William Grant & Sons Ltd.

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William Grant & Sons Ltd.

Phoenix Crescent
Strathclyde Bu
Bellshill ML4 3AN
United Kingdom
Telephone: (+44) 1698 843843
Fax: (+44) 1698 844788
Web site: http://www.glenfiddich.com

Private Company
Incorporated: 1886
Employees: 915
Sales: £400 million ($700 million)(2002 est.)
NAIC: 312140 Distilleries

William Grant & Sons Ltd. is one of the world's leading producers of Scotch whisky, ranking number four overall. Yet its flagship Glenfiddich brand is the undisputed leader in the more exclusive single-malt category, claiming nearly 40 percent of all single malt Scotch sales worldwide. While Grant's competitors include some of the world's largest diversified drinks groups, including Diageo and Seagrams, the largest part of the company's operations remain focused on its whisky production, which, in addition to Glenfiddich, include the 100-year-old The Balvenie brand of Scotch whiskey and, since 2002, Canada's Gibson's Finest blended whisky. The company also produces private label Scotch whiskies, a market which provides approximately 20 percent of the company's revenues. Despite its emphasis on whisky, Grant has diversified its portfolio somewhat at the turn of the 20th century, buying three rum brands from Diageo at the end of 2002 and launching a fourth, Sailor Jerry, in 2003, and acquiring Iceland vodka group Polstar. The company also hold a 30 percent stake in Scottish rival Highland Distillers and its Famous Grouse and Mac Callan brands. Wholly owned by the founding Grant Gordon family, William Grant & Sons remains a resolutely private company. Sales have been estimated to top £400 million ($700 million) in the early 2000s. In 2003, CEO Patrick Thomas—who had been the first CEO from outside the Grant family in the company's history—stepped down from the post, as the family once again decided to assume control of the group's operations.

Founding Scotch History in the 19th Century

Born in 1839 in Dufftown, Scotland, William Grant first went to work at the age of seven herding cattle on lands belonging to the Duke of Fife. Grant went on to apprentice as a cobbler, but instead went to work as a clerk, before becoming a bookkeeper for the Mortlach distillery. It was there that Grant learned the art of distilling, remaining in the position for some 20 years, and eventually becoming the distillery's clerk and manager.

Throughout his career at Mortlach, Grant saved up his earnings—which reached no more than 200 pounds per year. Finally, in 1886, Grant had saved enough to go into business on his own. Together with his wife and their seven sons and two daughters, Grant purchased a plot of land in Speyside, near the River Fiddich. For a little less than 120 pounds sterling, Grant acquired a secondhand still and other equipment from the Cardhu Distillery. Construction began that same year, with all work being carried out by Grant, his sons, and a stone mason; by 1887, the distillery had begun production. Grant named his distillery Glenfiddich, Gaelic for "Valley of the Deer." The company's stag's head logo was later to become famous around the world.

Grant's whisky, using spring water from Robbie Dru, quickly achieved a popular following in Scotland, attracting other distillers to the Speyside region. While much of the Scottish market at the time consisted of blended whiskies, combining grain and malt whiskies, Grant's whisky remained a purely malted whisky, produced in small quantities in single barrels—almost a century before the creation of a true single-malt variety. The rising popularity of Scottish whisky in general led to a boom in the number of distilleries in operation as the 19th century drew to a close.

Grant too took part in the expansion of the Scotch market when, in 1892, he bought Balvenie Castle—previously owned by Grant's former employer, the Duke of Fife—and surrounding farmlands. Grant set to work converting the castle itself into a distillery, which began producing its own, unique whiskey in 1893. The Balvenie, as the brand became known, remained one of the only whiskies to boast not only having its own malting plant but also growing its own barley.

Until the end of the century, much of Grant's production was sold to third-party blenders, such as Pattison Limited, then the leading whisky blender and distributor in the country. Yet the huge growth in the number of new distilleries at the turn of the century had led the industry into over-production, resulting in financial collapse. Pattison itself was one of the early victims of the whisky market crash, declaring bankruptcy in 1898. By 1899, the crash had claimed a growing number of distilleries.

William Grant & Sons too was hit hard by the crash, losing its largest customer and finding itself saddled by debt. Yet Grant saw opportunity in the turmoil of the Scottish whisky market and decided to expand his business from a simple distillery to a complete wholesale, blending and distribution operation. Grant was joined by his sons, and also by son-in-law Charles Gordon, who became the company's sales agents. In 1903, the company set up a whisky storehouse in Glasgow, and by 1904, Grant had established its first export office, in Blackburn, in Lancashire, England.

One year later, Grant began exporting to Canada after discovering that the country's High Commissioner was a distant relative. After setting up an export office in Canada, Grant also opened an office in the United States. While John Grant was building up the company's North American operations, Charles Gordon traveled to the Far East on a year-long tour starting in 1909, introducing the Glenfiddich brand throughout India, Singapore, Hong Kong, Shanghai, and Japan, before turning to Australia and New Zealand. Gordon next brought the Glenfiddich brand to the European continent, opening sales offices in Rotterdam, Hamburg, and in Scandinavia. By 1914, the company had more than 60 sales offices, supporting its exports to 30 countries.

Rationing efforts during World War I coincided with increasing prohibitionist sentiment to cut into the growth of the Scottish whisky industry. A major blow, at least in the short term, was the passage of the Immature Spirits Act in 1915, which barred sales of whisky that had been aged for less than two (later three) years. While the Act spelled the end of large numbers of distillers, it would later provide one of the major selling points for Scottish whisky. Nonetheless, continued raw materials shortages during the war put an end to production in 1917.

Grant did not resume production again until 1919 and the following year faced a new threat to its business, as prohibition sentiment swept across many of its major markets. While Prohibition was enacted most famously in the United States, the ban on alcohol extended into Canada, most of Scandinavia, Belgium, and Russia as well. The drop in whisky sales nearly wiped out the Scottish industry; by the end of Prohibition, only six Scottish distilleries remained in operation, including both the Glenfiddich and Balvenie distilleries.

William Grant himself did not live to see the end of Prohibition. By the time of his death in 1923, a new generation of the Grant Gordon family, and in particular William Grant Gordon, had joined the company. The younger Grant Gordon persuaded the company to increase its production despite the drop off in sales. In this way, the company was prepared to meet the surge in demand as countries began dropping their prohibition efforts in the early 1920s. In this way, Grant not only edged out potential newcomers, it also was able to present a higher-quality whisky that had spent more years aging.

Postwar Market Leader

Grant opened a London office in 1927, and restored its Scandinavian export markets soon after. The repeal of Prohibition in the United States in 1933 brought a new peak in demand and the Glenfiddich brand had already begun to assert its dominance as the world's best-selling Scotch whisky.

World War II once again brought a halt to whisky production, with barley diverted as a crucial food crop. Yet Winston Churchill correctly recognized the importance of Scotch whisky as a valuable source of foreign currency, stating, in 1944: "On no account reduce the amount of barley for whisky. This takes years to mature and is an invaluable export and dollar producer. Having regard to all our other difficulties about exports, it would be most improvident not to preserve this characteristic British element of ascendancy." Through Churchill's intercession, distillers were once again given an allotment of barley, and production could continue. In order to counter the coal shortage, Grant took to burning peat—which in turn added a distinctive flavor to the company's wartime production.

The postwar period saw the emergence of a new and stronger worldwide demand for Scotch whiskeys. Faced with a fresh rise in the number of Scottish distilleries, Grant turned to marketing for the first time. In 1957, the company commissioned a new bottle for its flagship Glenfiddich brand. Designed by Hans Schleger, the new bottle featured a highly distinctive triangular shape that made it instantly recognizable among the host of whisky brands and other types of alcohol on the shelves.

The 1960s brought a fresh marketing coup. If most of the whisky sold in the world remained of the blended type, a growing number of connoisseurs had begun to discover the single-malt type preferred by the Scots themselves. While a blended whisky might be composed of whiskies from several different distilleries, a single malt was the product of a single distillery—and often from a single barrel. In 1963, William Grant & Sons recognized the marketability of this whisky type, and became the first to market its whisky on the export market under the new denomination.

Grant also sought to increase its control over its distribution network, and in 1964 the company acquired the U.S.-based distributor Popper Morson. In this way, Grant claimed to be the first Scottish distiller to own its U.S. import business. The company's export efforts were later acknowledged during the 1970s, as the Glenfiddich brand became the world's leading Scotch whisky brand.

Company Perspectives:

Not much has changed at the Glenfiddich Distillery since the first spirit ran from the stills on Christmas Day, 1887. It is still independent; owned and run by the fifth generation of the same family. Our founder, William Grant, aspired to create "the best dram in the valley". He achieved it, and we maintain it—through a single-minded dedication to craftsmanship and quality throughout every stage of production.

Glenfiddich remained the company's flagship brand through the 1990s. In that decade, however, the company began stepping up its marketing efforts for its other brand, The Balvenie, which had become the whisky connoisseur's favorite. At the same time, Grant had built up a strong business as a private label supplier for other brands. In support of this activity, the company built a new distillery, the Kininvie, located in Banffshire near Grant's historical Dufftown home. In the meantime, the company's private label sales encompassed not only blended whiskies, but other categories of alcoholic beverages as well. In this way, the company began producing the vodka for the launch of Virgin Vodka in the early 1990s.

By the mid-1990s, however, Grant had been confronted with the rapid consolidation of the global drinks industry, which saw the emergence of such major players as Seagrams, Diageo, Allied Distillers, and Remy Cointreau. Determined to maintain its status as a privately held, family-owned company, yet hoping to remain competitive, the secretive Grant began opening itself up to outsiders, taking on a number of directors from outside of the family. The company also moved to add to its product range, adding new labels, such as the 15-year-old Solera Reserve, and the 18-year-old Ancient Reserve, both under the Glenfiddich brand. Another new product was Grant's first single-malt whisky liqueur. At the same time, the company began looking for external growth opportunities. After talks to acquire a stake in publicly listed Burn Stewart Distillers failed to result in agreement in 1997, the company instead acquired a 30 percent stake in rival Highland Distillers, in a partnership with the Edrington Group, which took the other 70 percent of the formerly public company, in 1998.

In 2000, the company appointed Patrick Thomas, from France, as the group's CEO, marking the first time someone from outside of the Grant Gordon family would lead the company. Thomas promptly led the group on a restructuring, and took the Glenfiddich brand into a successful new marketing campaign designed to update its image. Thomas, who had originally joined the company as a director in 1994, also began seeking opportunities for diversifying Grant's product portfolio.

Toward that end, Thomas oversaw a series of brand acquisitions. The first of these included three rum brands held by Diageo and Pernod Ricard, which was followed by the purchase of Gibson's Finest, a Canadian whisky owned by Diageo. At the end of 2002, the group added to its portfolio Iceland's Polstar and its line of flavored and premium vodkas. Following the purchase, the company began preparations to build a new vodka distillery for the brand.

Under Thomas, revenues at William Grant & Sons grew strongly, topping £400 million, with profits topping £40 million. Yet in 2003, the Grant Gordon family decided to take back managerial control, and Patrick Thomas resigned as CEO. As newly appointed chairman Charles Gordon told The Herald: "We wish to continue the transition of our family business towards a fully professional organization, focusing on the development of brands and leveraging the enormous advantages of the values and long-term perspective that the family can bring to the business." In this way, the company intended to maintain its tradition as a family company, even as it developed into a diversified drinks group in its own right.

Key Dates:

1886:: Scotsman William Grant builds his own distillery, Glen Fiddich, and is joined by his seven sons.
1887:: Glen Fiddich begins production of whisky.
1892:: Grant buys Balvenie castle and converts it to a distillery, beginning production of The Balvenie whisky the following year.
1903:: Grant enters blending, wholesale and distribution, opening storehouse in Glasgow.
1905:: Exports to Canada begin; sales offices in Canada and the United States are established.
1923:: William Grant dies; grandson William Grant Gordon convinces company to increase production in spite of Prohibition.
1957:: Glenfiddich brand receives new and distinctive triangular bottle design.
1963:: William Grant & Sons becomes the first to market its whisky as "single malt" to the export market.
1964:: Company acquires its own U.S. importer and distributor, Popper Morson.
1990:: New distillery in Kininvie is built to support third-label production business.
1998:: Company acquires 30 percent stake in Highland Distillers.
2000:: Patrick Thomas is appointed CEO, the first from outside the Grant Gordon family to lead the company.
2002:: The portfolio diversifies with acquisition of three rum brands, a Canadian whisky brand, and Iceland's Polstar vodka brand.
2003:: Patrick Thomas resigns, and Grant Gordon resumes management control of business.

Principal Subsidiaries

Highland Distillers Limited (30%); Maxxium Worldwide B.V.; William Grant and Sons Inc. (United States).

Principal Competitors

Diageo plc; Seagram Company Ltd.; Jim Beam Brands Worldwide Inc.; Irish Distillers Group plc; United Distillers and Vintners Ltd.; Remy Cointreau; Allied Distillers Ltd.; Cantrell and Cochrane Group Ltd.