Students from the Master in International Business Administration at Carlos III University has developed this analysis about the international business strategies in vermouth companies.
The following report will discuss the chosen business strategies of three different beverage companies that produce vermouth. It will delve into the history of each company and the decisions taken in order to expand globally.
International business strategies in vermouth companies
1. Martini & Rossi
Martini & Rossi was one of the world’s best-known vermouth producers. It started in 1847 when businessman, Alessandro Martini, and manufacturer, Luigi Rossi, decided to enter the industry of vermouth. At first, they only produced vermouth, then, in 1863 along came Teofilo Sola who collaborated in the creation of Martini, Sola & C.ia. A few years later, Teofilo Sola passed away, allowing the firm to adopt the name Martini & Rossi.
In 1863, they bought the Distilleria National di Spirito di Vino, in Turin, and created their first product, the Martini Rosso, a revolutionary vermouth with a smoother and sweeter flavour, as vermouth was originally quite bitter. In order to promote the product, the firm assisted the best Universal Expositions of that time, such as the EXPO Paris (1878) and Dublin (1865), which helped spread their brand across Europe. At the end of 19th century, the company took a big leap and entered the American market and developed subsidiaries in Argentina, New York, Geneva, Barcelona and London. Shortly after, the company became the leading brand in the United States, Brazil, Argentina, Greece, Portugal, Belgium, Switzerland, Turkey and Egypt.
Martini’s success is also due to their publicity and marketing campaigns, especially those from Europe and New York. Back in 1918, the campaign White Woman was created. It was a masterpiece because of its simplicity and its modern adaptation to society. Later on, in 1921, the firm decided to focus on futurist publicity by launching the futurism campaign, where you see a man chasing a bottle of Martini vermouth.
The first sponsorship of Martini & Rossi was in 1925 when they became the official sponsors of the Turin cycling race Gran Coppa Martini & Rossi. From then, in 1934, the company ceded its brand to the Gran Premi della Montagna and they designed the campaign Elixir di China and Vermouth Martini.
As this promotion strategy was successful, Martini & Rossi decided to take part on the automobilistic racing after the Second World War. For the first time in history, a placard with Martini and its logotype was shown at the finish line of the Spanish Gran Premio Automovilístico. Due to the successful response of their collaboration at sportive events, the company decided to focus their efforts on being the main sponsor of these kind of events in countries where they already had a consolidated presence.
Nowadays, Martini & Rossi still export their products worldwide. However, since 1996 Martini Rosso (and other Martini & Rossi products) is exported under the Cuban brand: The Bacardi Group (known for their wide variety of rums) allowing the now Bacardi-Martini product to be distributed amongst the Bacardi market. However, Martini continues developing their own publicity campaigns following the initial strategy that got them to where they are today.
International Strategies and Locations
Martini & Rossi have followed a global integration strategy. There wasn’t, and continues to not be, a need for cultural adaptation; therefore, the firm has developed several subsidiaries around the world that distribute the exact same product. They have also used an international integration strategy as the company continues to distribute its products to countries that do not have a subsidiary; therefore, there is no need to have subsidiary in a country in order to have Martini products.
Martini & Rossi’s internationalisation was originally based on culture and history. The company’s main focus were Italian immigrants that had migrated to other countries, such as Argentina, or cities, such as New York (Little Italy). This was a smart and easy way to enter a new country, as not only did their target market already know their brand, they were also providing a home comfort to the Italian immigrant community.
As previously mentioned, Martini and Rossi’s global reach was based on following the Italian immigrant community, which is how they started their growth in America. Once the founders passed away, Luigi Rossi’s sons (who had a wider vision) inherited the company. They created subsidiaries across Europe and expanded their reach across the globe.
Now, with the recent Bacardi-Martini partnership, Martini uses the Bacardi distribution network which is present in more than 150 countries and it is one of the most worldwide renown brands in the beverage industry.
2. Gruppo Campari
Gruppo Campari was founded in 1860 by Gaspare Campari, with a brand new product: the cherry red aromatic aperitif. In 1904, Campari’s first manufacturing plant was opened in Sesto San Giovanni, Milan (Italy).
The red spirit beverage experienced huge growth over the years and by 1923 its exports increased significantly. For this reason, Gruppo Campari decided to settle a manufacturing plant in France, Switzerland and Brazil. The expansion was unstoppable and in 1960s the firm was already present in 80 countries.
However, at the end of 20th century the beverage industry experienced quick and critical changes as a few companies had expanded their business or had added a wide range of products and brands. Therefore, they were becoming the main players worldwide through merging or acquisition processes, while small firms were researching in new emerging markets.
So, to be a part of this unstoppable expansion, in 1995, Gruppo Campari made a decision towards globalisation by acquiring new brands and products, and moving into new markets by carrying similar operations than other large companies. This aggressive strategy of acquisitions allowed Campari to expand widely into different sectors of the beverage industry.
Nowadays, Gruppo Campari is the main exporter in Italy and Brazil and operates in more than 190 countries worldwide. Due to this increasing expansion, they built 16 manufacturing plants around the world and own distribution networks in 20 different countries; they are now the 6th largest beverage company in the world.
International Strategies and Locations
Gruppo Campari primarily follow a global integration strategy. In each country, the majority of their products have the same quality, taste and format due to their marketing strategy to link all products to the Italian culture, tradition and personality. Their products are manufactured in large amounts and in independent manufacturing plants across the globe, allowing them to reduce production costs, obtain economies of scale and increase profits.
Gruppo Campari’s expansion is based on both organic growth (50%) and external growth (50%): on the one hand, they develop and produce their own product-line to export worldwide; on the other hand, they consolidate their presence in emerging markets by researching local popular brands and acquiring them to not only expand the company’s growth, but also to gain a new distribution network for their own products.
On the other hand, a key factor to their success is the investment in advertising and modern marketing that has built strong brand awareness over the years. They were pioneers in coloured printing advertisement for their products and often collaborated with renown brands and events, which increased their brand reputation.
In regards to global presence, Gruppo Campari’s headquarters are based in Sesto San Giovanni Milan (Italy), the city where its first manufacturing plant was built. Their products expand further and are exported to over 190 different countries worldwide. In 2004, due to their global expansion, Gruppo Campari developed 8 manufacturing plants across France, Italy and Germany (remaining close), and the USA and Brazil (via acquisitions).
Today the company has its own distribution networks in 20 countries and 16 manufacturing plants worldwide: Italy (4), Greece, Scotland, Jamaica (3), Australia, Mexico, United States, Canada, Argentina and Brazil (2). Without any doubt, it is one of the major companies of the beverage industry.
3. Fratelli Branca Distillerie
Fratelli Branca Distillerie was founded in 1845 by Bernardino Branca and was established in Milan. Initially, Bernardino invented Fernet-Branca, a drink originally used as a remedy for cholera. Nowadays, it is consumed not only for benefits to the digestive system, but for its natural and straightforward taste.
In 1862, Stefano Branca joined the firm and started a very ambitious process of internationalisation. He started by exhibiting the product across many international expositions and, in 1891, the firm increased its product portfolio and started to sell abroad.
Due to the migration of Italians to Argentina during the 19th Century, Fernet became a well-known brand. In 1925, the Argentinian firm Hofer & C. was awarded with an exclusive license to produce and sell Fernet. In 1941, sales were booming; therefore, they decided to found in Buenos Aires the Fratelli Branca Destilerías. This allowed the firm to take control of the production-line and sell its own products within Argentina, which was a milestone in the internationalization process. In 1955, the firm expanded its European production and, by 1987, it acquired the Distilleria Candolini of Tarcento (Friuli-Venecia Julia region).
In 1982, Fratelli Branca Distillerie went on to acquire an Italian company called Carpano (only 50%, the whole brand was not acquired until 2001). Carpano’s Antica Formula was the first type of vermouth actually sold by the company and adopted the name “The King of vermouths”, as it was created by Antonio Benedetto Carpano in 1786 for the King of Italy. The king enjoyed the drink so much that he declared it the “aperitivo” (aperitif) of the kingdom. Today, it is commercialized by Branca Distillery Company but with the same traditional recipe.
Currently, F. Branca concentrates the manufacturing process in Italy and Argentina. The products manufactured in Buenos Aires are sold to the domestic market and also in Uruguay, Chile, Bolivia and Paraguay. The products manufactured in Milan are sold to the rest of the foreign markets. Fratelli Branca Distillery currently produces a huge range of beverages such as bitters, brandy, champagne, cognac, gin, grappa, liqueurs, rum, tequila, vodka, whisky, wine and vermouth that from this last one, the firm produces 5 different types of vermouths under the brand of Carpano.
In 1999, Niccolo, the late president’s son, redesigned the group and founded the current holding Brand International SPA to compete in new markets and with other multinational companies. In order to direct the production of its facilities and other real estate properties, the company created Branca Real Estate S.r.l. Moreover, Branca International S.p.A. controls the producers and distributors of beverages (Fratelli Branca Distillerie S.r.l. in Italy and Fratelli Branca Destilerías S.A. in Argentina).
Branca International SpA, with a centralized management of financial flows and group investments, has two objectives: to help with expansion projects and to strengthen its presence with the acquisition of brands and companies from relevant sectors in Italy and abroad, in order to diversify investments and increase the importance of international relations established over the years.
The company also owns a small portion of Bioera S.p.A. (a firm which produces and sells organic products, natural cosmetics and traditional food products) and Whitestones S.C.A. (a global advisory and assets management firm).
International Strategies and Locations
Throughout research, it is quite clear that the internationalisation strategy taken by Blanca was a global strategy. They produce and sell the same products within each market without adapting to cultural differences; at the same time, they manufacture the product across two highly efficient production facilities in order to obtain economies of scale.
The main strategy of Fratelli Branca Distillerie Company is organic growth. The firm invested directly in Argentina (when it established further manufacturing facilities in Buenos Aires) and currently exports its products to each market from its two production sites. To develop its distribution network, it usually makes distribution agreements with other firms, such as Rémy Cointreau in Italy, or Blavod Wines and Spirits Plc. in the U.K.
However, the company also acquired some minor Italian manufacturers and brands (which can be considered a whole ownership strategy) and they also created an holding to diversify their risks, manage their real estate properties and investments, and develop major financial resources to compete with the main players of the industry.
Regarding its global presence, the production is located in Italy, as it is the firm’s country of origin, and in Argentina because of its huge similarities with the Italian market. Hence, economic and demographic indicators were taken into account alongside cultural factors to choose these locations. The company sells its products in 160 different countries which were initially chosen because the firm believed there where markets with an increasing demand of this kind of products.
In summary, despite the differences between the international business strategies in vermouth companies, the three of them have implemented a global strategy instead of applying a local responsiveness strategy due to historical and environmental factors as a way to reduce manufacturing costs and obtain profits. However, they also use a similar operating strategy as they take advantage of their reputation in Italy in order to introduce their products into new markets.
Their expansions are based on both organic and external growth, by developing new internal products at the same time as acquiring key brands of local companies which fit with the company’s production-line and values. By taking these strategies, they can expand the presence of their own products by taking advantage of the local distribution networks already settled by local company.
Last but not least, regarding their worldwide presence, the three firms have expanded to a vast number of countries across five different continents, with the aim to reach new emerging markets. Although they entered these countries with slightly different strategies, this expansion allowed them to distribute their products and develop economies of scale, meaning a significant growth of the company at an international level.
And if you want to know more about this sector, don’t miss the Porter’s analysis this group developed for the Vermouth Industry in Costa Rica!