Across the atlanticI know Jack |
How Jack Daniels took over the world.
Last week I had the wonderful experience of touring the Jack Daniels' distillery in the small town of Lynchburg, Tennessee.
One can take a virtual tour of the distillery here, but it's nowhere near as good as the real thing, primarily because you can't smell anything online. The distillery is one of the more odiferous places I've visited. The barrel houses, distilling stills and mellowing warehouses smell of whiskey and white oak, and the whole place is overlaid with the scent of sour, fermenting mash, a porridge-like stew made from corn, rye, malted barley, yeast and water out of which the whiskey is distilled. The mash sounds icky but smells wonderful, like very yeasty bread.
At the heart of the distillery is the icy cave spring, which provides the low-iron, limestone-filtered water that feeds the whole operation. Also on site is a rickyard, where employees burn sugar maples to make the charcoal through which the whiskey will be filtered, and a small bottling operation where the premium Single Barrel brand is bottled and packed. The whole operation is peopled with bearded, beer-bellied, middle-aged Southern men who talk with a drawl and tell amusing yarns; despite its status as global giant, Jack Daniels feels pretty much like a family business.
Wandering around Lynchburg is also fun, because it's so clear that Jack Daniels is the town's raison d'être. Every store sells Jack merch - coffee with Jack Daniels, pecans roasted in sugar and Jack Daniels, Jack Daniels T-shirts, Jack Daniels barbeque sauce, Jack Daniels shot glasses.
The only Jack Daniels merchandise you can't buy is Jack Daniels itself, because among the more fascinating quirks of this little village is the fact that, despite housing America's biggest whiskey maker, Lynchburg is in a dry county.
Moore County, which houses Lynchburg, is ‘dry', which means that it is illegal to buy or sell alcohol within the county limits, although a recent exception was granted that allows the distillery to sell special, over-priced commemorative bottles of whiskey to tourists. You cannot, however, buy a bottle of plain old Jack, or any other alcoholic beverage at any of the town's little cafes and restaurants, a rather mind-bending experience.
Like the town and county it operates from, Jack Daniels is interesting. The company makes about 10m cases of whiskey a year, exports to some 130 countries around the world, and generates half of the profits of parent liquor conglomerate Brown Forman (around $800m in 2009), yet it operates out of the same 9-acre distillery it's (more or less continuously) called home since the 1860s and directly employs only around 400 people. The company survived the Prohibition, the Great Depression, and the implementation of a federal liquor tax regime, which employees still seem to resent, to become America's number one whiskey maker and exporter, all this from the single distillery in Lynchburg.
Incidentally, according to my tour guide, South Africa is the company's seventh-largest export market, which made me proud, considering South Africa is only 26th in the world by population - clearly South African drinkers are working hard to make up in per capita terms what we lack in absolute numbers.
So how does a small whiskey company, located in a county that prohibits the sale of alcohol, become such a dominant global player? My tour guide told me that the reason is the quality of the product, but of course it's more than that (although the quality, especially of the Single Barrel, isn't bad).
One of the main drivers of Jack Daniels' success is its powerful brand. Through many decades of advertising campaigns the company has fostered a brand image as an authentic, American product, with a long history and venerable tradition. A lot of the clothing associated with the brand, for example, is vintage-styled, tapping into people's nostalgia, and most Jack Daniels advertising focuses on telling the story of the company and emphasizing its traditional distilling process and old-fashioned values.
This brand is supported by sophisticated distribution networks and highly efficient production - for all its old-school styling, the Jack Daniels distillery has embraced modern efficiencies like computerized monitoring facilities, automated bottling and so on - but the heart of the company is definitely its very American brand.
This fact points to the key competitive advantage of contemporary American businesses: the sophistication of American marketing and brand-building. America literally invented modern advertising, public relations and branding, and it remains leaps and bounds ahead of everyone else in its ability to create powerful and well-loved global brands.
According to the 2009 Interbrand Best Global Brands survey, eight of the world's top ten brands, sixteen of its top twenty-five brands, and fifty-one of its top one hundred brands, are American. This dominance of the high-value business of branding is one of America's core advantages. Most of what GE, Intel, HP and Gillette make is produced outside America, but the real money still goes to the USA. A razor worth around 15USC in terms of its raw utility is worth $5 when it's a Gillette, and this alchemy is what has underpinned America's phenomenal economic success.
This alchemy turns sugar, caramel and CO2 into valuable Coke, rye, barley and corn into valuable Jack Daniels and plastic, rubber and cotton into expensive Nike running shoes. It's the top of the value chain in modern business, and tellingly none of the emerging BRIC economies - Brazil, Russia, India and China - have brands in the top 100 yet.
If those economies are going to truly evolve into powerhouses, eventually they too will need to learn the magic of turning dross into gold, or at least mash into an American icon.
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