Interview: Exploring premium opportunity, with Bacardi-Martini Australia MD Luiz Schmidt

Luiz Schmidt started on as the Managing Director of Bacardi in Australia and New Zealand in May last year after more than two years in Panama working as Regional Marketing Director for Bacardi in Latin America and the Caribbean.

Earlier this month, Bacardi-Martini Australia officially unveiled its new Sydney headquarters, signifying a renewed commitment to the ANZ market by the world’s largest privately held spirits company.

Drinks Trade took the opportunity to sit down with Luiz Schmidt to discuss Bacardi-Martini Australia’s new headquarters, its current market positioning, and what it will be focusing on for the rest of 2024 and beyond.

Drinks Trade: Luiz, you’ve been Bacardi’s Managing Director ANZ for 1.5 years now… How’ve you been finding the new market?

Luiz Schmidt: I think in Australia we are extremely lucky. When originally Bacardi was established, they had a really clear focus on building to the strategy of the global business - which is to become a leading company within premium plus spirits - and if I look at the portfolio in Australia, more than 70% of our sales in Australia are coming from premium plus brands.

If I compare to Bacardi in some parts of Europe, for example, I think we do really well just because of the fact that we are playing in a more profitable segment of the market.

DT: Have the current economic pressures impacted this tendency towards premiumisation?

LS: Because of the current cost of living pressures premiumisation is a little bit on hold. I have seen some category trading down over the last 12/18 months, but I think we have to focus on the long term, and the long term… definitely [has] a light at the end of the tunnel. I think it's just a small decline in a trajectory of long-term growth.

Australia is still a very prosperous country with a strong population/strong migration still coming in. The other day I was seeing this statistic around where high net worth individuals are moving to, and Australia is one of the countries that is receiving the most high net-worth individuals in the world (I think it was a top three/top five).

DT: Which categories have you noticed consumers trading down in?

LS: It's a mix. I think some players in the industry are seeing some pressure; I mean, everyone is going through pressure and they are trying to offer better value to consumers. I have seen a lot of activity from within vodka [and] gin; some aggressive pricing on ready-to-drinks as well. I don't want to name brands, but I think it's across the board. I think consumers are definitely price sensitive at the moment and savvy, getting more intelligent on how they buy. So definitely looking for better bang for the buck.

From a Bacardi standpoint, I'm still seeing really good growth for Patrón [and] still seeing really good growth for Grey Goose, so, it's kind of a mixed behaviour within the portfolio.

DT: How do you see the current economic pressures developing in the short to mid term?

LS: I was checking some of the numbers within the category. In the last 25 years, spirits growth in Australia has been around 7.4%. In the last year, growth has been just 1%, but in August, it went back to around 6.6%, so going back to closer to the historical averages in terms of growth.

I don't think there’s much changing, I think the macroeconomic is still the same… It's just a matter of a good combination of an August [that] was a warmer month compared to Augusts in the past, and I think some of the tax breaks offered by the government as well has helped a little bit. But I still see a tough industry out there.

DT: How is Bacardi-Martini Australia adjusting its offer to improve its offer to consumers given the current economic climate?

LS: [We’re] try[ing] to make sure we have the right investment and the right price points… Although there are cost of living pressures, I think consumers are still very open to brands delivering top-notch experiences. A good example of that was the recent partnership we had with Crown in Melbourne launching the first Grey Goose bar in the world: really focussing on the martini, having a clear calendar of activations in that venue, bringing a lot of influencers/a lot of key opinion leaders from Melbourne to that venue as well, [and] just really having great service/great options in terms of different martinis, and being progressive. Experiences like this I think are helping to keep the good momentum.

We [also] engaged a lot of consumers during the recent Master Distiller visit from Angel's Envy. We hosted three different tasting dinners and some people were invited, but we also put some tickets for sale and we saw a really good uptake from consumers in high-end bars participating and wanting to engage.

I still think that consumers are still very open for brands, as long as you deliver elevated experiences/something that is unique… [Also], I think [Australians] are definitely still interested to indulge in having those affordable luxuries in their lives.

DT: What’s the main focus for Bacardi-Martini Australia at the moment?

LS: Grey Goose, Patrón and Angel's Envy: these have been kind of the highlights for the year, and I'm excited because if I look at where the bulk of the growth will come from most of this summer - especially for light spirits - both Patrón and Grey Goose are performing well up to this stage. So hopefully now during the key selling period - October, November, December - we probably should see some more growth.

I think now during summer we're definitely going to see a lot of ‘Margies’ being consumed.

DT: How has Patrón been performing in light of the current tequila boom?

LS: Patrón is doing really well - it's definitely a bright spot in our portfolio. There's many new entrants to the category and everyone’s obviously trying to steal a little bit of market share, [but] that said, I think Patrón is performing extremely well: we are holding our market share and we're even growing our market share versus a key competitor set.

I think it's just a matter of building for the long term with Patrón, and we have been very aggressive over the last, I would say, five years in building the brand/really supporting the brand for the long term.

We don't have a big celebrity on our backs. That said, what I'm seeing for a lot of these new-entrant tequila with a celebrity [is] they come, they do some sort of launch, and then they disappear… We have been able to hold our ground very well.

DT: You mentioned earlier that the Australian market has a tendency towards premiumisation... How does Bacardi-Martini Australia adjust its offer to suit this?

LS: As consumers get closer to the category, they're definitely keen to understand more; you know, okay, I'm having a silver tequila, can I enter into the category and try a reposado or an añejo? - and we're also seeing a huge penetration of ‘prestige’ tequilas coming to the market.

We see the phenomenon around 1942, Clase Azul. Very soon, we're launching a variation of Patrón called El Alto, which is an Añejo tequila in this really luxury bottle. We're going to have a lot of activation for the launch [and] a lot of different elevated experiences.

Also, we have to remember Australia is a very multicultural country. So although I think Australians tend to be more frugal in terms of how they ‘adopt’ luxury in the market, the multiculturalism does bring a population that have some different nuances: they like the luxury lifestyle, they want to show off, they want to have that occasion.

A lot of the bars that we've seen in Australia that are popping up now at the moment have bottle-to-table service, with people having those luxury bottles at the table to indulge and experience. We're seeing a good uptake on that… I think it will be very unique in Australia, and it should do well from the initial uptake we're seeing.

DT: A few weeks back, Bacardi-Martini Australia relocated into a new HQ… Can you talk about the move and what it means for the team?

LS: First of all, we were operating in the office that we were in for over 22 years. Obviously, workspace is very important: it's your image, it's the first impression you set… We want to be very attractive to the new generation of potential employees that will come to the business. We also want to have a really premium feel to the office and want to be very close to the centre of on-premise in Sydney

Every time you move to an office, it will cost you a lot of money, so it was a very well thought through investment in renewing the confidence in the market, built for the long term, and sent a clear message to potential people that are interested in working in the spirits industry/the liquor industry that Bacardi is an option.

It's a modern office with great benefits, great parental leave policies, great diversity and inclusion measures as well.

DT: Bacardi was recently recognised in Forbes' 2024 list of the World’s Best Employers… As Managing Director ANZ, how do you go about fostering a safe workplace environment in the area you oversee and do you have any advice for other businesses?

LS: Bacardi is based on our values of Family, Fearless, and Founders. Although I know it sounds nice, I think we go beyond the sounding nice and we have really honest, robust conversations. When we lock ourselves in a room to decide something, we like to see us as a big family: we have really good discussions and sometimes it gets heated, but we don't have two faces, right? With what we are discussing in the boardroom - we tend to be really transparent with our employees. We try to make decisions that they are part of.

There's no secrets in the business. People know what we're doing, they know the problems, but they also know that the parts that are good, [and] the problems that we have we try to solve together. And I think that's what engages people nowadays.

DT: How does a company the size of Bacardi go about balancing family-centred values?

LS: I think the critical point for Bacardi is the fact that we treat people the way they would like to be treated. So the conversations on, you know, it's a hard time for the business/for the industry - I think everyone knows that they're going to have to deliver every year… So I think it's just having those constant conversations around aiming for a high-performance culture that is very honest and robust. I think that’s when we talk about family, right, family is one of the values.

On the other hand, we also ask people to have a fearless state of mind. If you have something in your head, be transparent and put it out there, challenge the status quo a little bit!

We also have the founders value. If I'm investing this money in this brand or if I'm taking someone out as a customer, you know, would you use that money the same way if it was your money? So I think when the three values combine, they bring the sense that people can make a difference and can have really transparent conversations.

I don't think we're perfect. I think, like any business we are, we are evolving, but I think prizes such as the Forbes top employers of the world is a great example that it is a thriving culture of a company that is more than 160 years old. Because we do care about our people. We treat them fairly.

DT: What’s the future of Bacardi-Martini Australia looking like in the short-, mid-, and long-term?

LS: We’re very excited with the two launches - Grey Goose Altius and Patrón Alto - playing into that prestige part of the market.

We are [also] enjoying the fact that, after 22 years in the same location, we have a new office and a great new bar.

We also saw the numbers in August going back to closer to the average growth of the industry, so that puts a light at the end of the tunnel as well. And I think from a long term perspective, we just launched our new 2030 strategy internally, so everyone is on the same page.

DT: Can you give any insight into the 2030 strategy?

Obviously it's a confidential document, but I can share a very high level. So it's very simple. We're going to continue to focus on our premium plus brands - especially Grey Goose and Patrón - to win in the marketplace.

Brands such as Angel's Envy and St Germain, they are very premium, have great resonance with the marketplace, so have a very sizable profitable role to play. If you look at a brand like St Germain as well, the spritz occasion is gaining relevance with consumers in Australia, driven by Aperol, so [we’re asking ourselves]: how can we play within that as well with St Germain?

Also, we will play with RTDs, really making sure that we leverage strong partnerships in the marketplace as well.

We put a survey out there: people appreciate the new strategy, they understand it because it's simple, so there's really strong engagement.

DT: Can you explain the future of RTD at Bacardi-Martini Australia?

LS: I can't share everything that we're doing from a homework perspective, but the recent partnership that was communicated a couple of weeks ago between Bacardi and Coca-Cola - so Bacardi and Coke in an RTD - is the first real partnership that we are starting within the ready-to-drink category, and you will probably see more into the future.

We know it's a part of the market that we can not ignore - it will be bigger than spirits probably over the next three years - and so we will really play within RTDs.

The only thing that I would say is that if in the past we have launched and we have tried different things that were potentially smaller ideas that play within niche segments of the RTD category, such as cocktails in a can, or, for example, we have our Bombay in gin & tonic RTD, which is only 3% over the overall RTD category. In the future, we will probably see Bacardi playing to win with very meaningful and scalable opportunities such as Bacardi and Coke, which navigates really well within dark spirits (although we are light spirits) with Bacardi Carta Blanca.

DT: Regarding Bacardi’s prestige brand launches such as Grey Goose Altius and Patrón Alto, how much of the focus is on pure revenue generation and how much is it a way of reinforcing the premium cues for the brand?

LS: Obviously the commercial part comes as a result of it, but it certainly helps to generate an even more premium halo effect for brands like Patrón. To your point, Patrón is a well-established tequila brand that is massive in the US - it's still the leading super premium tequila in that market. But obviously, as you become more popular, it has an impact in terms of the equity, so brands such as Patrón El Alto, which is just a prestige entry, it definitely would help us to elevate the credentials of all Patrón, and that luxury prestige halo effect will certainly support the branding into the future.

DT: Lastly, any plans on relaunching Patrón XO?

LS: We got access to a very small quantity of Patrón XO, which is coming back into Australia from November, but in a very small quantity. We had to be very persuasive in terms of getting that stock into Australia.

There're not many markets that are ‘relaunching’. We're not even calling a relaunch. We're going to make it in a very kind of a hush hush situation. But we know there is a demand for it: consumers love it, and we want to make sure that we are offering that option.

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