Drinks billionaires – keeping it in the family

Today Ian Buxton takes a closer look at some of the illustrious families of the drinks industry such as the Haigs, Bacardis and Ricards, and reveals which great brands are still in family hands.

Do you ever wonder who might raise a glass to you when you, to coin a phrase, raise a glass yourself? It’s an intriguing question. After all, drinks companies are fond of maintaining the façade of family owners. Think Bulleit Bourbon – it’s actually a Diageo brand (which arguably was mainly developed under Seagram’s) but a very high profile is maintained by Tom Bulleit and, until recently, his daughter Hollis. They’re speaking via their lawyers now. The story behind their acrimonious break-up is a rather unfortunate one and perhaps for another day, but sadly illustrative of the potential problems lurking in any family.

But back to Diageo. In its Scotch portfolio we’ll also find the Johnnie Walker, Buchanan’s and Haig brands. Now, once upon a time, there were real-life actual people answering to Walker, Buchanan and Haig who owned the distilleries that made these products – but no longer.

Today Diageo is a publicly-quoted company. That means you can buy a share in the business and be a part-owner. Actually, if you have any kind of a pension plan (whether through your employer or direct) you probably already own a share in some shares. Diageo is one of the UK’s largest and most successful businesses, and most well-balanced pension portfolios will have a holding in the company.  To declare an interest, I certainly do (I checked), and I’m very happy with its recent performance.

Many large industries have evolved in this way. But the drinks trade is something of a curiosity as a number of important brands remain in the hands of the descendants of the founding family.  Though some, like the Walkers, Buchanans and Haigs have long since cashed in, other companies remain determinedly independent and make great play of the long-term planning required in the spirits business. This, they suggest, means the industry is well suited to family ownership rather than being driven by the short-term demands of the financial community.

Some of the smaller examples are well known. Glenfarclas, for example, is happy to stress the fact that the distillery has remained in the Grant family since 1865 with chairman John Grant and son George directly and actively involved in every aspect. Grant Snr even lives on site, and you can’t get more hands-on than that.

Glenfiddich too is a family concern so, along with the various brands they own – think Balvenie, Hendrick’s Gin, Tullamore D.E.W. and Sailor Jerry rum among others – the forty-odd descendants of the founder William Grant thank you for every bottle you buy.  Oddly, though, while the public face of the company is largely represented by the Gordon branch (Peter Gordon and Grant Gordon in recent years) the major shareholder is believed to be the intensely private Benedicta Chamberlain. If her reputed 29.9% of the business is anywhere close to accurate, she’s comfortably in the billionaire class. Think of that next time you pour a dram of the world’s best-selling single malt.

As you’d expect, the family take the whole business very seriously. So much so in fact that Peter Gordon has even published a book on the subject. Family Spirit: Stories and Insights From Leading Family-Owned Enterprises looks at the strategies of eleven other family-owned businesses, though mainly not in the drinks industry. One of the companies he might have studied is Bacardi.  Yes, every drop of Dewar’s or Aberfeldy single malt or William Lawson’s (a million case-plus blended Scotch you’ve probably never heard of) adds a few coppers to the eponymous descendants of Don Facundo Bacardi.  A Bacardi and Coke puts a smile on their face, as does your call for Grey Goose, Martini, St-Germain or Patrón tequila.

Now the Bacardi family is very disciplined, borrowing if necessary to fund its acquisitions (over US$2 billion in 2004 for Grey Goose, then reputedly the largest purchase price in spirits business history for a single brand, and now a cool $5.1 billion for Patrón), but the equity isn’t sold. Much the same story could be told about Suntory Holdings, still controlled by the Saji and Torii families.

Elsewhere, public listing to raise capital hasn’t entirely removed family control as the tight grip of the founding dynasties at Davide Campari SpA, Brown-Forman and Rémy Cointreau SA clearly demonstrates. The Ricard family still retain 16% of the giant Pernod Ricard operation. It’s no coincidence that one Alexandre Ricard is both chairman and CEO, even if activist US investors Elliott Management are pushing to shake things up.

So, the reality and scale of family control is something to ponder as you part with your hard-earned cash. As you raise their brands to your lips, the question can’t be avoided: ‘what are the drinks billionaires sipping tonight?’