Beam CEO: ‘Big ambitions’ for House of Suntory

18th October, 2019 by Amy Hopkins

Albert Baladi is in the driving seat as Beam Suntory’s new president and CEO. He tells The Spirits Business about his ambitions to position Bourbon as the world’s foremost whisk(e)y and make his company the ‘most admired’ in the industry.

Albert Baladi became CEO of Beam Suntory in April 2019

*This feature was originally published in the August 2019 issue of The Spirits Business

In 1795, three years after Kentucky became a US state, farmer and grain mill operator Jacob Beam filled his first barrel of whiskey.

Just over a century later, on the other side of the globe, Shinjiro Torii started production of grape wine, and later established the domestic whisky market in Japan. These two men, though separated by distance and time, laid the foundations for what would become the global spirits powerhouse Beam Suntory.

Formed following Suntory Holdings’ US$16 billion acquisition of Beam Inc in 2014, the group is the world’s third‐largest distiller. In 2018, its flagship brand – Jim Beam – shifted 9.7 million cases, a 9.8% annual increase that secured it the title of World Whisk(e)y Brand Champion in SB’s latest Brand Champions report. It is a leading light in Beam Suntory’s portfolio, which is brimming with heritage Bourbon brands.

In April this year, Albert Baladi assumed responsibility for driving the company’s next phase of growth, as its president and CEO, taking over from Matt Shattock. At the time, Baladi expressed a desire to “make Bourbon the world’s whisk(e)y”.

MEGA-MERGER

Baladi joined Beam Suntory in its former incarnation of Fortune Brands in 2011. He built his career and FMCG giants Procter & Gamble and PepsiCo, and most recently acted as Beam Suntory’s chief operating officer. He was president of Europe, the Middle East and Africa when the mega‐merger between the spirits units of Suntory and Beam took place, a move he describes as “very positive”.

“Suntory has a deep knowledge of the spirits industry – it created the whisky market in Japan in the 1920s,” Baladi says. “So we were acquired by a company that really deeply knew what we were doing. We quickly realised we had common values around quality, respect for legacy, setting bold goals and having a vision for building premium brands.” Baladi adds that since its formation, Beam Suntory “hasn’t missed a beat”, despite a short period of “adjustment”.

With Suntory as its parent, Baladi says his company benefits from an “east‐meets‐west” perspective, which has resulted in a number of cross‐continent new product developments, among them: Japanese gin Roku; Japanese blended whisky Toki, which Baladi says surpassed 100,000 cases in less than two years; Japanese vodka Haku; and Legent Bourbon, created as part of a collaboration between Jim Beam master distiller Fred Noe and Suntory chief blender Shinji Fukuyo.

Japanese gin Roku contains six botanicals including sakura flower

While Beam Suntory is exploring new areas of the spirits industry, Bourbon remains at its core. According to Baladi, the firm invests approximately half a billion dollars in its Kentucky operations each year. “We have been investing in our Bourbon assets for many years. Matt [Shattock] started that – he was a big believer in the future of Bourbon. So we have the capacity we need for Bourbon today.” An enviable position in an industry where supply often fails to meet demand.

Baladi states that Beam Suntory owns 40%‐ 45% of the Bourbon barrels in Kentucky, with 30 warehouses and “growing at a rate of six per year”. Unfortunately, it is one down after a lightning bolt set a building ablaze last month, destroying all 45,000 barrels of whiskey maturing inside. The fire burned for days, and despite the best efforts of local authorities and the Beam Suntory team, a 23‐ mile‐long trail of alcohol spilled into the Kentucky River, killing scores of fish and other aquatic life forms. No people were injured, and Beam Suntory is working with local, state and federal government agencies to “minimise and remediate” the environmental fallout of the incident.

Birdseye images of the enormous building – blackened and collapsed, its contents spewed out – were widely shared, and made for sombre viewing. However, the loss represented just over 1% of Beam Suntory’s total maturing stock in Kentucky (3.3m barrels), and most of the damaged casks were said to contain “relatively young whiskey from the Jim Beam mash bill”. As such, a company spokesperson confirmed that the fire would “not impact the availability of Jim Beam for consumers” – a good thing, since the brand continues to ride a tidal wave of popularity.

Baladi enthuses: “We have been laying down liquid with a view of making Bourbon the world’s whisk(e)y. The vision here is a big, bold bet on Bourbon. If you look at the US, the Bourbon market is a lot lower than its peak in the 1970s. So, while we think that the US has been really buoyant in American whiskey, there’s still much more room to grow. If you look internationally, American whiskey is a fifth the size of Scotch, and it’s growing faster. There’s a real opportunity to put Bourbon on the map more than it is today.”

Jim Beam is continuing its strong growth

Since the creation of Beam Suntory, Jim Beam has benefited from the distribution muscle of its Japanese parent, and enjoyed newfound success in the east. The brand sold 30,000 cases in Japan in 2012, increasing to 800,000 in 2018, and is set to hit the 1m‐case mark by 2021. By the time the Tokyo Olympics rolls around next summer, Japan will be the biggest export mark for Jim Beam.

Another brand that’s growing its global audience is Maker’s Mark, which passed the 2m‐case sales threshold last year, and recently hit 100,000 case sales in Japan alone. The brand is “growing high single digits” internationally, with double‐digit growth in the US. “Japan is really putting this brand on the map,” says Baladi, “and we’re doing the same in places like London and other key cities around the world. We think there’s a very bright future for Maker’s Mark. It’s made [in] the same [way] today as it was when it was founded [in 1953] and we have been very protective of this legacy. Therefore, we have an ability to scale up on a global basis but also maintain transparency in the way the liquid has always been made.”

As well as Jim Beam and Maker’s Mark, Beam Suntory produces the Knob Creek and Basil Hayden’s whiskey brands, among others. As the market swells with new players, Baladi says Beam Suntory is not resting on its laurels and will build a ‘craft’ distillery on the grounds of its Claremont site to create “small batch experiments, and think about the whiskey that will be leading the trends in 20 years’ time”. Beam Suntory broke ground on the new distillery, called the Fred B Noe Craft Distillery, last month, with a view to open the distillery next year to mark the 225th anniversary of Jim Beam.

Beam Suntory may have bold ambitions when it comes to Bourbon, but, like other large American whiskey distillers, it is at the mercy of political powers. Following Donald Trump’s steel and aluminium tariffs, the EU and other nations fought back with their own punitive measures, catching American whiskey in the firing line. For Baladi, the tariffs put Bourbon at a disadvantage to other whisk(e)y categories.

Maker’s Mark passed 2m-case-sales threshold last year

TARIFF WARS

“We are an unfortunate victim of these tariff wars, and obviously it hurts, because consumers look at whisky overall and they compare us with other categories,” he says. “We have to go after Scotch, and we know there is a very clear transfer between the two. Therefore, our pricing relativity has to be maintained, which is very difficult when you have tariffs.” As such, Beam Suntory has increased its prices in some markets “in a strategic and punctual manner”.

Baladi adds: “We have taken what I would call a differentiated strategic approach, which has passed some price on to the consumer, has absorbed some in profit and loss, and we have made some very painful choices in our investment approach because of the cost of tariffs.” Nevertheless, the CEO is confident the category will bounce back: “There are so many opportunities [for Bourbon] in the US and overseas. Building scale around Bourbon is one of our big priorities.”

Beam Suntory has also invested heavily in its Japanese whisky business, but is “still short on aged single malts” from Yamazaki and Hakushu. In May 2018, the group confirmed plans to discontinue its Hibiki 17 Year Old and Hakushu 12 Year Old expressions “at some point” from 2019 due to stock shortages. At the start of this year, Beam Suntory’s Japanese arm also stopped producing six bottle formats for its Shirokaku, Chita and Kakubin brands.

To combat stock pressures, the firm has focused on the Hibiki and Toki blends. The development of white spirits Roku and Haku has also helped maintain consumer interest in the face of an aged whisky shortage. Baladi says there will be “a lot of exciting stuff” from Beam Suntory in terms of Japanese white spirits. “The combination of these things [whisky blends and white spirits] has put us in a good place,” says the CEO. “We have set a vision for the House of Suntory brands to achieve a billion dollars in sales by 2030. So we have big ambitions for our House of Suntory portfolio, and with brands like Toki and Hibiki, which will be our big global icons, we will be achieving big numbers.”

As the Japanese whisky industry comes under greater scrutiny, questions have been asked about some distillers’ use of whisky distilled outside of Japan. As such, a number of stakeholders have called for stricter regulation of the market, and even advocated the creation of a Japanese whisky GI.

Popular: Japanese whisky

Popular: Japanese whisky

“There are discussions happening at the moment,” says Baladi. “I don’t know where it’s going to land, but we are definitely in the driver’s seat when it comes to defining regulations for Japanese whisky. There has been an explosion of Japanese whiskies and Japanese spirits around the world. A lot of these whiskies are what we call ‘product of Japan’, which is different to our approach, because we are 100% Japanese whisky. With ‘product of Japan’ you have a very broad definition – you can be blending with Scotch or other things, which allows you to expand the liquid you have. That’s an important differentiation. We have the liquid that allows us to create a variety of tastes – the permutations are amazing.”

Outside of whisk(e)y, Baladi highlights the “incredible” potential of Hornitos Tequila, which recently passed the million‐case mark. The group will also seek to turn Courvoisier Cognac into a “house of luxury”. Baladi explains: “We have started that journey, but there’s still a long way to go. We have big ambitions in the US and China, and we have a strong presence in Russia. Two years ago we opened our business in South Africa – again, a very big Cognac market.”

FASTEST-GROWING

Baladi says Beam Suntory doesn’t have any “glaring gaps” in its portfolio, but “might talk about acquisitions here and there”. Principally, he says, the group will centre its efforts on becoming the “fastest‐growing and most admired” spirits producer, a mission underpinned by three pillars: “premiumisation, scale and purpose”.

The CEO wants to see 50%‐60% of Beam Suntory’s portfolio in the premium sphere by 2030, growing from its current 35% share. The group is also aiming to “scale up” in its strategic markets. “We are big in the US today but we want to be even bigger, and the same in China and India,” says Baladi. “These are big emerging markets where we have a small presence but big ambitions – we have set billion‐dollar goals for each of these markets by 2030.”

By that time, Beam Suntory is hoping to become a US$10bn company – more than doubling its current sales. With its “east‐meets‐west” perspective, there is arguably no firm better placed to act on global spirits trends and build the heritage brands of the future than Beam Suntory.

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