, where local subsidiaries Casa Pedro Domecq and Pernod Ricard Brasil respectively have become “much more professional” than in the past.

Besides, he points out, the company is “not starting from scratch” in the region and already sells more than 100,000 cases of Chivas Regal in both Brazil and Mexico, with good growth continuing.

Further down the price chain, Passport is now selling more than 1m cases a year, with Latin America the brand’s heartland. But its larger Diageo rival, Buchanan’s, is about 500,000 cases ahead of that, and has used its success in the south to tap into the Hispanic consumer opportunity in the US, becoming North America’s fastest-growing Scotch in the process. Could Passport follow suit?

Porta isn’t so sure. “The premium/standard Scotch market in the US is not a very dynamic market currently,” he says. “There are more losers than winners in that market. Super-premium blends and super-premium malts – that’s where the dynamic growth and the profitable growth is.”

But even Chivas Regal, given its dramatic growth in China and generally strong performance elsewhere, has had a surprisingly chequered performance Stateside.

“Chivas Regal has had a more difficult history in the US,” agrees Porta. “It was basically a neglected brand with Seagram in the ’90s, and it has taken time and effort to find a solution.

“Three years ago, we decided to invest more and go back to the basics of building a super-premium Scotch whisky like Chivas. For the last year, we are now stable-plus with very good growth for Chivas 18 and stable for 12. The brand now is in a small growth pattern and we want to continue that.”

Nonetheless, the story of Chivas Regal illustrates how the global opportunity for Scotch has diversified beyond the historic mainstays of the US and Europe. At one point, the brand sold 500,000 out of 2.8m cases in the US; now the figures are 400,000 and 4.9m respectively. Times have changed.

Much of the reason for that transformation – in Chivas Regal’s case especially – is to be found in China. But that market too is evolving, following the dynamic growth of 2002 to 2008, then a slowdown as the world’s economies dipped. As China matures, will the super-premium focus of the market develop to include cheaper blends as well?

“No, for the time being China is a fantastic market which starts with Chivas, Ballantine’s 12 and Johnnie Walker Black Label,” replies Porta. “We see this continuing to happen and we are very optimistic.”

Instead, he says, the evolution of Scotch whisky in China is much more about diversifying when it’s consumed, switching from whisky’s traditional place in bars and clubs towards drinking with food and, in the longer term, at home.

Christian Porta will celebrate a decade as CEO of Chivas Brothers next year

The “with food” occasion has historically been the stronghold of Cognac (and baijiu) – so don’t Porta’s efforts to target this opportunity risk conflict with Pernod’s other Chinese success story, Martell Cognac?

Not really, he says. “The opportunity is so huge. The meal opportunity historically has been in the southern part of China, where Cognac has made an effort for the last 10-15 years; it’s in the western and northern part of China where we are doing most of our work. There is room for two big imported spirits categories within that opportunity.”

The Asian potential for Porta’s brands extends well beyond China, taking in Vietnam, Singapore and Malaysia, as well as a host of smaller markets such as Laos and Cambodia, as well as India – if that country’s punitive excise tax system is ever reformed.

Mind you, the company is still managing to sell more than 100,000 cases of Chivas Regal in India even now, investing also behind Ballantine’s and 100 Pipers to complement parent company Pernod Ricard’s successful domestic brands, including Royal Stag and Blenders Pride.

That’s due in no small part to the far-sighted vision of the old Seagram business, which made inroads in establishing routes to market in India and China when rivals like Diageo remained hesitant about their potential.

It’s a similar story with Scotch whisky stocks, with Pernod reaping the rewards of a bullish Seagram production policy from nearly a generation ago. “They laid down a lot of stocks in the ’90s, but then they put their foot on the brake in the late ’90s very violently,” says Porta. “When we took over, there was a lot of whisky available, but we were quite optimistic. We started rebuilding distillation capacity and reopening closed distilleries.”

That sense of optimism continues into the present boom in demand for Scotch: following the extension of The Glenlivet distillery to fuel its long-term ambition to overtake Glenfiddich as the world’s bestselling single malt (Porta is coy about whether this will be achieved during his tenure), Chivas is reopening Glenkeith and extending Glenallachie, Glentauchers, Tormore and Longmorn.

No wonder, then, that when asked about the possiblity of future, niche acquisitions, Porta somewhat hedges his bets. “You never know, but we have had so much work to do with the integration of Seagram and Allied,” he responds. “We have single malts in our portfolio that we haven’t even started on, like Scapa with its Orkney heritage, and Longmorn, a hidden gem in Speyside. We have our own hidden gems in the portfolio, which we intend to develop, and I think the most difficult part of my job is knowing where to begin and what to prioritise.”

More than a decade after the company became a serious force in the Scotch whisky industry, and nine years since Porta took over at the helm of Chivas Brothers, it’s clear that Pernod Ricard’s Scotch whisky business remains very much a work in progress – and that seems to suit its CEO just fine.