Guinness is good for you

Modern Brewery Age, July 19, 1999

Good for a wholesaler's bottom line, that is. We talk with Tim Kelly, new president of the Guinness-Bass Import Co.

The Guinness Import Company is now the Guinness-Bass Import Company, a name change that reflects the importance of Bass Ale as one of the twin pillars that have driven the company's growth over the years. Tim Kelly, a Briton of Irish descent, arrived in April of this year to serve as president of the newly renamed company. Kelly has worked for Guinness since 1995, and most recently served as marketing director for Guinness Ireland. Prior to his post at Guinness, Kelly worked for the Coca-Cola Company in London as head of marketing and head of sales. "My experience is in sales and marketing in blue chip global branded business," he says. "Selling and marketing global brands for big companies is what I do." In the interview that follows, we talk with Mr. Kelly about the challenges facing the Guinness-Bass Import Co. as it rides the waves of the turbulent but profitable imported beer segment.

What was your charter when you arrived here?

This business is about growth. If we examine industry dynamics and consumer dynamics there is a huge amount of opportunity for us to grow here. It is my job to realize that potential. To take advantage of the external dynamics and bring a brand to the market, Guinness, that will grow at 20% a year. My job, if you like, is to get the company, in terms of skills, credibility, morale, and people to realize our investment and produce that return.

You speak of external dynamics....

External dynamics meaning that the consumer is trading up to better beer. We're moving up from the domestics to something that is more challenging in taste with lots of history and heritage. American consumers have got a lot of money in their pockets and they are willing to pay for something that is high quality, with excellent heritage, but also represents good value for the money.

And do you see this as a broad-based trend?

Yes. I see it in cars, food, restaurants, cinema, everywhere. People are willing to pay a little bit more for an experience. And you see that in shopping and retail - you see it in the way that people sell. Not just the way that people buy.

So this better beer segment is expanding. How high will it go?

It's hard to know exactly where we'll get to. There is a lot of experience in other markets. Not just the beverage industry, but in other markets around the world. based on that experience, the premium segment can command up to 20% of the total. There are some people who think that this better beer segment will get to 20%.

Are you among them?

It's hard to say. I think that it would be possible. It is certainly going to be a lot more than 10%, but probably more like 15-16%. Twenty percent is a lot.

In other beverage arenas, wine and spirits have gotten up there.

Certainly, that's true. If you take ice cream...you take confectionary...you take soft drinks...lots of businesses. That's not just the consumers driving it, but clearly there is a lot more margin there. So 15-20% is not out of line as a long-term prediction.

We've seen the import market in this country go in cycles driven up by a few strong brands and then we usually see a lull. Do you see that occurring again or has the game changed?

It's hard to predict that. I think generally the cycles are a good way of looking at the business and looking at the world in terms of economies. But in terms of brands, I would say that brand Guinness is sufficiently strong and sufficient in longevity not to be influenced by cycles. I think we would expect 20% growth each year for the next five years almost irrespective of other factors.

What numbers did you chalk up for Guinness in '98?

Well we track a fiscal year that is July through July, but 20% is pretty close. Draught Guinness is growing over 20%; canned Guinness is near 100%, and bottle Guinness, which is the slower growth is less than 10%.

And Americans are embracing Stout?

Absolutely. I was at the Boston Fleadh with Elvis Costello, and Hootie & the Blowfish. There were tens of thousands of people that had come to that event looking to drink Guinness. I see that, not just in the Northeast but the Fleadh in San Francisco had 32,000 people - it was packed. And that's one of the highest taste beer markets in the U.S., or the world.

So you define "better" beer as "taste" beer.

We break it out as taste and imports.

So you break the Canadians and Mexican brands out?

No we don't actually. We define two segments internally. One is taste beer and one is import beer. But we tend to add them up and just call them "taste", which would include imports.

You take 90% of the market-A-B, Miller, Coors, and it leaves a segment, we'll call it 10%, that includes Corona, Heineken, us, the micros, all others. We compete in that segment, what we view as "taste" beer.

Certainly the micros in the "taste" category had employed a lot of growth until quite recently. Why do you think they hit the wall?

Failure to build brands is one very good reason. Consumers want to pay more for a brand that means something to them, that has a genuine history and heritage. I think they also want to pay more for excellent quality. And I think that the micros, in general, don't have the history and heritage, don't have the quality and didn't do the brand building. Now there are clear exceptions to that. Some very good exceptions to that. But in general that category was built with a lack of attention to those three things. The proliferation of SKU's is the legacy of that market. I mean there is really a bizarre range of SKU's out there..