Beverage news portal Just-Drinks.com sat down with the CEO of Amber Beverage Group, Seymour Ferreira to talk about how to compete with the giants of the industry, the difficulties of finding good distributors and why cannabis and low-alcohol offer attractive growth for the future.
just-drinks: Your company sits in a number of contrasting markets. What excites you about the different parts?
Seymour Ferreira: The move towards low-alcohol is definitely happening. From a commercial point of view, it's attractive because industry players can start to think about different margin structures where you are paying less tax.
In Australia, we distribute [Diageo's non-alcoholic spirit] Seedlip, and we see interest from consumers in having the experience of an alcoholic beverage without the effect. That's definitely a trend, and one that will become a significant category.
One of the challenges in the industry is that we are not in the business of selling alcoholic beverages. That's an outcome. We are really in the business of meeting specific consumer needs. It's about social lubrication, about feeling part of a group; relaxing, sometimes showing off. A non-alcoholic beverage has all the same cues and can meet those needs as well.
From a production point of view, we need to be looking at new technology, new formulations. And, taking the brands into areas we wouldn't have considered before.
j-d: Do you think that will be led by existing brands or new entrants?
SF: Some existing brands position themselves as distilled non-alcoholic drinks, and there will be many more. Bringing in a new brand is always challenging. I suspect you'll see some of the bigger, more well-known brands coming into this through range extensions. If you're in a category with a strong presence, and you can introduce a lower-alcohol version - a 'skinny' if you like - it makes sense that you'd do that. We would look at that as well.
j-d: In the last year, you've bought two distribution companies - Cellar Trends in the UK and Australia's Think Spirits. Why?
SF: Cellar Trends and Think Spirits were driven exactly for the same reasons. The UK is a very challenging market to get into – there are very few choices of distributors. Initially, we were looking at Hi-Spirit but it was sold to Sazerac (in early-2016). It's the same in Australia. As an independent brand owner, you try to find distribution. It's very difficult.
j-d: Will you look to buy distributors in other markets?
SF: If there are opportunities to partner or to acquire really interesting distribution vehicles almost anywhere in the world, we will look to do it. Yes. We are ambitious and we want to grow quickly. If there are opportunities to partner or to acquire really interesting distribution vehicles almost anywhere in the world, we will look to do it.
There are core markets that we're very interested in. Central Europe is one. We're a European company and we want to expand our route-to-market here.
j-d: What about brands? Any acquisitions on the horizon?
SF: The obvious gap in our portfolio is brown spirits. For us, we're interested in finding the right opportunity in Irish or Scotch. Or Bourbon.
j-d: Those are tough categories to get into, with a lot of distilleries already having been bought up.
SF: Very tough. For many years, people have been worried about how big the dominant players are. Pricing is a challenge because there are big brands out there selling at low prices to drive volume. For smaller companies like ours, that makes it difficult to generate the margins we'd like to see. That's not a problem for them, because their cash flow is enormous.
I'm pleased at where the industry is now because there are a lot of independents coming in; small, nimble, creating fantastic brands and trying to build something in the cracks of this huge global business. In Sweden for example, there are small companies making whisky. Then, there are people making craft vermouth in the Swiss mountains.
I'm not worried about the industry being dull and boring. There is lovely stuff coming out. I wish there was more opportunity for smaller craft producers to get to market. The future of the industry isn't to get concerned about monolithic brands like Bacardi and Smirnoff but to encourage and focus on the innovators. That innovation is definitely accelerating.
j-d: It must be difficult when the larger companies are spending big money on small companies: Casamigos, for example.
SF: Casamigos - I'm still trying to work that one out! It changes the expectations of the buyers and the sellers. It's like selling a house in London: "The one down the street sold for GBP25m, so I'm going to get GBP25m." People raise their expectations because of their neighbors.
The reality is it's cyclical. Grey Goose is the perfect example. Everyone said at the time: "you're kidding me!." But, eventually, that panned out. I'm not sure with Casamigos if that will be the case.
I always thought that they bought him [owner George Clooney]. They didn't buy Casamigos, they bought him. And, maybe he's worth that.
j-d: You say the alcohol industry should be in the business of meeting consumer needs. Does that mean you are looking at other categories? What about kombucha, for example?
SF: We've looked at it, and we didn't spend much time on it. The technology of how to make it is not within our expertise. So, that was put to one side as a general project. If an opportunity came along, we would look into it, but only if the expertise was there somewhere.
It's very difficult for any company to say, this is what we make and now we are going to make something we know nothing about.
j-d: And cannabis?
SF: You'd be foolish if you didn't look at it. We can see from America, there is significant growth in that industry. It's quite clear that cannabis will become a new category within the alcoholic beverage portfolio. For me, the question is whether or not it should be associated with alcohol at all. We can bring our marketing experience to this and perhaps treat it slightly differently. The idea of mixing it with alcohol? I'm not sure.
But, it's a really interesting category. It goes to the question of what industry are we in? We should not be limited in thinking of how to serve our customers.
j-d: Have you had conversations about getting into it?
SF: Yes, but very low level. The question for us is do we wait, let the big guys take the lead and follow? This is probably the best way to go. Or, do we lead? We could possibly lead in some European markets or in some areas. We're looking really closely, but I won't rush into it.
In the next six months, Brexit will force some movement on us. I think the UK will move [into legalizing cannabis] very quickly and follow the Canadian lead. After that, other European countries will follow.
It's like standing on the beach and seeing the tsunami coming. You can see the water over there, but you don't realize how quickly it's coming. And that's my view - it's going to come very quickly.
Amber Beverage Group is a good example of a mid-tier alcohol company. Part of the SPI Group, the company employs around 2,000 people across its production sites in the Baltics, Russia, Mexico, and the UK. It also distributes global brands including its own Riga Black Balsam® and Moskovskaya® vodka across the world. According to CEO Seymour Ferreira, Amber prides itself on having a global reach while remaining small enough to be as agile as a start-up.