Scottish & Newcastle (S&N) has already started rationalising its brand portfolio, as it waits to be carved up between its rivals Carlsberg and Heineken, whose joint takeover offer was accepted by the British brewer last month.
S&N has created a new joint venture for its heritage brands, including Newcastle Brown Ale and Scrumpy Jack, called Jygsaw Brands (I last week). The move will allow S&N to focus on its core brands such as Foster’s and Strongbow, as well as product development.
Jygsaw has been formed by a team of existing S&N managers and will be responsible for the sales and marketing of ale brands McEwan’s, Young’s, and Newcastle Exhibition and cider brands Woodpecker and Scrumpy Jack. It will be led by managing director Simon Brown, a former S&N director.
This business model is unique in the drinks industry and aims to help build the heritage and provenance of brands operating in difficult markets, such as the declining ale market. It has been hailed by experts as an “appealing proposition”.
Ned Colville a senior consultant at The Value Engineers, says: “S&N has marked out its local and global jewels and this new business will include local jewels such as Newcastle Brown Ale that need a focused marketing strategy. To try to leverage value out of brands that may not be power brands but continue to have a lot of emotional attachment is a shrewd move to make.”
Interbrand chief marketing officer Graham Hales thinks the move comes at a “pivotal moment” in S&N’s history. He adds that it will allow the brewer to grow and build a portfolio that could later even be sold off under the new management.
S&N accepted a $15.4bn (7.89bn) takeover offer from Carlsberg and Heineken on January 25, following three months of negotiations. The deal is expected to be completed by the second quarter of this year. Carlsberg gets S&N’s businesses in France, Greece, China, Vietnam and the full control of Russian brewer Baltika, while Heineken takes S&N’s operations in US, India and the UK.
Colville says: “Jygsaw will get the freedom to experiment in a more entrepreneurial environment and outside the grip of a massive juggernaut marketing system. That can only be good news for the brands.”
Jygsaw says there are no plans to sell off the business, adding that the initial focus will be on supporting the brands through trading development and reinvigorating the brand propositions and performance.
McEwan’s, Young’s and Newcastle Exhibition have all been struggling in the tough ale market, traditionally seen as a drink for the aging population. And though cider sales have been on the increase since 2005, Woodpecker and Scrumpy Jack continue to trail behind fellow S&N cider brand Strongbow, C&C’s Magners and Constellation Europe’s Blackthorn.
Care and attention
Jygsaw marketing director John Edwards admits there has been a lack of focus on certain brands within the S&N portfolio and that the new business will “give the care and attention that the heritage brands need”.
Drink Works business director Graeme Mitchell says it is “quite honest” of a big company to come clean about its need to be efficient and focus on big brands and on becoming the lowest-cost producer. “Every business needs a greenhouse,such as Jygsaw, to grow brandsoutside its core portfolio and possibly develop brands of the future,”he adds.
But, in truth, the heritage brands’ future lies in the hands of new masters Heineken, who will decide how they can be developed in a mature and consolidating brewing industry.