Catching Up With Paul Gross, CIO, Brown-Forman Corp.
This month, CGT Executive Editor Kara Romanow catches up with Paul Gross, CIO, Brown-Forman Corporation, to get his perspective on the consumer goods industry and the unique challenges that wine and spirits manufacturers face. Plus, find out how he spends his free time and why the Chicago Cubs hold a special place in his heart.
What keeps you up at night?
There are two major challenges facing the consumer goods (CG) industry. The first challenge is the need to be cost efficient yet still retain service levels. The second involves getting close to the consumer in order to be as innovative as possible.
On the cost and service side, manufacturers are facing additional margin pressures from big-box retailers who are driving for their own cost efficiencies in order to lower the cost to the consumer. In their quest to lower the cost of goods to consumers and increase profitability, the large retailers are trying to take out as much inventory as possible and improve the overall efficiency of the supply chain. This often requires CG manufacturers to increase their reliability, their service and to explore things like collaborative forecasting, collaborative planning and vendor managed inventory.
As for innovation, it is necessary so that suppliers' products don't become commodities and aren't subject to marginalization through private labels. Therefore, it is key to try to anticipate the needs of the consumer -- even those unarticulated needs -- and then be able to provide solutions that address those needs. There needs to be not only innovation around product, but innovation around brands to make sure consumers are asking for specific brands instead of a generic product. This is especially important in the wine and spirits industry.
Brand loyalty and brand awareness is what our business is about. Brown-Forman's strategy is to become best brand builder in the industry. As long as consumers are asking for our brands, like Jack Daniels or Southern Comfort or Finlandia, we will overcome other challenges.
How can manufacturers and retailers better collaborate?
In the United States we are prevented by law to sell directly to retailers so we are selling to distributors, who in turn sell mostly to liquor stores, mom and pop stores, restaurants and small chains. We do collaborate with some big-box retailer customers in the United States, acting as a category validator. We get point-of-sale data from those retailers to help us understand how the category in general is performing so we can assist retailers in making sure the category as a whole meets and exceeds both their expectations and our expectations.
Manufacturers and distributors can better collaborate by sharing information and data so we can both gain better insight into what activities and what promotions are having the greatest impact on consumers, This ultimately benefits the distributor, the retailer and Brown-Forman. In another opportunity that involves product data, one of our distributors has a process in place where they gather information about our brands so they can add value in the selling process. Since we're also gathering and capturing that same information, it would be ideal to provide this unstructured content to them on an periodic basis.
What advantages does the three-tier distribution model provide to suppliers of beer/wine/spirits? What are the disadvantages?
The advantage of our three-tier distribution model is that we can focus our energies and efforts on those things we believe we do uniquely better than others; therefore, we are focused on building our brands and manufacturing great spirits and wines. The distributor's core competencies are servicing a diverse and heterogeneous retail base that is spread over a wide geographic area. If we weren't using distributors we would have to have the infrastructure in place to allow sales people to take orders, monitor inventory levels, and sell and promote our products.
The challenges of the three-tier model involve getting close to consumer because we have an intermediate tier between us and the retailer. We need to make sure our marketing activities are directed at those retail accounts and those consumer segments that we believe we will have the greatest impact on, of course being cognizant of and responsible about making sure we are only marketing to people who are of the legal drinking age or above. Our promotions aren't typical promotions like coupons or advertising; instead we do on-premise events in bars or different venues to try to encourage trial in a responsible way. We are working with our distributors to make sure those activities are as targeted as possible.
First job:Working in a Toys 'R Us warehouse moving boxes
Who Inspires You?
My dad who overcame a lot of hurdles in his life
Favorite movie:"A League of Their Own"
How do you reward yourself?
Hang out with my two boys, play golf; go to movies every now and then; and go out to dinner with my wife
Favorite Musician: Beatles (Favorite song: Hard Day's Night)
Vacation Spot: Hawaii or Colorado Proudest moment:The birth of our two boys
Biggest challenge: Raising two kids and making sure they grow to be happy, productive adults -- there's not a text book or recipe for it
Most recent tech purchase: 42"flat panel TV
Hobby: Golf is the one that takes up most of my free time
Favorite Sports team: I am a Cubs fan -- I grew up on Northside of Chicago. They draw you in and then break your heart.
Favorite Quote: "The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy." -Martin Luther King Jr.