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Peter Gordon | People are beginning to understand malts

Peter Gordon | People are beginning to understand malts
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First Published: Fri, Sep 02 2011. 08 53 PM IST

Duty-bound operations: Gordon says that central and state duties in India are a significant barrier to a healthy volume base in the country. Photo Pradeep Gaur/Mint
Duty-bound operations: Gordon says that central and state duties in India are a significant barrier to a healthy volume base in the country. Photo Pradeep Gaur/Mint
Updated: Fri, Sep 02 2011. 08 53 PM IST
New Delhi: Peter Gordon, the chairman of William Grant and Sons Ltd, the family owned distillery best known for single malt Glenfiddich, was in New Delhi to introduce Snow Phoenix, a new malt brand, to India’s whisky aficionados. Gordon declined to share revenue figures for India where the company opened a marketing office last year, or global turnover, but said in an interview that he was betting on the country’s large brown spirits market. Edited excerpts:
How much do single malts sell worldwide?
Duty-bound operations: Gordon says that central and state duties in India are a significant barrier to a healthy volume base in the country. Photo Pradeep Gaur/Mint
Of the total whisky market in volume, malt whisky has 8% market share in volume and 15% share in value. That’s the global picture given by SWA (Scotch Whisky Association, representing major distilleries).
How much market share do you enjoy?
We would have about 15% share. Glenfiddich is the largest (selling) single malt and it does over a million cases.
Which are your big markets? What about India?
The largest markets for malt are the US, the UK and France. India is not very tiny when you put together the domestic volume and travel retail volume in and around India. But also, India is very important because the consumers are buying some of the more premium variants of Glenfiddich. So it has a larger proportion of the value than the volume.
Are Indian consumers really going for premium whisky?
In days gone by, blended whisky had been a predominant part of the category. But two things have happened. The first is, over the last 25 years, people have understood a lot more about wine or about maturing, about vintages... The whole movement to single malt has benefited from that understanding. We’ve seen robust growth in the standard whisky category in India. People are beginning to understand malts. In India, 80,000 cases of single malt sell, and Glenfiddich has 42% market share.
In India, duties are a significant barrier to volume. The national duty is 150% and then the 28 states have tax on top. It is fairly prohibitive. In some areas like Scandinavia and even the UK, taxes are really quite high. France and Italy are low; among Asian countries, Taiwan, China and Korea are quite low.
How do we compare with China in terms of consumption?
Consumption of super premium whisky in China is significantly higher. But China has its own Baiju (white spirit). Also, the category that consumes single malts or fine whisky in China sits around in large groups and order a bottle. That makes the volume base so much more robust (In India, customers never ask for a bottle but order 30ml or 60ml pegs). The base spirit of India is whisky. That’s why for Scotland, it is a market of extraordinary interest.
Are all your brands here?
No, they are not. Glenfiddich, Balvenie and Hendrick’s gin, these are really the three here. The future plans depend on whether or not standard blended whisky bottled in Scotland can compete with locally-made products. That depends really on the regulatory framework. We have a product, Grant, but with additional duties, it’s very difficult to see how it can compete.
How come the company is still family-owned?
Good luck, good fortune and a bit of good management.
But you must have got good offers for your brands.
We do not have many shareholders and we run the business so that it can be successful in 15 years time as opposed to trying to make as much money as possible. We are lucky to be in a position to realize it and, two, to be able to do it.
What are the drawbacks in a family business as opposed to large liquor conglomerates?
The main drawback is that you can choose your friends but you can’t choose your relatives (smiles).
In a way, it (family business) is more exciting because we cannot compete in a conventional way. We must find our own way.
It also means that we can do things they cannot do. We are the ones who out of adversity created Snow Phoenix (It came about after the distillery roof collapsed over casks of maturing whisky, exposing it to snow).
In creating new brands organically, private businesses can do better than large multinationals, because MNCs try to get numbers very quickly. They do not leave something new in the incubator long enough to see if it can be strong.
How many family members are owners?
About 90% of our shares are held by nine people. So, a very small number in itself is a very great help.
There are four families at the moment who are involved. Our next generation, that is, the sixth generation, are starting to be at an age where they may start to think about joining.
How is it structured?
We have a supervisory board made up of three shareholder directors, three independent non-executive directors and two executive directors—chief executive and the CFO (chief financial officer). I am a non-executive chairman.
Feeding into the supervisory board, we have something called the family council, which is a non-legal body that discusses ownership issues to ensure that the board does not have to discuss them.
We are a very small business with about 1,400 people. We sell in 180 countries and have offices in 12. We produce the Scotch whisky ourselves, so we are spread very thinly.
Who are your biggest rivals?
In terms of straight size, the largest businesses in the world are Diageo and Pernod Ricard. Then we are interested in how premium are you and we are envious of companies such as LVMH (Louis Vuitton Moet Hennessy).
Are your children interested in the business?
I think they are. For a family business, there are two big issues: one is generational change, how to make it happen. The second is succession. We are nine shareholders and the next generation will be 20 and it is unlikely that there are enough jobs. We have to evolve processes that we ensure that our shareholders remain emotionally involved with the business but not necessarily having it as a career. We are working on how to have a fair system of selection.
You play golf and tennis and like taking long walks.
Scotland is just the place for walks. They are beautifully laid. There is one which is just across the river where I live—it’s 42 miles. You go through gorges, plains. There is a walk across Scotland which I have done. We have something called the Right to Roam.
shuchi.b@livemint.com
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First Published: Fri, Sep 02 2011. 08 53 PM IST