In March last year, Suntory Global Spirits and Edrington announced they would end their two-decade distribution agreement in the UK, with the Japanese group setting up its own commercial business for the market.
Suntory’s new commercial UK arm, Suntory Global Spirits UK, was launched earlier this month. It is led by Nick Temperley, managing director for UK and Ireland, who has also recently taken on managing the group’s third-party distributor markets in eastern Europe and Italy.
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Just Drinks sat down with Temperley to discuss the growth opportunities for Suntory’s spirits in the UK and how the business looks to target a market of drinkers that are trading up as much as they are trading down.
Fiona Holland (FH): How do you see the wider spirits market in the UK right now? Would you agree it’s relatively flat in terms of growth?
Nick Temperley (NT): I think that’s broadly right… It’s probably a single-digit decline at the moment when you look at the full year last year but, within that, there are some pockets of growth. I guess that’s our challenge and our opportunity setting up our new businesses – that we outperform the category and we look for those areas of growth that do exist in the UK market.
FH: Where are those pockets of growth?
NT: First of all, we’ve got American whiskey, which has been in small growth. I think when people have a little bit less disposable income, quite often they look for well-known, trusted brands that are available. We’ve got a great Bourbon called Jim Beam, which plays exactly to that.
Then I think at the other end of the scale, you’ve also got people that want to pay for quality as well. That’s always been the case in our industry in the UK and our Japanese portfolio really plays to that trend. I’ve been in this industry for many years and, if you’ve got good quality spirits, people are willing to pay for that. We’re really proud of our liquids, of Hibiki, of Yamazaki, Roku gin and we want to bring those products to more consumers, and we want to bring some innovation in those categories as well.
Hibiki Suntory whisky. Credit: Suntory Global Spirits
FH: Why is it a good time to set up Suntory Global Spirits’ UK arm?
NT: First, I think when you set up a business from scratch, when you decide that you want to put down roots in a company and have your own distribution company, you do it for the long term. You don’t do it for one year, you don’t do it for two years. It’s a big investment that Suntory has made in the UK and that’s not a short-term investment.
Why the UK? I mean, first of all, it’s a very influential market globally but it’s also a market with big scale and it’s a market where we have a significant footprint in terms of distillation. We have our Scotch whisky distilleries up in Scotland, we’ve got a wonderful craft gin business that we own in Chiswick in west London called Sipsmith and, so, for those reasons it’s really important for Suntory to have a strong presence in the UK.
Suntory has historically been very strong in the US, very strong in Japan and we need to be a company that’s becoming more global. Last year, we opened up our own distribution company in France and this year we’re doing it in the UK.
FH: The implications of potential tariffs from the US is a hot topic. Suntory’s CEO also recently reportedly said he expected consumer boycotts on US products if they come into force. What do you think the impact might be?
NT: American whiskey is a robust category in the UK and is continuing to outperform the overall category. Jim Beam and Maker’s Mark are global priorities for us and we still see headroom to build share for those brands and grow the category overall in the UK. Having said that, the escalating rhetoric on tariffs is unhelpful to all industries, including ours. We’re glad that tariffs have not been imposed on our products and we very much hope it stays that way.
We also haven’t yet seen a change in consumer behaviour toward American products but we’ll be staying very close to our customers as things evolve. In the meantime, we’re making sure that our supply chain is flexible and we’re investing in building our brands across all our priority categories (namely Scotch, Japanese and gin in here in the UK) so our full portfolio is in the strongest possible position in case anything changes.
FH: What percentage of revenues does the UK market make up in the overall business?
NT: We’re a very big company and I would love to tell you that we’re a big percentage of it but we’re not. We’re a very small percentage of a very large global business.
Now, when you look at the numbers, that’s what it will tell you. When you look at the strategy, we over-index in the UK… because our market is big, we over-index because the influence of the UK is global. London, in particular, as an influential city. There’s a lot of the most influential people, bartenders, retailers, you know, big retailers and luxury retailers as well. For our global board, the size of the Suntory UK market might be small when you compare it to Japan, America but actually the influence really punches above its weight.
FH: What is this new commercial business looking to achieve in the next couple of years?
NT: Of course, I have my targets and goals. We all do. I lead a commercial team, so I’m not immune to annual targets, annual budgets. We wrote a business case for the establishment of this business and we’re sticking to it but, more generally, what I would love for this business to be known for is to be one of the best companies out there in terms of brand-building.
There’s a wonderful Japanese word called gemba, and sort of loosely translated it means, ‘where the action is’, ‘where things happen’. When you run a commercial team, spending time in the gemba or going to the gemba means you’re going to a supermarket, you’re going to a bar, a restaurant, a hotel, and you’re finding out what’s actually happening when people are spending money on our brands, whether they’re buying it a bottle off the shelf or whether they’re buying a cocktail in a bar. I want our team to be the team that is out there in the gemba, doing that all the time, and bringing the insights back to inform our brand-building so that we’re agile, we’re constantly learning from what’s happening out there.
Our challenge and opportunity is to make Japanese whisky much more well known.
We obviously want to be performing well. We want our brands to be growing the categories which they’re in. Helping our customers grow the category of American whiskey, grow Japanese spirits. People in the industry have all heard of Suntory and Japanese spirits, Hibiki, Yamazaki, but it’s still a very niche category. There’s over seven million cases of whisk(e)y being sold, and there’s less than 100,000 cases of Japanese whisky. Our challenge and our opportunity is to make that much more well known, so that people feel confident about which whiskies to buy, which Japanese whiskies are good, and that they start to explore it. That’s both a pocket of opportunity and something that we want to be known for.
The Yamazaki 12 single-malt whisky. Credit: Suntory Global Spirits
FH: What are you looking to achieve in terms of sales targets for the year ahead?
NT: I don’t talk about targets externally, but… one of the ambitions that I told you about is that I want to perform better than the competition and I want to perform better than the categories where we play. My targets would be to win share, to grow the categories for our customers. In particular those where we’re strong: American whiskey, Scotch whisky, premium gin, Japanese spirits. Those are the areas where I’d love to grow the categories and I’d love to be the company that wins our share. Those would be my short, medium and long-term targets.
FH: Is demand growing for Japanese whisky in the UK?
NT: Japanese whisky has been around for a while, but… we’ve never had our own people selling our own brands, not one. Second point is, it’s always been heavily allocated. There’s never been enough Japanese whisky worldwide to meet the demand. Part of Suntory’s new desire to grow its footprint globally is that there’s going to have to be a little bit more Japanese whisky to support the markets around the world. Those two things make it different. I think that’s why it’s different now versus five, ten, 20 years ago.
People are prepared to pay more for brands that have quality and craftmanship.
I also think there is a trend in in the UK and consumers, towards craft. Towards brands with provenance, brands that can trace back their roots, that have stories to tell, that have real founders who were real people with a story who overcame things and created something amazing. In our portfolio, that type of storytelling we call Monogatari. It’s a Japanese word which talks about storytelling and how you bring your brands to life… we’ll be trying as best we can to get those stories out, because people value craft, real, authentic brands and heritage, and people will and are prepared to pay a little bit more for those brands that have the quality and have the craftsmanship.
I don’t think we can take all the credit for this but I think, [as a] brand, Japan is doing very well at the moment. Partly, Japan is seen as a great place to visit… There’s a growing interest in Japanese food, both at the high end but also affordable levels as well.
As a Japanese company operating in the UK with a great quality whiskies, gins, and vodkas, we have the opportunity right now to seize on them.
FH: Are you looking to boost the presence of these brands in specific channels?
NT: I think it depends on the brand. We have some brands that are very strong in the on-trade like Maker’s Mark Bourbon, for example. A really strong brand that has great equity with bartenders, it fits great in cocktails and bars. We’ll continue to work with that community on Maker’s Mark. Then you have other brands more like Bowmore or Laphroaig Scotch whisky, which are much more skewed to the off-trade and, having the right products at the right prices, with the right shelf activity around it is where we would invest.
We also want to place our brands in culture and I’m a big believer that brands are built through experiences, and brands are built in culture. I can’t announce today but we’ve got some exciting things coming up in the second half of this year, where we’ll be placing our brands in kind of culturally relevant moments in the UK.
FH: Is premiumisation still driving consumer behaviour in the UK?
NT: There’s definitely a portion of the UK population that are continuing to pay for quality. They want good spirits, they want good cocktails, and they want good drinks when they do go out. Even if you’re sitting at home in more of a relax and unwind moment with a whisk(e)y, people want a really good one. That’s been constant and that still is happening.
At the flip side, there are people that are trading down because times are tougher. Not just in spirits but across the piece. There’s a lot of products being sold on promotion than there was, so people are looking for good, solid, well-known brands of good value.
Our portfolio has brands that sit in both of those and our challenge and opportunity is to make sure that, for both of those trends, we are placing our brands in front of the consumers when they make their choices.
