Allied Domecq’s plan to reshape its spirits and wines division, hatched last May, was never going to be easy. The restructuring was designed to simplify the sprawling organisation of the company’s wines and spirits interests around the world and bring the operation “closer to individual markets”.
Eight months on it seems no nearer its objective.
The parent company has been in a state of almost permanent upheaval since it was formed 30 years ago. It has expanded through acquisitions, but is selling its food and beverage divisions as it concentrates on core areas of spirits, wines and retailing.
The plan for the spirits and wines business involves bringing each major spirit brand under the control of an international brand director, and stripping marketing from the plethora of manufacturing and distribution companies in different countries. But six months have passed, and trying to fill the new top posts is proving to be a headache for Domecq.
The problem was exacerbated at the end of last month, when Chris Banks, one of Allied’s most senior marketers and a prime beneficiary of the restructuring, quit for pastures new (MW December 15, 1995).
Just seven months after being handed the post of European marketing director, Banks informed the board of the world’s second-largest spirits company that he was leaving to join the world’s largest – Grand Metropolitan – as international marketing director for its International Distillers & Vintners division.
The Grand Met job looks more appealing to an ambitious marketer, encompassing a worldwide marketing task rather than concentrating on the slow-moving European market. But Banks had moved swiftly through Allied’s new structure, taking the European role after a time as managing director of UK distribution company URM Brands. It looked as if he was on track for greater things within the company.
Allied’s restructure of international wines and spirits has been problematic from day one. It seems unable to find the talent to fill – or in Bank’s case hold onto – the posts of international brand directors created under the new structure.
The purpose of the shake-up was to eliminate bureaucracy and duplication of roles within marketing and sales for the spirits and wines business. The manufacturing companies were stripped of their marketing roles and the function was centralised into two “brand centres” in Los Angeles and Bristol. The Bristol centre controls Ballantine’s whisky, Beefeater gin, Cockburn’s port, Courvoisier brandy and Harvey’s sherry across Europe.
Each of these names was to have an international brand director under the new structure. Reporting to this brand director would be separate marketing and planning directors. The position of European marketing director, given to Banks, was created to work in parallel with the brand directors and ensure marketing plans were co-ordinated in each European country.
But Allied is still lacking directors for Beefeater and Courvoisier, although the marketing and planning directors are in place for both. On top of that, the company has to seek a replacement for Banks.
There is evidence of staff unease about the new structure and concerns as to whether it will succeed in clarifying the global marketing task faced by Domecq’s brands. One insider says: “You wonder why Banks was disenchanted at Domecq when he had enjoyed such progress at the company. People do not believe the restructure is working – there is a lack of leadership.”
The source says senior managers see similar problems at Allied Domecq Spirits & Wines as have been manifest at the company’s joint brewing venture, Carlsberg-Tetley: “People are not sure who is responsible for what in the new structure – there is a lack of clarity on budgets and pricing.”
Even more uncertainty could be on the cards for senior marketers with the arrival of Sir Christopher Hogg, when he replaces Michael Jackaman as chairman in April. Hogg has a reputation for taking tough decisions, and staff fear yet another round of restructuring when he takes the helm.
Speculation about what Hogg will do is rife, not only in the company, but also among City analysts. Some play down the significance of the role – Hogg will be a non-executive chairman, which limits his scope for making big changes, they say.
But others see him making the big moves on which he built his name. When he was chairman of Courtaulds, he split the company’s textiles and chemicals interests. Could he make similar moves at Domecq?
Broker ABN Amro Hoare Govett suggests that he should sell off Domecq’s spirits side – netting an estimated 4.25bn – and become a retailing company. Hypothetically, it could buy Burger King from Grand Met for about 2bn. Domecq’s retail interests span more than 4,000 pubs, the Victoria Wine off-licence chain, Baskin Robins ice-cream parlours and restaurants and the Dunkin Donuts chain.
There is also further scope for restructuring in Domecq’s UK drinks divisions. The divisions have been consolidated into the single entity Allied Domecq Spirits & Wines UK, and comprises two distribution companies. JR Phillips distributes Harvey’s sherries, Courvoisier cognac and William Grant whisky. URM includes Teacher’s whisky and Lamb’s Navy Rum.
These two marketing and sales operations could be folded into one. There is, however a potential brand conflict between William Grant whisky and Teacher’s, and observers believe such a consolidation will only take place if William Grant switches distribution to another company.
There seems little doubt that further change lies ahead for Domecq. The recruitment of top names for the spirits and wines division could be hampered if more senior marketers quit.
Uncertainty about the moves Hogg will make when he takes over as chairman must be a concern for top executives, and will be wondering whether they, like Banks, might best develop their careers elsewhere.