Just for kicks
Entrepreneur Steven Perez has turned his company, Global Brands, into a multi-million pound business after the launch of Vodka Kick in 1999. Robyn Lewis uncovers the secrets of his success
A warning before we start for all the old-school wine snobs and doom-mongers out there. This monthâ€™s Big Interview concerns a man for whom the world of alcopops and shooters has meant serious success and he certainly isnâ€™t going to make any apologies for it. So, for any of our readers who think drinking RTDs and downing some shots of an evening spells the end of civilisation as we know it, I suggest you go off and play the harp or do some needlepoint until I finish
here, because you arenâ€™t going to like what Steven J Garcia Perez, founder of Global Brands Ltd, is going to say.
A true entrepreneur, Perez began Global Brands, a Chesterfield-based company, from what might be described as less than nothing in 1999. Perez, who grew up in the area and has a true northernerâ€™s practical approach to business, owned a company called Global Beers, which imported premium beers from around the world. It did well until around 1993 when things got so bad that Perez had to face every start-upâ€™s worst nightmare and the company went into receivership.
â€œThe problem with this industry,â€ he says of this time in his life, â€œis that we are very much affected by outside influences such as government legislation, customs and excise, taxation and all that sort of thing. So, when in 1993 the government brought in cross-border shopping and prices dropped and the big breweries began importing directly, our business was naturally very badly hit by that.
It made a big difference to what we were trying to do and we took on some bad debts. The combination of those factors meant that the business went under and I was declared bankrupt at that time.â€
Like all opportunists, however, Perez was down but never quite out. He disappeared off the business map for a while, living hand-to-mouth, literally, rearing animals and growing his own vegetables. It was an experience that clearly marked the adventurer and, as he explains, â€œIt was very difficult trying to start another business from those circumstances. You know the banks donâ€™t trust you and it is difficult to get credit from your suppliers.â€ Nonetheless Perez is clearly not one to miss an opportunity when he sees one and a few years later his background managing pubs and bars provided him with the expertise to spot a gap in the then burgeoning RTD category.
â€œAt that time there was only Bacardi Breezer on the market and I recognised the fact that a lot of people donâ€™t like the taste of white rum. They prefer vodka, seeing it as cleaner and with a less distinctive and strong taste. I also realised from talking to the pub and club operators that they felt the 5% ABV that most of these products were at the time was too high. We could do an RTD at 4%, which they were asking for and, of course, we could make that cheaply, so there was a cost advantage as well. I wouldnâ€™t say it was a deliberate attempt at promoting responsible drinking to be honest, it was more of a business move, spurred on by the operators who didnâ€™t want their clientele getting plastered and being sick and all the rest of it.â€
When Perezâ€™s RTD â€“ called Vodka Kick or VK â€“ first launched in 1999, he admits there was some negativity from the trade. â€œSome were saying that if it was a premium product, it had to be over 5%. But ultimately weâ€™ve been proved right because now a lot of the other brand owners have also cut their ABV to 4% and I really do think that this is a far more suitable level for this type of drink, which is meant to be light and refreshing,â€ he explains.
In the first year after its launch VK took the company from a turnover of Â£200,000 to Â£2.2 million in the second year. These days with more products in the portfolio Perez puts turnover at some Â£64m, â€œwhere weâ€™ve been for the last few years, as the market has levelled offâ€. There are now more products including a non-alcoholic energy drink and one of the companyâ€™s greatest successes, Corkyâ€™s Vodka Shots.
â€œCorkyâ€™s has been the fastest growing in its category. Shots are really just the new liqueurs, but we canâ€™t call them that because it isnâ€™t exciting and it isnâ€™t sexy. But that is essentially what they are. The idea came from what I was seeing happening in bars where staff were making their own shots to sell to customers by flavouring vodka with Mars Bars and bubble gum and so on. The problem with that is, not only is it time consuming for staff, it is also messy and thereâ€™s no quality control. There are also health and safety and taxation issues, so we saw an opportunity to make something to solve those problems. We knew it had to look hand-made, hence the cork stopper and the name. In two years we are up to about 2m shots a month.â€
The launch of a new product, which for the big multi-nationals seems to mean months, sometimes years, of development and research, for Perez appears a much simpler matter of keeping your eyes open and being practical. â€œI think that people talk about developing new brands and things as if it is like inventing the wheel. But itâ€™s about evolution rather that innovation. So, for example with Corkyâ€™s, we saw the bartenders making it and knew there was going to be a demand for it. Same with VK, there was already a product out there but we spotted a way of making an improvement on an existing idea. You ask yourself can you make the packaging better? Is it the right price? Yes, of course it is still an expensive game to invest in a new brand and it is a risk. When we started with VK I sunk everything into it and if it hadnâ€™t worked that was me wiped out of business again and Iâ€™d probably be driving taxis now
Not that this approach is foolproof; Perez has certainly launched brands that have failed to set the market alight during the last few years. The one that surprised him most was a sparkling wine-based RTD called Cavela. â€œIt was a small bottle
of cava, mixed with fruit juice,â€ he explains perhaps a little regretfully. â€œThe taste of it was absolutely fabulous and it was targeted, perhaps wrongly in retrospect, at young women in clubs who were drinking those mini-bottles of Champagne.
We thought we could make it affordable and make it taste great â€“ it was certainly easier to drink than straight Champagne. But maybe we didnâ€™t get the packaging right or maybe people didnâ€™t understand what we were trying to do, especially up North.â€
Oop North, as we southerners like to call it (somewhat patronisingly) is Perezâ€™s home. It isnâ€™t just where he grew up, or where he still lives, but where his business is based and where he and his team keep their eyes on the market. â€œYes, the North of England is our heartland,â€ he says proudly. â€œThat is where we are based and where we trial our products but, having said that, we are as popular in Basingstoke as we are in Barnsley. We donâ€™t do well in places like London, we do well in provincial towns because of the way we market. Global Brands doesnâ€™t do expensive TV campaigns. â€œWe do have large budgets, but we target them at outlet level in the bars and clubs. We have promotion teams, with a big American branded truck that we drive around city centres. We are having a new bus built, costing us a quarter of a million pounds, and weâ€™ve just bought a hot-air balloon too.â€
Perez believes there are a lot of ways to market his products other than TV and press. â€œWe do a lot of radio promotions and that works well, particularly for the younger market. I think our competitions with Galaxy radio work particularly well. By marketing at outlet level you are personalising your product and when you get out there and talk to consumers you can get lots of feedback. That helps us develop our brands. For example, weâ€™ve just brought out a Corkyâ€™s Glacier Mint flavour and that product came directly out of talking with young women in particular who wanted something that would make their mouth feel and smell fresh during a night out.â€
Back to beer
In terms of taking the business forward Perez has, in a sense, returned to his roots, as he is about to develop a beer arm for the company. The first brand to sign with Perez is Tsingtao Chinese beer but he expects this to be the first of many. â€œIâ€™ve brought John Harley on board, who used to be the UK MD over at Budweiser Budvar, and heâ€™s out there as we speak actively looking for new brands for us to add to the portfolio. Thereâ€™s definitely growth in the premium packaged lager sector, as in specialist spirits, so we are looking there too.
â€œThere is a lot of consolidation happening in the drinks industry at the moment,â€ he continues, â€œand it means there are a lot of brands out there that donâ€™t fit into the big companies any more. We see ourselves essentially as a sales and marketing organisation and weâ€™ve a fantastic base of customers â€“ we supply to around 90% of retailers in the UK and we export to a further 32 countries. So it helps to have a wide range of products on board as we become more important to the retailers.â€
Perez describes Global Brands a â€œmini-Diageoâ€. He says: â€œI donâ€™t ever want to be as big as Diageo but ultimately I want to cover all the main categories and thereâ€™s room for a company of our size. Iâ€™ve no plans to become a Plc or do a reverse takeover.â€ Why not? â€œBecause I think for a start you lose control. You know Iâ€™m an entrepreneur, I donâ€™t really work that well on committees or big boards. Plus I think as a small company you can act quickly to change.â€
Given his previous experience in the industry it should come as no surprise that this is a factor Perez prioritises, but are there any other industry changes in the air that he is concerned about?
â€œThe crackdown on drinks promotions, now especially in Scotland, is becoming an issue. In some towns we arenâ€™t able to offer tasting or sampling or give anything away for free, which is incredible really.â€ He believes the issue of binge drinking in the UK has more to do with culture than anything the industry is doing. â€œItâ€™s too easy to point the finger and say itâ€™s the products. It isnâ€™t the products, there was binge drinking going on 15 years ago with super-strength white cider too. It is something that is inherent in our culture, what we need to do is to invest in education. Thereâ€™s no need to ban things like RTDs because people will just revert to another drink, which in all probability will be even stronger.
â€œObviously, we are all in business here to make money and we have to look for an increase in turnover but I do think it would help us all if the industry were to put on a more united front,â€ he says. A current preoccupation is the Portman Group, which is effectively controlled by the seven big drinks companies. â€œNow, I think they do a great job but it costs an awful lot of money to join.â€
A drinks business source estimated, in fact, that it might cost as much as Â£100,000 for a company with around Â£70m turnover per annum. The Portman Group itself, however, would confirm only that the cost per company varies and is based on several factors, one of them being global turnover. â€œIf it is to be truly representative of the industry it has to be more inclusive,â€ Perez continues. â€œOtherwise we are all pulling in different directions.â€
Relaxed drinking laws
Ultimately, however, Perez has a great deal of confidence that the UK drinking scene will change. â€œBut it will take 20 years or so,â€ he says, â€œwith more relaxed drinking laws and with people going abroad more and having more going on in their lives than just going out and getting pissed. Itâ€™s a cultural problem and that can only change slowly.â€ And what will Perez be doing in 20 yearsâ€™ time when this drinking revolution has taken place?
â€œWell, Iâ€™m beginning to be less hands on than I was,â€ he says. â€œIâ€™ve always been into rally driving and Iâ€™m able to indulge that more now. I won the British National Rally Championship last year. Richard Branson has his balloons, Iâ€™ve got the cars.â€ Something tells me Perez wonâ€™t be one for a quiet retirement.
Â© db July 2006