McGuinness sees success ripen slowly

Brendan McGuinness of Bulmers used to head a brand synonymous with teenagers in parks, but persistence and thought have borne lush fruit, he tells Una McCaffrey.

It is a warm summer's day and you have no work to do. You decide to head down to the park with a gang of mates for a few bevvies and, while you're still sober, a bit of a kickabout. A few hours pass, numerous plastic two-litre bottles of cider have been consumed, and you decide to take a little nap in the sunshine. Several more hours later you wake up, dangerously red-faced, sweaty, dishevelled, a touch hung-over.

The one thing that can be certain in this or comparable "bush drinking" scenarios is that the alcohol being consumed will not be branded with the Bulmers name. This will be the case because of the actions of one man and the company he heads - Brendan McGuinness and Bulmers. Because of McGuinness and his pet brand, cider is now seen as a drink not for getting hammered in the park or in a darkened field, but for quaffing sensibly in a salubrious public house, perhaps over an elegant sprinkling of ice.

Against all the odds Bulmers is not cheap booze, positioning itself instead among premium beers and long-neck drinks. It has been a neat trick, and one that McGuinness has been refining for the past three decades.

A native of Belfast, McGuinness was posted to Clonmel in Co Tipperary to run C&C's small alcohol business. At that stage, the company was jointly owned by Guinness (now Diageo) and Allied Domecq, a marriage of giants that left Bulmers looking very small indeed.

The biggest product coming out of Clonmel when McGuinness took over at the age of 32 was Babycham, a pear-based drink pitched squarely at the Republic's emerging band of female drinkers. Babycham was followed by the launch of what McGuinness calls "a more mature version" in the form of Stag.

Ritz, another drink made from fermented pears, eventually overtook Babycham, and so the story goes on.

The common thread with all of these products of course is that they were more brands than drinks. Drinkers did not ask their barmen for "a perry", but instead ordered a Ritz or a Babycham. McGuinness was presiding over a series of marketing launches and he was learning something new from each one.

All the while, as acquisitions led to new product developments in spirits and wines, McGuinness knew that cider was the sleeping giant of the operation. "When I started, 70 per cent of our tiny profits came from Babycham," he says, acknowledging that cider had serious image problems.

"It was blamed for every form of juvenile misdemeanour," says McGuinness, listing its "problems". It was high-strength, it was cheap and it was seen as a cause of trouble.

So how could Bulmers get away from this position and manoeuvre its beloved cider on to another level? By being courageous, according to McGuinness.

He says a decision to stop producing Bulmers in "flagon" bottles was "one of the bravest decisions we made". The natural extension of this move was to start selling Bulmers only in beer-type sizes and to start convincing the market that cider could be branded in just the same way as beers. It was a simple idea, but one that had thus far not been tested.

"It didn't have its origin in a huge raft of research," says McGuinness. "If you look for the obvious, you have a much bigger chance of success."

The move, which came in the late 1980s, coincided with the emergence of a new female, professional class in the Republic. These women, says McGuinness, were starting to eschew "female" brands, thus making products such as Ritz the "victim of its own success".

"We didn't see it coming but we acted to deal with it," he says, recalling how the wider consumer market was at that time becoming engrossed in brands, from Levis to Nike. Why should alcohol be any different?

Bulmers's first attempt to answer this question lasted two years and ended in failure.

"We missed the most obvious thing. We tried to position ourselves as a lager, with very limited success. We made the mistake of trying to be something we weren't," says McGuinness.

Luckily, the cash backing that came from continuing sales of Ritz and Stag allowed Bulmers another crack of the whip.

This involved emphasising the "positives" in cider, such as its natural base, its roots in tradition and its ability to refresh in warm weather. In addition, the product's strength was brought down from between 6 and 8 per cent to 4.5 per cent, leaving it in line with many beers. Bars were encouraged to sell the product on draft and, crucially, its price was moved up to that of a "premium lager".

It was indeed a neat trick, and one that has led to Bulmers increasing its share of the Irish beer and cider market from less than 1 per cent to 10 per cent today.

McGuinness says he started to really believe that the manoeuvre had worked about 10 years ago.

"Internally we began to believe it could be a power brand," he says. The problem with this, of course, was that the success of Bulmers was starting to reach its limits, principally because C&C's owner, Allied Domecq (which had bought out Guinness), was starting to view the product as a challenge to them as well as to the market.

"They were adamant that we were not going to go outside the Republic and I had to live with that," says McGuinness.

An exit was to come, however, with a leveraged buyout of C&C in 1999, backed by BC Partners. He was one of 36 senior managers who took part in the deal (and subsequently earned a multi-million paper windfall when C&C floated), which he describes now as a "liberating influence".

At the same time as injecting new life into the company, however, the buyout saddled it with a mound of debt. This called for new growth strategies, which in the case of Bulmers led McGuinness to examine the UK market.

He and his team started to develop the Bulmers product in the North, branding it Magners because the Bulmers brand already exists there as a different product (now owned by Scottish & Newcastle). The next small step came in Irish centres in the US.

Problems were emerging on the home front, however, with the emergence of "alcopops" taking market share away from Bulmers in the Republic. There was also the imposition of an 87 per cent excise hike that left Bulmers seriously winded and required a heavy marketing spend to encourage drinkers to maintain their habits.

"All the cider players stopped investing in the category," says McGuinness. He was not deflected, however, deciding that an international roll-out should develop.

Another test came in Glasgow in 2003 and the brand was extended all over Scotland in 2004. It bore fruit: for the year to February 2005, C&C reported a 61 per cent increase in sales volumes of Magners.

"We created a market from nowhere," says McGuinness. The natural next step, he adds, was London.

C&C outlined Bulmers's plans to roll Magners out in London when it presented annual results in May. The launch was well under way at that stage, with Magners already a prominent brand in poster advertisements in the UK capital. Research conducted by Merrion Stockbrokers in June found that Magners was being sold in more London pubs than might have been expected at that stage. The broker was prompted to raise its 2006 sales forecasts for the brand by 60 per cent to €9.8 million and said C&C's earnings per share growth could now reach double digits by 2007.

It was a roaring endorsement of the Magners strategy.

McGuinness himself is coy on how things are going, but he proclaims himself "very satisfied" with progress, acknowledging that the warm summer weather has helped matters.

There is evidence of success coming from other quarters too, with competitor Scottish & Newcastle announcing earlier this month that it was launching a "premium" cider in the same market space as Magners. The flattery speaks volumes.

McGuinness is reluctant to cling on to the €1.5 billion London market as Bulmers's only great hope, however, saying the brand (a centrepiece of C&C) has many more strings to its bow.

It has, for example, launched a low-carb version of Bulmers to satisfy modern dietary requirements. The market in the North also continues to develop, as does the Magners presence in Irish pubs all over the world.

Revenues are making some progress in the Republic too, with C&C posting a 9.8 per cent constant currency increase (to €194 million) for its cider brands in the year to the end of February.

Without the currency adjustment, however, revenues were weaker, probably because of the effects of the smoking ban. London becomes all the more crucial against this backdrop.

All of this strategic posturing is of course just fodder for the energetic McGuinness who has, at this stage, seen it all before. So what keeps him stimulated in Clonmel after all this time?

"I have not been in the same job for the past 29 years," he says simply, referring to the changes that have kept him on the ball.

Factfile

Name: Brendan McGuinness

Age: Just turned 61

Position: Managing director, Bulmers

Education: BSc in Economics from Queen's University, Belfast

Career: Joined Gallaher (tobacco company) as graduate trainee in the mid-1960s. Ended up as a senior brand manager in the company's London marketing department. Returned to Ireland in 1971 to join C&C as marketing manager for soft drinks. Three years later he was chief executive of marketing. In 1976, aged 32, he became managing director of C&C's small alcohol business in Clonmel, Co Tipperary. He has been there ever since.

Marital status: Married to Bernadette, with three children.

Why he is in the news: He is spearheading Bulmers's expansion into London's €1.5 billion cider market.