Last year was a busy period for Stock Spirits Group. While inflation and cost pressures defined 2023 for many in the spirits industry, it didn’t dampen the Warsaw-headquartered company’s expansion.
Stock Spirits made four acquisitions in the latter half of the year, snapping up the French drinks distributor Dugas, the Polish vodka brand Polmos Bielsko-Biala, German spirits group Borco and Scotch whisky brand Clan Campbell.
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The deals for Borco and Clan Campbell enabled the group to sell in Germany and France for the first time.
With a portfolio dominated by vodka, Stock Spirits’ purchases of Sierra Tequila owner Borco and of and Clan Campbell also allowed the company to enter new spirits categories. The group’s entrance into Tequila specifically comes at a time when the category has witnessed consumer downtrading, albeit outside of its target market in the US.
Just Drinks spoke to Stock Spirits’ CEO, Jean-Christophe Coutures, to find out more about the group’s future growth plans and how it expects consumer confidence to pan out in the year ahead.
Just Drinks: How did the company perform in 2023?
Jean-Christophe Coutures: 2023 was a very good year. As you’ll know, Stock Spirits was taken over by CVC back in November 2021. At the time the company was making around €350m ($382.6m) [in annual] turnover and, at the end of [fiscal] 2023, we will be making close to €500m. We’ve been growing year on year in terms of top line by around 18%.
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By GlobalDataPoland and Czechia have been our two engines behind our growth. The other thing which has been doing very well are all the flavour categories in vodka which have been growing very dynamically overall.
Those numbers [don’t include] all the acquisitions we made at the end of 2023. If I was to recalculate the portfolio turnover including those acquisitions we did in France and Germany, all turnover for 2023-2024 [would be] around €850m.
Just Drinks: What did sales volumes look like last year and how do you expect those to pan out this year?
Coutures: We reported some flat volumes between 2022 and 2023. It went slightly down in Poland, and slightly up in Czechia and in Italy.
The total spirits market in Poland is negative by around 5% to 6%, as a result of the uncertainties which exist today in central Europe because of the war in Ukraine and inflation which was quite high. As a result, consumption is down in spirits. The vodka category is suffering more than the brown spirits categories. The clear vodka categories [were] down by around 7% to 8% in Poland.
We’ve been able to report flat volume overall across our businesses and it’s because our business model is to rely on local brands in mainstream segments. Today, it is true that consumers are looking for good value for many brands and trustworthy brands which [they] can afford at the right price. That is exactly where we are with our brands. As a consequence, we’ve been able to gain share in central Europe despite negative market headwinds.
Just Drinks: What’s your pricing strategy and how easy is it to price at a time when consumers are still quite tight with money?
Coutures: I think we’ll be very cautious on price increases [in 2024]. There are two elements which could explain [why] we put price increases in central Europe. There have been excise increases in Poland… Czechia and Slovakia, and our policy is whenever there are excise increases we pass the increase to consumers… We expect next year our raw material [prices] to be quite flat versus a year ago. We don’t anticipate a strong increase [on] our raw materials.
Another important element is that we just completed the construction of a new distillery in Poland that will start operating in May 2024. That will be able to produce and distil 32 million litres of pure alcohol from [opening]. As we will be internalising that process, we think that we’ll be able to maintain some raw material cost evolution that should be flat. Next year, [in] central Europe [we should see] our cost to consumer increasing only by the excise and the rest for cost we should be flat. As a consequence, we don’t expect to pass any increase to consumers.
At the same time, we will be introducing new products in the low-alcohol segment which we feel will provide consumers different types of products at different price points. On the French market… we’ll be taking over the [Clan Campbell] brand this year, [and] we expect to keep the price flat versus a year ago.
Just Drinks: Is the new distillery focused on white spirits?
Coutures: Yes… We have to date two distilleries, one in Germany which is producing 90 million litres of pure alcohol [at maximum capacity in 2023], and we have another one in Lublin in Poland, close to the Ukrainian border, which is producing 32m litres of alcohol. We are producing close to 50m litres of pure alcohol, and this is largely covering most of our vodka business, clear and flavoured vodkas, across Poland and Czechia… we felt that it was important in terms of quality, in terms of efficiencies, but as well in terms of our ability to innovate, to be in full control of most of our distillation. This is why we decided two years ago to start the construction of this distillery, to be in full control of our distillation capacity.
Just Drinks: How do you plan to increase sales volumes in 2024?
Coutures: I think consumer confidence in Czechia and [more so] in Poland is stronger. It’s going back up and we have strong plans. We made some significant acquisitions last year, we acquired Sierra Tequila [and] Clan Campbell whisky, so I think next year is going to be the year where we are going to grow share in those new categories.
We are going to grow in Tequila [and] in Scotch whisky and we are going to bring a very strong innovation [in] our line-up for next year, very much under the no-low trend, bringing consumers lower-alcohol categories around the flavoured vodka segment. All that is planned both in Czechia and Poland, and we think that the combination of stronger consumer confidence which will improve volume trends and all those innovations and our ability to get into new categories will help us to grow volume share next year.
We took over Clan Campbell from Pernod Ricard in France [from] 1 March, and we are going to invest significantly behind the brands to bring the consumer back… We expect therefore to see the brand gaining market share, particularly in the French market, and as well we will be introducing Clan Campbell in Germany in the middle of this year, 2024.
Just Drinks: How do you expect consumer confidence to shift across your markets this year?
Coutures: I think if you look at the long-term trend in spirits, it’s fair to say that there has been a trend of premiumisation. The spirits category [over] a very long period, which is [at least] ten to 20 years, has been premiumising, there is no doubt about that.
It doesn’t mean that when you drink mainstream products that you’re not premiumising
I think today we are facing a situation of higher inflation, lower consumer confidence, macroeconomic uncertainties, and I feel… there is probably a willingness from consumers to go back to trustworthy brands… It doesn’t mean that when you drink mainstream products that you’re not premiumising. You can aspire to drink better and better-quality products, but I do believe that the local brands sitting in mainstream segments in the coming years will see [much] stronger dynamism.
Given the consumer confidence index and the high inflation we see across Europe, I do think that mainstream products will be the key category… I’m not talking about North America or Asia, which obviously follow very different dynamics.
Just Drinks: What are Stock Spirits’ best opportunities for growth in 2024?
Coutures: I think 2024 will be the year of recovery for the spirits category. After two years of decline, the spirits category in Europe will reach stability in volume and growth in value. I think that the mainstream, low-premium category will be the category that will benefit the most from this recovery. And this is basically where the heart of our portfolio is positioned. As a consequence, we’ve invested behind those brands to benefit from this recovery in 2024.
Number two, we continue bringing innovation in the low-and-no category in 2024, particularly in the flavoured spirits category. This will be a very strong growth avenue for us.
Last but not least, we’ll be investing significantly behind Scotch whisky from Clan Campbell and Sierra in new markets like central Europe to basically increase the penetration of those products. In those geographies, this will be the third avenue of growth in 2024.
Just Drinks: How do you plan to integrate and grow those brands you’ve just purchased?
Coutures: [We want] Clan Campbell to sit in mainstream Scotch whisky segments and offer consumers very good quality Scotch whisky at an affordable price and see what [will stick]. We will be very much playing on the Scottish roots of the brand which is linked to Duke of Argyll and the Argyll family, and we will be enriching the proposition by bringing flavoured whisky to life as part of our offering.
The brand is already quite strong in France, it’s one of the leading spirit brands… so the idea is to reignite the growth of the brand in France by investing behind [it].
The Tequila category in Europe, we think will be one of the next booming categories in the years to come
With Sierra, a leg of the strategy [is] to introduce the brand in new geographies, in particular in central Europe where we have a very strong route to market... The Tequila category has been extremely dynamic. It’s been the fastest-growing spirit category over the last five years. A lot of that growth came from North America and the US market in particular thanks to the 100% agave product.
At the same time in Europe… the Tequila category has been growing but from a slow base… The Tequila category in Europe, we think… will be one of the next booming categories in the years to come, we really believe in the growth of the [segment] in the coming five to ten years, and we want Sierra to play a key role as being a gate opener for that category to new consumers.
You have two types of products. The 100% agave is one thing which has been fuelling a lot of the growth in the US, and then you have the tequila mixto, which is not 100% agave but it is still made out of agave, and… Sierra is playing to that. This is a way to bring consumers into that category at an affordable price.
Just Drinks: Do you think there’s enough consumer demand for Tequila in mainstream spirits?
Coutures: This is my belief. If I had to bet about how I see the spirits category in Europe in 10 years, I think the Tequila category will have been the fastest-growing category in spirits… I do strongly believe that Tequila is the next gin boom category across Europe, and we play a key role in that.
Just Drinks: Do you expect M&A to play a role in your business strategy for this year like it did last year?
Coutures: We made very strong acquisitions last year. We did four acquisitions in two months which basically changed the landscape for Stock. It was a game-changing innovation for us, so I think it’s very important now that we do integrate those new brands within our portfolio. Those new brands, which are Sierra and Clan Campbell in particular, it’s about growing those brands in central Europe and at the same time it’s about taking some of the very important brands we have [there] and it’s about growing those brands into western Europe in particular, in France, in Italy or in Germany.
The year 2024 is very much… about digesting those acquisitions, executing the integration plan and then M&A we’ll probably be looking at that… not before 2025.
Just Drinks: Do you plan to enter any new markets in the future?
Coutures: Currently, we are operating in ten markets… The two very large markets in which we are not today are Spain and the UK. The UK is a difficult market. It’s a market which is currently facing strong headwinds with very strong competitors. So currently, Sierra is quite a strong brand in the UK [and] we are using a third party to distribute that brand. In Spain, Clan Campbell is currently quite a strong brand. We have great ambition in Sierra, but we found a good sub-party in Spain, so for the time being there is no intent to establish our own route to market both in the UK and Spain.
In most other key geographies, we have our own affiliates [these include Croatia, Bosnia, Slovakia, Czechia, Poland, Italy, Germany and Belgium].
Just Drinks: How close is the business to achieving its sustainability targets?
Coutures: Our strategy is not to generate carbon emissions and to buy back carbon credits. [We want] to be a player that will be generating biogas that will be used for our distillation process in our distilleries in Germany and in Poland. As I speak, we are currently partnering with [a university in Lublin] and we’ll be starting to build in the months to come [a] biogas plant in Poland that will be using a byproduct coming from the distillation and producing biogas that will be used in our distillation process. We believe it will take us six months to obtain all the authorisation and then around 18 months to two years to complete the construction of the site. By that time, we want to be fully carbon neutral, by producing the biogas that will come as an input in our distillation process.
When it comes [to] the rest, I think we’ll be using electric car fleets across our business, and we’ll make sure that at level one and two initially, we are really looking at reaching this carbon neutrality by 2027.
Just Drinks: How much are you investing in the plant?
Coutures: It will be around the €50m to €60m mark.
Just Drinks: Stock Spirits has been owned by the private-equity group CVC for nearly three years now. Do you and they plan to search for a new buyer anytime soon?
Coutures: We know the time horizon during which they are with us is five to seven years and currently we are focusing on continuity, developing the business as a leading business in Europe, fully carbon neutral by 2027.
