In High Spirits - Maxxium (A) (B): Demonstrating Successful Partnership Management

During the 90s, the international spirits industry was transformed from one dominated by family-owned SMEs, to a highly concentrated environment with a few main players battling for supremacy. While overall consumption of wine and spirits was declining in most developed markets, consumers showed a sustained appetite for premium products. Associate Professor in Entrepreneurship Ha Hoang and Research Associate Rumiana Lulova consider the case of one of the leading route to market firms in the spirits industry, Maxxium Worldwide. Maxxium demonstrates how growth through successful alliances and well-maintained partnership management can be achieved remarkably quickly.

by Ha Hoang
Last Updated: 23 Jul 2013

During the 1990s, the international spirits industry was transformed from one dominated by family-owned SMEs, to a highly concentrated environment with a few main players and their portfolio of brands battling for supremacy. While overall consumption of wine and spirits was declining in most developed markets, consumers showed a sustained appetite for "trading up" to premium products. Happily for distillers, this presented the opportunity to improve margins, mainly through bolstering brand awareness. At the same time, distribution and wholesaling channels were also concentrating, especially in Europe. All of this put smaller drinks-makers at a disadvantage; only the bigger players were now able to achieve the "critical mass" of economies of scale needed to be cost efficient in direct distribution.

Associate Professor in Entrepreneurship Ha Hoang and Research Associate Rumiana Lulova consider the case of one of the leading route to market (including distribution, sales and local marketing) firms in the spirits industry, Maxxium Worldwide. Formed as a JV between four medium-sized wine and spirits makers with equal shares, Maxxium demonstrates how growth through successful alliances and well-maintained partnership management could be achieved remarkably quickly.

Maxxium was formed in 1999 with the merger of the distribution systems of premium, family-owned European producers - France's Rémy Cointreau and Highland Distillers of the UK - and Fortune Brands, a US-based holding company of leading premium wines and spirits brands, including Jim Beam Brands (JBB). With global economic uncertainty hurting firms' bottom lines through much of the decade, Rémy Cointreau saw the benefits of creating a shared distribution network with a few like-sized premium brand spirits producers in order to focus on building and sustaining its spirits brands. The authors detail the three main criteria used by Rémy Cointreau to identify and select their eventual partners.

The case offers a revealing example of three firms from different countries and naturally quite different corporate cultures being able to create a JV that was distinctive from its founding fathers. This was embodied by a "Roles and Responsibilities" agreement that stipulated the decision-making processes between JV and its shareholders at multiple governance levels.

Another lauded initiative taken by Maxxium was its tool for developing new brands with its shareholders. Maxxgate was intended to provide a rigorous screening process that only brands having a very high chance of succeeding internationally would be launched. Another tool, the Brand Priority Matrix, was intended to ensure that all shareholders' brands were afforded equal and appropriate treatment.

While it naturally took time for the people of Maxxium and the corporate shareholders to acclimatise to working together, its partnership management techniques were soon widely regarded as one of its core capabilities. The authors explain how this extended to creating tools to evaluate the performance of external partnerships that it operated. The results would be shared with partners as a basis for improvement and knowledge and best practices could be shared internally.

Despite the inevitable initial difficulties, an effective partnership management model was formed. The JV succeeded in greatly lowering distribution costs for its shareholders and boosting net sales by over 40% in the first three years of the JVs operations.

The (B) case describes efforts made by Maxxium to assure the shareholders and partners that its operational model could still be the driver for long-term sustainable growth, particularly with the addition of a fourth equal partner, Sweden's Vin & Spirit, owners of Absolut vodka.

INSEAD 2004

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today