We're going to talk to a veteran of the industry about what he's seeing. Our next guest has served on the executive leadership team of Beam Suntory for 12 years, spending the last five as CEO and president. And he's getting ready to step down on October 1st.
Joining us now is Albert Baladi, Beam Suntory CEO and President. And we also have Yahoo Finance's Executive Editor Brian Sozzi back with us. Thanks so much for joining us.
And you talked about the evolving taste in the US and the fact that the spirits industry has been gaining. As a matter of fact, spirits is now the number one if you look at value, number two in terms of volume. And this is all because I think consumers are gravitating more towards spirits. You know, it offers a lot more choice than beer has, whether you want a craft cocktail or you want to have a more refreshing lighter type of spirit.
Great opportunity for consumers to discover that. And we're fueling this with innovation and all the work that we're doing with our brands. So it's always about a foot in the past and in the history and the legacy. But more importantly, a foot in the future and looking where the consumer is going.
BRIAN SOZZI: Do you view the Japanese whiskey part of your portfolio as an undervalued crown jewel inside of the company? When I go to the liquor store, it's still behind certain cases. The price points are higher. Are people gravitating to this? And are they missing the Mark?
ALBERT BALADI: No, I mean, people are gravitating towards Japanese whiskey. As a matter of fact, we don't have enough Japanese whiskey to go around given the demand that's out there. And some of this is fueling the pricing that you see. And the reason for it is really very much-- I mean, at least, the way Suntory does its whiskey-- I cannot speak on behalf of all Japanese whiskeys.
But for Suntory whiskey, a lot of things come together to make these whiskies very, very unique. Firstly is, I think, if you look at our most important distillery, which is in Yamazaki just on the outside-- on the outskirts of Kyoto, the water quality there is very, very unique. It's a very pure water compared to the water you have in Scotland or maybe in Kentucky that has more mineral content.
And it gives the liquid something quite unique. The summers in that part of the country in Japan are very hot and humid. The winters are cold and dry. And that creates also an interaction between the liquid and the wood that gives it very deeper flavors. So you have the kind of the nature aspect of it. The other aspect is that Japanese distilleries-- at least, Suntory's distilleries-- have a lot of variety within them to create different blend profiles.
So there's, like, eight different pairs of copper stills. Suntory uses different strands of grain. And then there's different casks. And this gives our master blenders a great opportunity to blend to perfect taste. And then finally, I would say it's the Japanese craft and eye for quality that you see in all Japanese products around the world, which come to play.
All of these factors come together to make sure in fact that the Japanese whiskies are very highly awarded, particularly Suntory's whiskies. The world has woken up to those probably 20 years ago when Suntory Whisky started accumulating all these awards. And there's not enough demand to go around. We're working hard on this. We're investing a lot in capital. Hopefully, in a few years from now, there'll be a lot more.
BRAD SMITH: I think you mentioned something really critical there too. And the world is also waking up to hotter temperatures. This is one of the hottest years on record for the planet Earth.
DIANE KING HALL: Yes.
ALBERT BALADI: So as we think about what you were mentioning in the distilling process even, how is climate change changing the distilling process, and thus, for your company, the volumes that are able to be produced, and thus, the revenue profile of the business as well?
ALBERT BALADI: Well, these are things that we take into consideration, for sure. And when we age our liquid, I mean, obviously, we taste them. And we make sure that they're ready to be released at the right times. Quality is always top of mind. But more importantly, I mean, we're incredibly committed to sustainability.
And we want to play our part in ensuring that, I mean, we're careful with what we do with the carbon footprint, with everything we do around. From a sustainability and environmental sustainability standpoint, we're very vocal. This is a big priority for us. And primarily, as you said, I mean, the whisky making is very much an agricultural process. These are very natural products.
They rely on the quality of water. They rely on the quality of the wood. So we go to great lengths to ensure that we're protecting the environment around our distilleries.
BRAD SMITH: And then just additionally here, when you talk about that sustainability you had talked about even recently how this is going to change the packaging too. Laphroaig was one of those. How quickly do you see that cascading across the other brands should consumers expect a vastly different bottle than they've become accustomed to for all of these brands over the years?
ALBERT BALADI: Look, we're always innovating and evolving our packaging and our look. And we've been on a journey of doing that, obviously, over the last few years, particularly since we've introduced our brand led operating model, where now we have kind of leaders looking after our brands and our distilleries in ways we didn't have before.
I can call out, for instance, brands like Basil Hayden, which has gone through a major packaging relaunch to great success. On the other hand, you've got a brand like Maker's Mark, which is really sticking very much to what it used to be when it was originated. And it's staying very, very close to its DNA. So-- so different courses for different horses.
But clearly, the visual identity of a brand, as you say, is something that's incredibly important as part of the marketing mix.
DIANE KING HALL: And so I want to ask you about any expansion plans. Are there any plans to expand the wheelhouse, whether we're talking about your whiskey or even going over to-- I'm not a whiskey drinker myself. Let's say rum. You have one rum brand. Are there any expansion plans or collaborations that are coming down the pike?
ALBERT BALADI: So look, I mean, we've set our ambition to be the most admired premium spirits company in the world. And that's a very bold goal that we've set for ourselves. And it means for us kind of a strong drive towards premiumization and a portfolio that tackles and addresses that and goes after the consumer need. It also made a strong drive towards ready to drink. And we're driving those two categories.
So we're seeing a lot of expansion on the ready to drink side of things. And we're using both a combination of acquisitions but also organic development to expand on the full bottle spirit side. We've introduced new brands like Roku Gin, for instance, from the House of Suntory, a brand new to world five, six years ago that has been doing incredibly well. We've done partnerships with brands.
We've got equity in some brands. So it's a combination of organic and inorganic to make sure that we're meeting the consumer needs.
BRIAN SOZZI: US investors, I would say, over the past month are seeing slowing Chinese economy. The data continues to get incrementally worse. What are you seeing in terms of your brands over in China and then even Japan? If you compare the two economies, Japan is pretty hot right now. What are you seeing in both areas?
ALBERT BALADI: Look, I would say, both markets have been net contributors to growth this year. China is up strong double digit. Japan is up strong double digit for us. And part of the reason is that these two countries are coming out of COVID. You know, when you look at year-- versus year ago comparisons, you need to look at what was going on a year ago. And a year ago, those two countries had strong COVID restrictions.
As the on-premise and the out-of-home channel has reopened, you're seeing tourists coming to those countries and so on. And the spirits industry is benefiting from that in both countries at the moment.
DIANE KING HALL: And I want to ask you. So I've been talking to some AI experts this week. They say AI can make every industry better. I find that hard to believe for certain industries. But what about technological advancements within your business? Is AI even-- is it a factor?
ALBERT BALADI: It is a factor in everything we do and the way we communicate with consumers. There's, of course, productivity opportunities to be had with AI. So we're very focused on doing that. On the other hand, when it comes to whisky making and the craft of that, we really believe that this is something that is born, is inside, and is going to be very hard to replace by machinery.
BRAD SMITH: I have been very much overserved by some of your beverages over the years. And so, you know, thank you in the team for bringing that distribution to New York here so we can all take part on that. [LAUGHS]
ALBERT BALADI: Of course, of course.
BRIAN SOZZI: Time to get out of here, bro.
BRAD SMITH: Yeah, it is. All right.
DIANE KING HALL: It's 5:00 somewhere.
BRIAN SOZZI: It's 5:00 now.
BRAD SMITH: We're going to leave with Albert actually. Albert well out of here is the Beam Suntory President and CEO. And our own Brian Sozzi as well joining for the conversation. Thanks so much.
ALBERT BALADI: Thank you.