After the dramatic turnaround over the last two years under the astute stewardship of former managing director and chief executive officer, Wayne Yip Choy, Angostura Ltd looked in-house and selected Robert Wong as the successor.With more than 20 years of experience and being in charge of many departments while moving up the ranks, Wong now has the opportunity to chart his own course for the globally-recognised rum producing company. Before his elevation on January 1, 2012, Wong was executive manager for rum bulk sales.Yip Choy helped turn Angostura’s performance around, after the company posted a billion-dollar loss in 2009 because of money owed to it by its parent, CL Financial.In 2010, the Angostura Group recorded an after-tax profit of $371 million.Testifying before the Sir Anthony Colman-chaired commission of inquiry into the collapse of CL Financial subsidiaries, Clico/British American Insurance Company (Trinidad) Ltd, and the Hindu Credit Union last September, Michael Carballo, former chief financial officer (CFO) of CL Financial, said funds for purchasing companies in the United States and Europe to expand CL Financial, were borrowed using Angostura’s good name.
Carballo said when the deals went bust through a lack of due diligence, the losses were placed on Clico’s books, making policyholders liable for all risks involved in risky decisions made in the boardroom or by former executive chairman, Lawrence Duprey.Carballo said when he assumed the position of CFO in 2008, CL Financial owed $3.3 billion to Clico, and it was company practice to keep risky deals off Angostura’s books by arranging inter-group funding to hide such ventures.When Yip Choy joined Angostura in 2009, he made a swift turnaround of the company’s misfortune.In its 2010 financial report, Angostura recorded the “strongest performance” in its history. Under his stewardship, Yip Choy moved the company from a 2009 $1 billion-plus loss to a 2011 after-tax profit of $102.7 million.This according to its nine-month period September 2011 unaudited financial report.In an interview with the Business Guardian last week Friday, a composed Wong expressed confidence in taking over from Yip Choy. Describing his take over as a smooth transition, he said he and his executive team will continue to build on the successes of the world-renowned Angostura Bitters-producing company.“A good leader is as strong as the relationship he has with his workers,” Wong said humbly.He explained that the executive team has been working alongside Yip Choy in turning the company around.“In all respects, we have worked together on this. I was part of that executive team, so the same team is here contributing to the company. So I do not see a challenge in us continuing because all of our development strategies have been medium- to long-term.“We have only just began to put things back in place as we take the company forward.”
Investing in core business
Prior to the turnaround, CL Financial, the parent company of Angostura, had plans of creating a global rum dynasty. Angostura was the centrepiece of that plan. CL Financial made several investments, one of them being the 2008 purchase of an 86.6 per cent stake in Lascelles de Mercado (parent company of Appleton Jamaica Rum), for US$676 million, for which Angostura was the guarantor. Wong, like Yip Choy, admitted that the challenges Angostura faced were all due to investments made by CL Financial. “We were in a position where Angostura was now being stretched to make a lot of global investments, whereby CL was focusing on expansion and acquiring companies globally. It was a good vision, but I guess things didn’t work out because we were stretched a little bit too much.” Wong said that situation has changed and Angostura has returned to investing in its core business—that of making rums—and this is reason for the major turnaround.
He stated that the same ambition that fuelled the international drive was taken to refocus Angostura’s performance in the local market, without sidelining its global vision. Wong recounted how the process of turning around the company took place.
“We disposed some of our non-profitable assets and would continue to do so as we have a few more.”
Unwilling to divulge which assets the company is planning to dispose of, Wong pointed to the other measures, which included continued plans of re-branding, re-imaging, marketing and advertising with a focus on main products. In its September 2011 unaudited financial reports, Gerald Yetming, chairman of the CL Financial, Angostura, Clico and Lascalles de Mercado, said Angostura year-to-date selling and marketing costs of $81.4 million were 39 per cent higher than 2010 levels. The major part of this spend was incurred in the final quarter of the year when its Single Barrel rum was gaining momentum. The report stated that 2011 spend includes the cost of promoting the Single Barrel rum campaign as well as re-imaging activities of its premium brands: Lime Lemon, Bitters, popularly known as LLB, the iconic all-purpose aromatic Bitters, premium rums 1919, 1824 and its international product branded Angostura Trinidad Caribbean Rum.
“Our strategy is to get into profitable niche markets to grow our business.” Apart from the main vision to be the most profitable rum company in the Caribbean and the largest aromatic bitters company in the world, Wong said Angostura has plans to develop the LLB drink into a major international brand.
The drink that has become very popular in T&T was first marketed in Australia as part of Angostura’s international re-branding exercise and was then introduced locally. Wong stated that the company is presently working on a project to take LLB into five new territories under the trademark licensing agreement for manufacturing and distribution. He said by the second quarter of 2012, LLB should find its way to the top of the five places targeted, and that country would then be responsible for marketing the drink in the other four countries. Asked to identify the countries, Wong smilingly cited a confidentiality agreement which prevents him from disclosing the information, but said more would be released later. He managed to reveal, though, that it would be major markets in Central America, North America and Europe. The LLB product, Wong said, would be marketed together with its leading iconic bitters, which is already sold in 150 countries. “So we get a lot of traction from the connection with bitters. The LLB brand has the potential to sell a few million cases.” There are plans to continue promoting Angostura Bitters through an education drive on the uses and its benefits that have been lost along the way. This would be done through global cocktail competition like the Global Cocktail Challenge to be held on Carnival weekend at Trotters for bartenders and mixologists. “There are a few countries bitters are not in, so we are working on a distribution drive to show the different uses in food as well.”
According to the 2010 report:
• Net sales for cased alcohol jumped from $321.5 million in 2011 compared to $243.5 million in 2010
• Bulk alcohol also increased with net sales at $104 million, while in 2010, it was $96 million.
• Net sales for Angostura Bitters in 2011 was $54 million and in 2010, $76 million, so there was a decline.
Wong explained that the decline occurred as a result of a shortage of glass in 2009, and that those orders were filled in 2010, which resulted in increased sales.
The top three selling products are Old Oak White, Forres Park puncheon and Black Label. Following behind in the premiums rums are Single Barrel, 1919 and 1824.
In taking the company forward, Wong said it was imperative that Angostura improves its technology to become more efficient. “Raw material costs keeps rising and, as a consequence, we need to become more efficient to remain competitive.” He revealed that the company spent a minimum of $10 million to upgrade its five bottling lines. Wong explained that the upgrade is a combination of Italian and German technology. The German technology, under the company Krones is used for labelling, while the Italian technology supplied by MBF and Bertolaso, is used for filling and capping.
Wong said that Angostura has so far upgraded two lines. A further two are in the process of being upgraded.
The benefits derived from this upgrade will include a reduction in manpower of between ten and 15 per cent, higher outputs and higher quality of assembly. The bottling plant is capable of roughly 36,000 bottles per hour.
Meanwhile, Wong said Angostura’s international rums are bottled in Scotland. Asked to explain, he said it was cost effective because Europe carries a smaller size of 700 millimetres than the other rums. He said considering the volumes and freight costs, it would be cheaper to bottle and produce the rums in Scotland. Glass and other raw materials are sourced in Europe. The Scotland-based company, Burn Stewart Distillers Ltd, an Angostura subsidiary, bottles and distributes the range of brands—five- and seven-year-old Gran Anejo, a white rum called the Reserver and the five-year-old Angostura Caribbean Rum, together with 1824, 1919—to only Europe and Asia Pacific.
Wong revealed that his technical director was on the recent India trade mission with the Prime Minister because the company is pursuing new technology from India regarding waste management systems.
He said India has more experience in waste management systems. “We are in the process of looking at the operation and within a month’s time, an Indian technical crew would help us set up a pilot plant.” On the trading aspect, Wong said India has a potential market for their premium rums. An international range of products already exists in India, which includes 1919, 1824, and a three-year-old reserver (a white rum) and two others that are not on the local market, but were developed specifically for the European market. Wong said that trading with India has not been easy. The company has been lobbying for India to change its duty structure and implement an appropriate classification structure for Angostura’s products. “So, hopefully, out of this visit there would be further trade negotiations for better duty structures.”
Angostura has done a lot of international rebranding in Europe, one of its main international portfolios.
Regarding the debt crisis in Europe, Wong seemed not to be overly concern about its effects on Angostura’s sales in the continent. “It has been volatile for a while and even though things were bad in Europe, we still got our consumption. So, hopefully, it remains the same.” He is also not unduly worried about Angostura repaying its European debts of 39.7 million euros, which has to be repaid between 2017 and 2018. Wong said there were efforts to restructure the loan. Notwithstanding that, he said there is a lot in the company’s favour with the European situation because repayment is based on the euro exchange rate. “We are confident within that timeframe, our company has the ability to repay our loans...our cash flow is very strong.. it’s just one loan; it’s not a challenge.”