Like all other drinks firms, Spain’s Zamora Company has been thrown by the coronavirus pandemic. But CEO Emilio Restoy is sanguine about the effects of the Covid-19 lockdowns on his bottom line, and has been using the experience to make sure his outfit is agile enough to capitalise on new trends.
*This feature was originally published in the August 2020 issue of The Spirits Business
“There’s before March and there’s after March – and it’s having an impact,” explains Zamora Company’s CEO, Emilio Restoy, referring to life before Covid‐19 and life since the pandemic struck. The company enjoyed several prosperous years leading up to 2020, with the launch of a joint venture in the US, called Zamora Company USA, a subsidiary in France and its first commercial office in Mexico.
The firm has also made bold investment moves to enhance its portfolio, acquiring Villa Massa limoncello in 2017, an equity stake in Yellow Rose Distilling in the same year, before buying a majority stake in Martin Miller’s Gin and Chinese distributor Tintafina in 2018.
According to Zamora’s most recent financial results, the Spanish company’s sales grew by 6% in 2019 to more than €200 million (US$222m), boosted by its flagship Licor 43 liqueur brand, Martin Miller’s Gin and a strong performance in the US.
“Before the pandemic, we were doing quite well,” says Restoy, “especially in Germany and the Netherlands. Obviously a lot has changed because of the pandemic, but we are confident we can get through this.”
Collapse and rebound
China was the first market to be hit by the coronavirus crisis, which forced the country into a nationwide lockdown to stymie the spread of the virus. While Zamora Company is present in Asia, Restoy notes it is not a huge market for the group’s spirits portfolio.
“Asia is all about premium dark spirits, mainly Cognac and malt whiskies; this is the bulk,” he says. “We are into liqueurs, which are sweeter. China all but collapsed in January, February and March, but we have been surprised by the strength of the rebound. As soon as the on‐trade began opening, sales went up, so much so that at the end of May we were slightly above May last year.”
This rebound gives Restoy confidence that the drinks sector will be able to recover from the effects of the pandemic. Experiential offerings will be key to driving growth and increasing consumer confidence.
“We don’t sell drinks, we sell experiences, we sell the joy of life, and people want to enjoy life,” Restoy says. “We have all gone through very difficult situations, emotionally it’s been very challenging, and we could talk forever about what is going to happen in the next few months. But people want to enjoy life and want to take their lives back. It’s showing clearly in China.”
However, Restoy notes the effects of the pandemic can differ drastically from one market to another. He cites three key drivers hitting sales. The first is the percentage of on‐trade to off‐trade sales in each market. “Let me put it this way, the UK is a very off‐ trade market, so the impact of Covid‐19 has not been as relevant as in Spain, where 70% of our volume is on‐trade,” Restoy explains. “So the impact in Spain has been harder.”
The second factor is how relevant a brand is to the consumer. “In moments of crisis, people normally tend to go for trusted brands, brands they respect,” he says. “So if you’re a brand that’s powerful and trusted by the consumer you will be better off.”
Third, says Restoy, is “how you shape the curve of impact”. He cites three typical scenarios that market sales are facing: the ‘V’, where sales drop drastically, but also return to growth very quickly; the ‘U’, when sales fall quickly, struggle for a while, before a sharp uptick; and the ‘L’, where sales decrease rapidly but the lower sales linger for longer than hoped for or anticipated.
“We think that different markets will have different shapes,” he adds. “Germany is clearly a ‘V’; it is a very strong off‐trade market and the management of the situation honestly has been better than most countries. Spain will be more like a ‘U’ or ‘L’ because we have been very, very severely hit and there we are strong in the on‐trade.”
With on‐ and off‐trade outlets shut down worldwide during the pandemic, Zamora has witnessed a surge in e‐commerce sales. Before the pandemic, e‐commerce represented 0.77% of the business; now, it’s grown to 5%, says Restoy. But he believes the firm will naturally gravitate back to the off‐ trade once business resumes – at least in the company’s home market of Spain.
“Here, I don’t know how much it will grow,” he says. “The online [spirits] assortment normally is more limited, and you can find the assortment in the off‐trade. For spirits, there will be a lot of focus on experiences, for example virtual tastings, and going digital. We have done it and they have been extremely, extremely successful. I keep on being impressed by how well the consumer takes the tasting with one person that is 2,000 miles away.”
He believes the trend to host online tastings will be here to stay long after the pandemic. Consumers are already demonstrating strong demand for more digital experiences, he says, and the industry has, until now, been slow to meet those needs.
“With everything about digital and e‐commerce, I think companies are behind the consumer,” he explains. “Again, I keep thinking how we act with our mobiles, how we shop, how we look for information, that’s how it goes, everything is digital. The industry has been a little bit behind the curve. Whereas before [the pandemic] with the on‐trade, the experience was about drinking and the product would be explained face to face. All of this has changed overnight.”
The resilience of each brand has also been determined by “off‐trade exposure and brand awareness in the market”. Martin Miller’s Gin, for example, has seen sales grow in the UK thanks to its strong off‐trade presence. The brand launched a seasonal expression in June, called Summerful, to celebrate its 20th anniversary.
The gin is made using the original double‐distilled expression, which then undergoes a third distillation with Arctic thyme and rosemary botanicals in a nod to England and Iceland’s spring and summer seasons. Available through Waitrose and Amazon, Restoy says Summerful has proven so popular it has sold out on Amazon.
“Licor 43 is a key brand for us in Germany, in the Netherlands, where we are the leaders in liqueurs, and our market share is growing even though our sales are going down,” says Restoy. “In Germany, I think we are ‐5% from January to May, but growing market share. Why? Again, strong off‐trade positioning and visibility. There was availability of the product at all times and good brand call. It was a trusted brand people can rely on.”
Zamora capitalised on this further by ensuring it connected with consumers during the pandemic through online tastings and activations. “Again, we have done more tastings for Licor 43 and we have had more downloads on how to prepare our signature drinks in these past three months than the previous two years,” Restoy adds.
One significant change for Licor 43 is the format of this year’s Bartenders and Baristas Challenge, which will take place in a digital format for 2020. Instead of pairing baristas with bartenders, entrants will enter as solo competitors this year, with the fourth edition of the competition due to take place virtually on Licor 43’s website and social media channels. The global finalists will have a film of them making their cocktail posted on Facebook, which will result in one winner chosen by a panel of experts, and a second winner chosen by a public vote.
It’s an example of how strategies must adapt to the ongoing crisis. How Zamora Company divides its attention between the on‐trade and off‐trade is also having to be reassessed. “As a Southern European company, we have a mindset that everything is on‐trade,” says Restoy. “That was before March. Now we are moving more towards the off‐trade, for example with Licor 43.” The Spanish brand recently unveiled its first ready‐to‐drink (RTD) line, called Cocktail 43 Fresco. The range of ‘fizzy fusions’ is made by combining Licor 43 Original with real fruit juices. Available in two flavours – lemon and berry – the RTDs have an ABV of 5.6%.
“We launched Fresco in the Netherlands, solely focused on the off‐trade,” adds Restoy. “For us, it shows this movement towards the off‐trade and we will allocate a proportionate amount of resources to the off‐trade and convenience stores as time passes by.”
Italian digestif Villa Massa has also proven popular in the off‐trade during the pandemic. Zamora Company has built on these two occasions further by promoting the limoncello as the base for a Villa Massa and tonic for the summer. “In the on‐trade, [Villa Massa] is currently non‐existent because the restaurant business has gone down, and, again, in the future fine dining is going to suffer more,” says Restoy. “So we have moved from one area that will take consumers longer to get into, fine dining, into another where consumers are already playing, which is at‐home dining occasions.”
But the challenges facing the on‐trade will be significant in shaping the future of spirits. As bars reopen after months of closure around the world, there are many that simply have not been able to survive the crisis, and more that are expected to fold in the near future. “This is the fundamental threat of Covid. Not what has happened in these past three months, or what is going to happen in the next three months, but the new trends that are going to emerge,” says Restoy. “The on‐trade is fundamental for two reasons. One, it’s the basic way to interact with your consumer and present your product. Two, it is a profitable route to market.
“If this decreases, two things will happen: it will be more difficult to interact with consumers and consumption could very well decrease.” He explains that the increase in at‐ home alcohol consumption is not enough to offset the downturn of the on‐trade, even as venues start to reopen and consumers venture to their favourite watering holes once more. He believes that if consumption levels fall for a prolonged period of time, “they will not come back”.
“Again, we sell things people don’t need; we sell things people want,” says Restoy. “There’s no need to have a whisky. If you want a whisky, you’re enjoying it either by yourself, as a couple or with a bunch of friends enjoying life. If this ‘with a bunch of friends enjoying life’ moment is less relevant, then in‐home consumption is not as big and will not make up for the loss of out‐of‐home.”
Travel retail is arguably the worst affected part of the industry, with passenger numbers significantly down as nations closed their borders and flights were cancelled. Restoy explains that “as a rule of thumb”, the channel represents between 8%‐10% of business sales, and “in our case it was pretty much like that”. While he remains unsure when travel retail will bounce back, he is adamant it will eventually do so.
“Clearly, travel retail will not work until travel itself reignites and your guess is as good as mine as to when that will happen,” he says. “When it happens, at the start people will have less interest in swanning around in an airport looking from shelf to shelf. But travel retail is a fundamental part of the industry.
“It’s a great way of having contact with your consumers, and I cannot tell you where we will be in six months, or 12 months, but I am absolutely convinced it will get back in shape. Perhaps it will not be exactly like it was, but it will be fundamental.”
Restoy is realistic that the Covid‐19 pandemic will result in losses for Zamora Company this year, and possibly beyond. But he believes the firm’s ability to adapt to the fast‐changing trends emerging from the crisis, company infrastructure, quality products and family values will see Zamora through to the other side.
“When this all started, by the end of March our vision was pretty clear: we are going to lose revenue and we are going to suffer in P&L [profit and loss] significantly,” admits Restoy. “But we want to be out of this in 12 months, or 18 months, stronger than we were before with a higher market share. That’s why we have been investing strongly in online and in digital marketing, tastings and in the off‐trade.
“We want to leave this period better than we started, and that’s very important if you are a family company because you are thinking about the long term.”
Via The Spirits Business