There are at least two lessons for marketers implicit in the sad saga of Bulmers, which last week reached a new nadir with the resignation of its chief executive after the untimely discovery of an unscheduled £3.3m of promotional spend. Not all of them relate to the drinks industry.
However, the chief executive in question, Mike Hughes, certainly did. In fact, he had a distinguished pedigree in it. Once marketing director of Coca-Cola, he had spent 15 years at Guinness (now Diageo) in various roles, culminating in the post of managing director of Guinness Brewing UK. It was this background, with its mixture of senior marketing, distribution and managerial experience, which made him, in 1999, such a shoo-in for the Bulmer family – who own a controlling stake in the publicly listed cider company – as the messianic figure who would drag them from the quagmire already engulfing their business.
What went so disastrously wrong? It certainly wasn’t lack of vision, ideas, or the energy to implement them that brought Hughes down.
As is well known, Bulmers faces a strategic quandary. It is overwhelmingly dependent upon being the overwhelmingly dominant player in the cider market. Strongbow may still be a must-stock item in just about every UK drinks retail outlet, but cider is a sector in long-term decline and Bulmers badly needed other strings to its longbow. This at a time when the drinks industry, led by Hughes’ own former employer Diageo, had embarked on an unprecedented round of global consolidation which was squeezing the middle out of the market.
Others, faced by this dilemma, might simply have plumped the company up and sold it. Indeed, Taunton did. Twice, in effect: first to Matthew Clark, and then through Clark’s sale of itself to a US group. Bulmers, by contrast, pursued an aggressive growth strategy. It sought an international partnership with Heineken, in the aftermath of Whitbread’s sale to Interbrew, by acquiring a £32m distribution company. But Heineken took a different route. Simultaneously, Bulmers tried to develop cider sales abroad. After initial successes, it was flattened by the arrival of PPSs. At home, Bulmers accelerated product innovation, which has been indisputably expensive but only dubiously successful.
As the ‘creative’ options closed down, Bulmers seems to have gone for market share at the expense of margins. This would certainly help to explain its serial profit warnings. Conceivably, it might also shed light on the unaccounted-for £3.3m, which could be lately rebated retailer discounts, though this is a matter of speculation. Whatever the reason, its disclosure sounded Hughes’ death knell: one nasty surprise too many for the City.
And the lessons? It’s easy to say now that Bulmers should have been sold. But Hughes, who had some bad luck as well as making a few bad judgements, faced two problems. One was his own ‘big company’ mentality, and the other – more important – was that Bulmers is a family-owned business. A pure joint-stock company would have been put under the hammer long ago; but families usually have private agendas. The second lesson is that marketing alone cannot solve strategic problems, despite the best efforts of its practitioners.