Donard Gaynor's knowledge of the global spirits market, particularly the buying habits of whiskey drinkers, is older than some of the rare malts resting in his private cellar at his home in New Jersey.
Formerly from Sligo, Gaynor has played a key role in the buying and selling of some of the world's best-known spirit brands over the past 20 years, including the sale of Seagram's global business to Diageo and Pernod-Ricard, and the expansion of US bourbon maker Beam into a major international business, including the company's $95 million (€72 million) acquisition of Cooley Distillery last year.
After joining Beam, in 2003, Gaynor led its international division. The company had sales of $1 billion and operating income of $300 million when he joined. When he left, almost a decade later, sales were $2.4 billion and operating income was about $700 million.
The company’s brands include Maker’s Mark Bourbon, Canadian Club Whisky, Courvoisier Cognac, Teacher’s Scotch Whisky and, following the purchase of Cooley, Kilbeggan Irish Whiskey.
Speaking in New York, ahead of a speech at a dinner of the Ireland-US Council business organisation in Dublin tonight, Gaynor displays great enthusiasm for the subject of whiskey and other spirits, even though he retired from Beam more than a year ago to pursue other business interests away from full-time work. He also has an eye on how big the spirits market could grow.
If the Chinese market ever took off like other markets around the world, there wouldn't be enough whiskey or cognac to meet the demand, he says. Drinks makers are struggling to keep up with the demand. The likes of television programmes such as Mad Men, whose main character Don Draper sips Canadian Club in most shows, have made whiskey drinking cool.
He says the whiskey market today breaks down into sales of about 90 million cases of Scotch whisky, 30 million of US whisky, 25 million of Canadian whisky and five million of Irish whiskey.
“If you can look at what Irish whiskey is doing – growing very strongly, like double-digit in the US – it is not out of line to think when Irish whiskey will cross 10 million, 15 million, 20 million cases. That is why you see Pernod expanding the way they are and all sort of characters getting into it,” he said.
The potential profit in whiskey has drawn a host of colourful players into the market. In Northern Ireland, lottery millionaire Peter Lavery is turning part of the former Crumlin Road prison in Belfast into a distillery and has reached a supply agreement with Beam, Gaynor says.
He has also heard everything from distilleries being set up in fishing villages in west Cork to plans for distilleries in Carlow and other areas of the country on sites where old distilleries once operated.
“I get calls all the time asking me what I think [about a certain distillery]? What I say to people is that you better realise that this is stuff you have got to put away. The law is three years. The premium end of it is eight, 10, 12 years of ageing. You are not going to see your money for 15 to 20 years,” he said.
Gaynor points out that John Teeling and the other shareholders in the Cooley Distillery didn't see a return on their money for almost three decades. He worked it out that they made 1 per cent less than the shareholders at Warren Buffett's Berkshire Hathaway, although Cooley paid out no dividends to shareholders over that time. "I am sure that some of them even forgot their shares," said Gaynor. "John stays very close to his shareholders. There were a number of them that couldn't be tracked down. I think a number of them were dead."
The main attraction of Cooley to Beam was that the US company did not have an Irish whiskey. At its heart, Beam is a whisky company, and specifically America's largest bourbon manufacturer, says Gaynor. The company had brought Scotch and Canadian whisky into its brands in 2005 with the acquisition of Allied Domecq brands, but it was missing an Irish whiskey.
Beam had also been distributing Tullamore Dew for C&C and could see whiskey was doing well in Germany and eastern Europe, so it started talks with Cooley in 2008. The US company went through a number of changes over the following three years – a new chief executive, the downturn struck and the firm’s parent underwent changes that eventually led to Beam emerging as a public company, in October 2011.
The day after the first board meeting as a public company, Gaynor finally received approval from the board of the company to start negotiations with Cooley. By December a deal had been negotiated between Beam and Cooley, and by January the Cooley board and shareholders had approved the deal.
Beam liked that Cooley had two distilleries that made malt and grain whiskey, which could be used to make a blended whiskey, and that the Irish company had over the years set aside quite a bit of whiskey, about two million cases in fact – roughly one million of malt and one million of grain.
Cooley also had the capacity to double its production without any capital expenditure and to quadruple production with minimal capital expenditure, says Gaynor. Beam was also drawn to Cooley's two working distilleries, a major plus for any big liquor company looking to crank up production. Scottish spirits maker William Grant & Son has to build a new €35 million distillery in the midlands for Tullamore Dew, which will take several years to come on stream, Gaynor says.
The icing on the cake for Beam was the fact that Cooley had a visitor distillery in Kilbeggan, the oldest working distillery in the State, dating back to 1757. “Heritage is incredibly important,” says Gaynor. Beam learned that from the bourbon and Canadian whisky that it sells.
He expects Beam to “put their arms around Kilbeggan”, and the true test of just how much the company is pushing the whiskey is that Gaynor can see it stocked in his local liquor store in New Jersey.
Gaynor started his career far from New Jersey. He was working as a chartered accountant in Sligo and wanted to broaden his horizons. He had his eye set on a move to the Untied States.
He applied to accountancy firm Pricewaterhouse and met in the Royal Hibernian Hotel in Dublin city centre, which has long since closed down. He met a Scottish guy from the firm's London office who told him there might be work for him in the firm's offices in South America, because Gaynor spoke Spanish. But he was given the clear message that the company did not hire for its offices in the US from the west of Ireland. You worked your way up from other parts of the world.
After the interview, while he was having a sandwich and a coke in the bar, he stuck up a conversation with a Canadian tourist. Two weeks later he received a letter asking him to meet a number of the US partners. The letter was signed by the chairman of the accountancy firm worldwide.
Hand-written under the chairman’s name were the words “the tourist”. Without knowing it, Gaynor had been interviewed for a second time in the bar of the hotel.
“Sometimes you get lucky in life,” he says. “When I became a partner many years later, one of the first letters I got was from the same man. He had kept an eye on me.”
Gaynor has been working in the US for the past 35 years, although he returns home to Ireland regularly. Walking down Park Avenue in New York, He points out with pride the floors of the various skyscrapers lining the street where he worked after moving to the city.
He shocked his bosses at Pricewaterhouse when he gave up a partnership after 15 years in the firm for a job at the drinks company Seagram, which offered him an opportunity to move "outside my comfort zone" as he was drawn away from finance roles to becoming an "operations guy".
He describes the $8 billion sale of Seagram's beverage business – which owned Captain Morgan and Chivas Regal – by Vivendi Universal to Diageo and Pernod-Ricard as the "mistake of the century".
He was on a private jet on his way from London to China when he was told to return immediately. He knew a deal was in the offing and thought it was crazy, but he returned to the US nonetheless.
Gaynor says that deal was the catalyst for what Diageo and Pernod-Ricard are today – Diageo profited from Captain Morgan and Crown Royal, while Pernod milked Chivas Regal and Martel, propelling their emerging markets businesses and strengthening Diageo in North America.
When Paul Walsh stepped down as chief executive of Diageo recently, Gaynor says, he was quoted as saying the Seagram deal was "the trump card of his lifetime".
A great believer in embracing change in life, Gaynor says it is always possible to reinvent yourself in business. After retiring, a noncompete clause meant he had to stay away from the spirits business for a year, but he always intended to come back to play an advisory role and get involved in deals.
Being an M&A guy with a focus on international deals, he also started looking around Ireland and England for companies that could use his expertise as a nonexecutive director. Agribusiness group Glanbia fit the bill as it was at an interesting point after spinning off its dairy processing business, he says. The food group is focusing on the proteins business and didn't have a director in the US yet. It was also looking to grow international with ambitions to expand into emerging markets.
“They impressed me. It is a very interesting board. There are at least 14 farmers on that board because it has its origins as co-ops. There are a few nonexecs as well. The chairman, Liam [Herlihy] does a hell of a job making sure everyone has their say – running it like a proper board, proper governance,” he says.
Gaynor is looking forward to trips with Glanbia to see “cows and cheese” in Idaho this summer and to see “more cows and cheese” at the company’s operations in New Mexico too.
Closer to home, he says the recent wave of emigration as a result of the recession at home is different from the economic period in Ireland at the end of the 1970s when he left for the US.
“Ireland has done a hell of a job getting ahead of the problem. In many respects they are the poster child for what the rest of Europe needs to do. It was a lot of pain,” he says.
He never bought in the property boom at home at a time when he was advised by friends to buy real estate as it was doubling in price. “I told them, ‘That is a bubble, guys – somebody is going to end up holding that.’ I do not buy property to speculate. I only buy property I live in,” he says. “I am not sure that people can’t look back and have a little egg on their face about it.”
As an international man of business, he has met Irish people in Russia, China and Australia and that “singularly they all intend to go back to Ireland”, he says. For Gaynor, though, America is his home and he intends to stay put. It has certainly served him well.
CV: Donald Gaynor
Name: Donard Gaynor
Former senior executive at US spirits and wine company Beam and current nonexecutive director at food group Glanbia
Family: Married to Janet with one son, Sean, and three daughters, Meaghan, Kara and Molly
Home: Scotch Plains, New Jersey and a holiday home in Florida
Hobbies: Swimming, crossword puzzles, collecting wine, reading and travel
Education: Trained as a chartered accountant at Sligo Institute of Technology and is a fellow of the Institute of Chartered Accountants in Ireland
Career: Started his career at Pricewaterhouse. Later worked at Seagram Spirits & Wine where he was as chief financial officer and managed the sale of the business by Vivendi to Diageo and Pernod-Ricard. He was head of Beam’s international interests from 2003 to 2010 and was most recently senior vice-president of corporate development at Beam Global Spirits & Wine before leaving the company at the end of March 2012. Works as an adviser and nonexecutive director
Something you might expect:
Collects wines and spirits, and has a tasting room and cellar at home
Something that might surprise:
Writes poems to celebrate milestones in people's lives