Belvedere S.A.

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Key Dates
1991: Jacques Rouvroy and Krzysztof Trylinski found France Euro Agro to import French wine to Poland.
1993: Company develops marketing concept featuring high-end decorated bottles for Polish vodkas, including Belvedere Brand, then expands concept to international level.
1997: Company changes name to Belvedere S.A. and lists stock on Paris Stock Exchange.
1998: Belvedere launches Sobieski vodka brand and creates distribution network in Poland.
2001: Company sells rights to Belvedere and begins acquiring privatized distilleries in Poland, becoming leading vodka group in that country.
2006: Belvedere diversifies portfolio and geographic focus with acquisition of Marie Brizard International.
2007: Company founds U.S. distribution subsidiary and launches Sobieski brand there.

Type: Public Company
Address: 10 Ave. Charles Jaffelin, Beaune, F-21200, France
Telephone: (+33 03) 80 22 93 83
Fax: (+33 03) 80 22 93 84
Web: http://www.belvedere.fr
Employees: 1,965
Sales: EUR 889.8 million ($1.13 billion) (2006)
Stock Exchanges: Euronext Paris
Ticker Symbol: 60873
Incorporated: 1991 as France Euro Agro
NAIC: 312130 Wineries; 312140 Distilleries
SIC: 2084 Wines, Brandy & Brandy Spirits; 2085 Distilled & Blended Liquors

Belvedere S.A. is a fast-growing France-based spirits group with a strong presence in the Eastern European market. In Poland, the company is the single largest producer and distributor of vodka, through its premium Sobieski and other local and regional brands. Sobieski, created by the company at the end of the 1990s, is also one of the world's top ten premium vodka brands. The company acquired four distilleries during the privatization of Poland's state-owned distilleries in the early 2000s; the company acquired a fifth, in Vilnius, Lithuania, and also owns two wineries in Bulgaria. Since the middle of the first decade of the 2000s, however, Belvedere has developed a two-pronged strategy of expanding its geographic focus while building its brand portfolio beyond the white spirits category. Acquisitions are helping to drive this strategy. Notably, in 2006 the company acquired Marie Brizard International, one of France's oldest producers and distributors of cordials, liqueurs, and other spirits. The company bought the Danska vodka brand, the fourth largest selling vodka in the duty-free channel, the following year. These acquisitions complement the group's entry in the French wine market, through its purchase of Provence-based Chateau d'Esclans. The company also owns the William Pitt brand, the leading Scotch whiskey brand in France. As part of its geographic expansion, Belvedere has entered the United States, acquiring production facilities and founding a distribution subsidiary, Imperial Brands, Inc., in Florida. Belvedere is listed on the Euronext Paris stock exchange, and is led by cofounders, principal shareholders, and, respectively, chairman and managing director, Jacques Rouvroy and Krzysztof Trylinski. The company had sales of EUR 889.8 million ($1.13 billion) in 2006.

Marketing Idea in 1993

In 1991, Jacques Rouvroy, a graduate of France's École de Commerce, teamed up with Krzysztof Trylinski, a popular Polish athlete then residing in France, to form a company importing French wines to Poland and Czechoslovakia. Rouvroy and Trylinski founded France Euro Agro that year, along with a Czech subsidiary and a subsidiary in Poland, France Vins Company. Euro Agro soon began to diversify into the wider spirits category.

In 1992, however, Rouvroy and Trylinski hit upon a new idea. With the collapse of the Communist regime and the introduction of the free market, Polish consumers had begun to show an interest in branded goods, especially in luxury products and brands. Rouvroy and Trylinski recognized an opportunity to extend their own business in wine and spirit. Specifically Euro Agro targeted the market for vodkas, the best-selling spirit in Poland. That country was also one of the world's single largest vodka markets, trailing only Russia and the United States.

Euro Agro's idea was to create a line of premium vodkas packaged in high-end bottles decorated with Polish national symbols. The bottles were designed and produced in France, and imported to Poland to be filled by a local brewery there. In this way, the company was able to overcome the steep import duties placed on foreign spirits brands in order to protect the local market.

During the Soviet era, the Polish vodka market had been entirely controlled by the state, with production completed through a network of 11 distilleries. In 1991, as a partial reform of the market, the government restructured its distillery network into 11 independently operating distilleries, or Polmos, which remained controlled by the government. Euro Agro's Polish partner began making the rounds of the distilleries seeking a partner for the company. In 1993, the company reached an agreement with Polmos Zyrardow, one of the smallest of the distilleries.

Belvedere Success

Zyrardow at the time had no viable brands of its own, and was struggling for its survival. The agreement with Euro Agro quickly became a strong partnership, as the two companies became determined to produce a high-quality, high-end vodka. The distillery soon succeeded in developing a light-flavored vodka, positioned between the flavor of Absolut and the more full-flavored Polish vodkas such as the Wyborowa brand. Yet the new vodka's success lay as much in Euro Agro's bottle designs. The first of these also became one of the companies' most emblematic, featuring a window overlooking Belvedere, the Polish presidential mansion and one of the symbols of the recent revolution. Other designs featured Chopin and the Krakow Cathedral.

The unusual bottles helped the new vodka brand, called Belvedere, gain instant notoriety in Poland. Despite being priced at two and even two-and-a-half times that of competing vodkas, the Belvedere brand became one of the highest-selling in the country. As Rouvroy explained to the Wall Street Transcript: "People went crazy for these new products, because for the first time ever, they had an opportunity to find on their markets, an upmarket product that looked like a Western product, but had strong features of the Polish and Czechoslovakian local culture."

The bottles also quickly found international success. Part of this came as a result of chance. One of the first shops to feature the bottles was a small duty-free store in Warsaw's Okecie Airport. The vodka became a popular souvenir item for foreign visitors, and before long demand grew beyond Poland. The success of these bottles led Euro Agro to roll out its bottling concept to other markets. Starting in 1994, the company added operations with local distilleries in China, Japan, Greece, Russia, Bulgaria, Belorussia, Croatia, and Yugoslavia, as well as markets in Latin America. While vodka remained the group's primary market in Eastern Europe, Euro Agro's bottles elsewhere contained the local white spirits favorite, such as ouzo in Greece, tequila in Mexico, pisco in Chile, and white rum in the Caribbean.

In support of its growing operations the company beefed up its logistics end, creating a dedicated subsidiary based in Germany. In France, the company formed a subsidiary, Mad Sarl, which became responsible for its glass purchases, as well as overseeing its bottle decorations subcontractors.

Among the company's international customers, meanwhile, was the wife of former presidential aide Zbigniew Brzezinski, who ordered several cases of the vodka for an art exhibition in New York City. In this way, the Belvedere brand gained almost instant access into U.S. high society. Attracted by the brand's success, Phillips Millennium Beverages (PMB), a drinks distributor in the United States, approached the Zyrardow distillery with an offer to become the Belvedere brand's U.S. representative.

Becoming a Case Study in 1998

Belvedere hit the U.S. market with a bang in 2005. Within two years, the number of cases sold had jumped from just 100,000 cases the first year to more than 1.2 million. The Belvedere brand quickly emerged as the top-selling premium vodka brand in the United States.

Nonetheless, the Polish market remained Euro Agro's primary source of revenues. In the late 1990s, the company moved to respond to a number of significant changes in that market, notably, the upcoming end of protective import duties, and the coming privatization of its distilleries. The former promised an onslaught of new competition in the vodka market, as foreign brands were able to compete on an equal basis. In response, the company decided to develop its own distribution operations in Poland to ensure its own brands' viability. At the same time, the privatization of the industry gave the company the opportunity to move from being essentially a marketing company to becoming a full-fledged drinks producer.

In order to finance its new strategy, the company went public in 1997, listing its shares on the Paris stock exchange. For the offering, the company changed its name, adopting the name of its most successful brand to become Belvedere S.A. Over the next year, Belvedere's stock rose strongly, from FRF 125 at the time of the offering, to more than FRF 1,400.

Belvedere's ambitions quickly ran into a major hurdle, as PMB attempted to gain control of the Belvedere brand. The company found itself vulnerable because of an earlier mix-up in the registration of the Belvedere brand and its bottle design. As a result, in 1996, the company and the Zyrardow distillery had reached an agreement in which the then-Euro Agro was given ownership of the Belvedere brand and bottle design, while Zyrardow was granted a free and permanent license to produce the vodka, distributed in the Belvedere bottle.

Belvedere found itself under attack by PMB. At first, PMB attempted to register the Belvedere brand as its own in 29 different countries. When Belvedere successfully countered that effort, Phillips Millennium launched an all-out assault on the French group in an effort to void the 1996 agreement made between Euro Agro and the Zyrardow distillery.

PMB began lobbying members of the Polish government, including reportedly giving $10,000 to a charity run by the country's president. Part of PMB's strategy involved discrediting Belvedere itself. For this, PMB hired the Edelman public relations firm to launch a negative publicity campaign. A centerpiece of that campaign was the creation of a web site claiming that Belvedere was under investigation by the COB, the French equivalent of the Securities and Exchange Commission. As a result, Belvedere's stock crashed, and the company's survival was threatened.

The attack, and Belvedere's ultimately successful defense, represented the first time the Internet had been used as a tool to attack a quoted French company, and soon became a case study presented at business schools in the country. Belvedere ultimately agreed to sell the Belvedere brand to PMB for a total of $22 million. The COB later exonerated Belvedere of any wrongdoing, and instead fined PMB for its attempt to defame the company. (As a footnote, in 2007, the Belvedere Vodka brand, acquired by the LVMH luxury group, found itself under attack by a California winery that claimed to have owned the Belvedere brand for more than 35 years.)

Changing Course for the New Century

Faced with its difficulties surrounding the Belvedere brand and the attack by PMB, another company might have found itself out of business. Yet, if Belvedere ultimately agreed to sell its namesake brand, it was because the company had moved on to something bigger.

In the midst of its battle with PMB, Belvedere had recognized the need to adapt to the future liberalization of the Polish vodka market. The company recognized the need to create a new midrange vodka brand that could position itself as a direct rival to the foreign brands soon to enter Poland. For this, the company developed Vodka Sobieski, named after King Jan Sobieski III, a legendary figure in Polish history. Produced at the Zyrardow distillery, the new brand was supported by a major advertising campaign, featuring the well-known French actor Jean Reno. Instead of using etched bottles, the Sobieski brand was packaged in more standard bottles. This enabled the company to market the brand at an affordable price.

Polish national pride helped with the rest. Within a month of its launch Sobieski had sold 500,000 bottles. The brand quickly became one of the top-selling vodka brands in Poland. At the same time, with a new strong brand in the company's portfolio, the investment community once again embraced the company's stock, which recovered its former levels by the year 2000.

The success of Sobieski also enabled Belvedere to position itself as one of the frontrunners in the privatization of Poland's vodka industry. Belvedere first acquired a 45 percent stake in the small Alco Pegro distillery in 2001. By the end of 2002, the company had bought the larger Starogard distillery in Gdansk and the Polmos Krakow distillery. A fourth Polish distillery, Polmos Lancut, was acquired in 2004. By then, the company had also bought a distillery in Lithuania, Vilnius Degtine. By the end of its acquisition drive, Belvedere had become the largest single vodka company in Poland, with its flagship Sobieski brand, and a portfolio of ten major regional brands.

Belvedere was primarily refocused on the Polish market, which accounted for 92 percent of its sales of EUR 349 million in 2003. The company added a new subsidiary, importing Bulgarian wine into Poland, meeting new success notably through the acquisition of the rights to use the well-known Sofia brand in 2003. By mid-decade, Belvedere had also acquired two wine estates in that country, and had begun developing its own premium quality wines.

Expanding the Portfolio in 2006

Belvedere failed in its attempt to buy Poland's largest distillery. As a result, the company later lost its leadership position in the market, becoming only the second largest vodka seller. Instead, Belvedere once again adapted its strategy, and focused on broadening its operations, both geographically, and toward a more diversified drinks portfolio.

The company quickly achieved both, when it reached an agreement to acquire Marie Brizard International at the end of 2005. Marie Brizard was one of France's oldest drinks groups, founded in 1795. The purchase not only gave Belvedere the perennially strong Marie Brizard cordials brand, it also added brands including William Peel, the number one Scotch whiskey brand in France; Old Lady's, the country's second largest gin brand; and San José Tequila, the leading tequila brand. The Marie Brizard purchase also included a soft drinks component, including the Pulco fruit syrups brand; this was sold in 2007 in order to pay off debts taken on by the acquisition.

Belvedere continued targeting add-on acquisitions. The company acquired Chateau d'Esclans, a Provence-based vineyard, in 2006. Also that year, Belvedere targeted the duty-free market, acquiring the Danzka vodka brand from Absolut-owner V&S. The acquisition gave the company the fourth largest selling duty-free vodka brand, and an entry point for a wider rollout of its portfolio in the duty-free channel.

The strength of the Sobieski brand in the meantime encouraged the company to make a new attempt to the enter the U.S. market. The company began building a base of operations in Florida in 2007, buying Florida Distillers, a producer of bulk and branded beverages, as well as vinegar and other products with four production facilities. Belvedere then created a dedicated U.S. distribution subsidiary, Imperial Brands, in order to launch Sobieski in the United States.

For this, the company positioned Sobieski as an inexpensive alternative to the highly expensive super premium category, suggesting "It's time vodka drinkers knew the truth about vodka. ... In essence, they are paying for fancy packaging and bloated marketing costs." An interesting twist, considering that just such marketing lay behind Belvedere's initial success. Yet Belvedere had successfully transitioned itself from a mere marketer to a fast-growing, diversified wine and spirits group in the new century.

Principal Subsidiaries

Belvedere Czeska; Belvedere Distribution (Bulgaria); Belvedere Logistik (Germany); Chais Beaucairois Sas; Cognac Gautier Sa; Euro-Agro Warszawa (Poland); Imperial Brands, Inc. (U.S.A.); Magichesky Kristall (Russia; 50%); Marie Brizard & Roger International Sa; Menada Vineyards (Bulgaria); Sakar Vineyards (Bulgaria); Sci Roger; Sobieski USA; Tianjin Belvedere International Trade Co. Ltd. (China); Vilnius Degtine (Lithuania); William Pitters International Sas.

Principal Competitors

Christian Dior S.A.; LVMH Moët Hennessy Louis Vuitton SA; Suntory Ltd.; Pernod Ricard S.A.; Maxxium Worldwide B.V.; Diageo Scotland Ltd.; V&S Vin & Sprit AB; Remy Cointreau S.A.; Champagne Moët and Chandon SCS.