The news of Pernod Ricard’s acquisition of spirits specialist retailer The Whisky Exchange (TWE) in September 2021 was one of the more surprising examples of M&A activity in the recent history of the beverage alcohol industry. After all, brothers Sukhinder and Rajbir Singh, who founded TWE in 1999, had spurned many approaches in the past. In the end, however, they concluded that if the business was to fulfil its global potential, deeper pockets were required.
For Pernod Ricard, the transaction – financial details of which were not disclosed – was the logical next step in the digital transformation of the business under CEO Alex Ricard. This began a decade ago with the harnessing of data to improve promotional efficacy and marketing strategy, but quickly shifted into the direct-to-consumer (D2C) space, with deals to buy wine-focused Spanish e-commerce businesses Uvinum (in 2018 and subsequently rebranded as Drinks & Co) and Bodeboca (2019).
TWE, a business on a much larger scale and with a strong focus on spirits, represented a shift from the ‘test-and-learn’ phase of the company’s digital strategy, alongside the creation of an independently-run D2C unit, headed by CEO Nicolas Oudinot (below) since November 2022.
For Oudinot, TWE now represents “the mothership” of the D2C unit’s strategy, a point reflected in the closing down of Drinks & Co’s e-commerce operations (only a concept store in Paris, managed by Pernod Ricard France, now remains). Meanwhile, Bodeboca continues to trades – not least because TWE does not currently ship to Spain.
‘No point’ going global with two brands
While Drinks & Co might have been a candidate for global expansion, Oudinot says there was “no point” in trying to do that with two brands, rather than one. And here, the wine focus of Drinks & Co and Bodeboca counted against them.
“There’s an assumption that you can increase the share of spirits, that the customers are a homogeneous group of people,” he explains. “Actually, it proved not to be that easy. Sometimes it’s not the same consumer, or it’s the same consumer but not the same buying occasion.”
Another crucial distinction was found in the underlying philosophies of the businesses. Uvinum/Drinks & Co was started, in Oudinot’s words, by “tech guys loving wine and deciding to make a move on wine”, compared with TWE, where “the core of the business is the product, not the technology, and the website is just an enabler”. Speaking of e-commerce businesses in general, he adds: “Whether it’s wine or spirits, those that really work all started from the product and not the technology.”
Another drawback was Drinks & Co’s marketplace model, meaning that the company did not own the stock it sold. While there are upsides to this approach – a business can scale up much faster, acquiring more buyers and sellers – Oudinot says it was “extremely challenging” from a commercial and customer service viewpoint.
“The service was not great, the economics were not great, so it wasn’t really a business model that we believed in for this industry,” he concludes.
By contrast, Oudinot describes TWE as having a “truly omnichannel footprint” matched by few others around the world. As well as the website, there are three physical stores in London, events such as The Whisky Show (below), auction site Whisky.Auction, and the on-premise distribution arm, Speciality Drinks.
The potential to grow the business internationally is obvious given its strong reliance on the UK market. “The main vehicle is the website, obviously, and geographical expansion is going to be our main growth driver,” explains Oudinot. “Not just for the sake of growing, but for the sake of serving the most demanding consumers, wherever they are.”
‘Retail is an experience driver’
Bricks-and-mortar outlets have a role to play too. “We won’t have shops in 35 cities in the world, but having a shop maybe in Paris, Singapore, Shanghai, Tokyo – why not?” asks Oudinot. “The retail is not a business driver; the retail is an experience driver – we can get to know the consumer, get to know what they like.”
The ‘experience’ side of TWE’s operations is also vital, from small in-store events to large-scale consumer fairs such as The Whisky Show and The Cognac Show, plus ‘money-can’t-buy’ tastings with master distillers. Such initiatives are as much about consumer interaction as making money, Oudinot emphasises. “Our experiences tend to be financially viable, which is good, but we don’t look at them from the point of view of making extra profit; it’s about building strong and lasting relationships with customers. This is invaluable.”
There’s a trade element to the business too that Oudinot is keen to tap into. “While it’s called ‘direct-to-consumer’, I strongly believe in the complementarity of the D2C arm, online, the shops and the B2B side, Speciality Drinks,” he says. “We have access to the best connoisseurs and collectors in the world, but also the best bars and hotels in London.”
The aim is to be “the most trusted global destination for connoisseurs of fine and rare spirits, but not to try to be the biggest. We are trying to be the most trusted by consumers, but also by suppliers”.
Independence put supply questions ‘behind us’
Ah yes, suppliers. There was a little head-scratching from some in the industry when the TWE acquisition was announced. Why would the likes of Diageo, Bacardí and so on be happy to continue to supply a retail business that was now entirely owned by one of their biggest rivals? And how would they feel about the owner having access to all of that retailer’s consumer data?
Oudinot acknowledges that this was identified as “one of the main points of attention” when the deal was made and pays tribute to the “incredible work” undertaken by the buying team in earning the trust of suppliers. The fact that TWE is seen to be managed independently of Pernod, he adds, has ensured that the issue is now “behind us”.
No data is shared with the parent company, he stresses. “That’s a prerequisite, that we’re not sharing anything, or we’re sharing it with all suppliers. The richness we get [from the data] is not so much a branding thing but, for instance, that we see a signal that agave is booming in top outlets in London.”
Luxury fashion versus alcohol: the e-commerce journey
If this concept was alien to some in drinks, it was “very straightforward” to Oudinot, who previously worked in luxury fashion at Gucci owner Kering. For instance, while LVMH owns a number of retailers – including global travel retail giant DFS – it’s “taken for granted” that no data is shared.
This hints at a clear difference between fashion and alcohol that Oudinot has seen for himself. “It’s an industry that is low in terms of e-commerce penetration, but we are accelerating at the moment,” he says. “There are good reasons why it’s low. We are selling products that are heavy, fragile and very regulated – it’s not that nobody woke up and started doing it.
“I believe that the industry is exactly like fashion 20 years ago. In fashion 20 years ago, all the big players believed e-commerce would never be big, because you need to touch the fabric.” It took disruptors such as Net-a-Porter to prove that, given the right consumer psychology – order an item in three sizes, send two of them back, and so on – the concept could work for retailers and customers alike.
Amazon pushes ‘people to raise the bar’
The diversity of TWE’s operations reinforces Oudinot’s assertion that it is “much more than just a retailer”. If there is an overriding philosophy that connects all the strands of the business, it is the imperative of listening to, and serving, the consumer at all times. “We need to become more consumer-centric,” he says. “If the only thing you provide is convenience, then you can never compete with Amazon.
“But Amazon is pushing people to raise the bar in terms of advice, in terms of experience and in terms of assortment. I really see it as a positive pressure. Those businesses that remain are very good, but it kills the bad cavistes who cannot speak about their wines.”
And, for all the differences in e-commerce maturity between luxury fashion and alcohol, Oudinot sees at least one parallel. “In both cases, we sell products that people don’t need,” he says. “Ultimately, we sell passion, we sell emotion and we sell love. That makes it quite fascinating for me.”
