Please enjoy our brands responsibly

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Loxham Seminar
INDEPENDENCE INNOVATION

INTEGRITY
INVOLVEMENT

• Please enjoy our brands responsibly

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• Stan Marshall
• Director of Operational Excellence

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Lecture Outline

• Personal Background
• The Edrington Group
• Brand Building
• Supporting World Class Brands

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Stan Marshall

• Edrington Responsibility for
• Facilitating Lean Manufacturing and Improvement
• Compliance
• Technical Support to Manufacturing
• Capital Expenditure

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Company Profile

• Headquarters - Glasgow
• Established 1860
• Employs 800 people
• Turnover 278m
• Brands sold in over 100 countries

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The Edrington Group Turnover
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Key Brands
Vision

• Focused on long-term development of premium
  brands internationally
• Deliver superior and sustainable growth
• Record investment to grow sales and market share
• Concentrate on our strengths
• Offices/representation in China, USA, India,
  South America (established last 5 years)

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Industry Position
Grain distilling - North British Distillery
19 of industry
Malt distilling - 5 distilleries- maltings at 2
sites 10 of industry
Premium brands The Famous Grouse The
Macallan Highland Park Cutty
Sark
Coopering - at 2 sites A UK market leader

• Blending and bottling
• Scotlands largest independent bottler
• - 8.7 of industry

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Structure
The Robertson Trust
Employees
The Edrington Group
70
The 1887 Company
Highland Distillers
Edrington Distillers
25
50
50
Maxxium
Cutty Sark International
Lothian Distillers
The Famous GrouseThe MacallanHighland Park
100
Cutty Sark
North British Distillery
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Family

• 1855 William Alexander Robertson
• 1897 James Robertson
• Elspeth, Ethel and Agnes
• 1961 Charitable Trust The Robertson
  Trust

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The Robertson Trust

• The Robertson Trust owns gt 90 of Edrington
• Charitable trust founded in 1961
• Funded by dividend income from Edrington
• Supports wide variety of charitable causes 7.4
  million in 2006/2007

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Values
Innovation
Integrity
Independence
Involvement
ABC
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The Four Is
Edrington Values

• Independence
• Longer-term decisions
• Innovation
• Looking for new/better ways
• Involvement
• Well-informed employees making a difference
• Integrity
• Honest in our dealings

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Brand Building

• Learnings from how we have built The Famous
  Grouse brand globally

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First Things First
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What Is A Brand?

• A brand is a collection of beliefs and
  expectations about a product or services which
  makes it relevant and distinctive thereby
  strongly influencing purchase

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Which International Branding Model is
Appropriate to You?
FACTORS

• Scale
• Cultural
• Legal
• Distributive
• Portfolio
• Market
• Environment

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Brand Credentials
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In the beginning
Matthew Gloag Son Limited established in
1800 In 1896 Matthew Gloag developed the
Grouse Brand to appeal to Victorian Sporting
Gentlemen
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In the 1970s

• In 1973 we ship more than 180K cases
• Nike Inc. is founded
• We achieve our first ever duty free listing at
  Prestwick Airport
• Sony launches the Walkman
• By the end of the decade we are No.1 in Scotland
• Microsoft is formed
• By 1979 we ship more than 1.3M cases
• 17 of these go overseas

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In the 1980s

• In 1983 we ship more than 1.5M cases
• IBM sells their first ever personal computer
• Hiram Walker make an unsuccessful bid for
  Highland Distillers
• The Apple Macintosh is launched
• France becomes our No.1 export market
• Columbia, the first Space Shuttle, completes its
  first mission
• By 1989 we ship in excess of 2M cases
• 27 goes overseas

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In the 1990s

• We grow at double the rate of the premium scotch
  sector (25)
• Nelson Mandela is released
• Greece becomes our largest export market
• Euro Disney opens for business
• We ship more than 2.5M cases in 1999
• The Channel Tunnel is opened
• 37 is exported

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To Recap
In 30 years we have grown the brand 30 fold!
Annual Sales Millions of 8.4l cases
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
1973
1979
1983
1989
1993
1999
2006
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Consumer Insight Needs Map
Bourbon
PPLs
B
Sapph
Champ
Irish
JB
PMSs
Vodka
Famous Grouse
Lager
Rum
Malt
Wine
Ale
JWRL
Stout
Cognac
Gin
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Our Goal

• Grow the brand by 8 pa for the next 10 years by
  improving its global footprint
• Invest behind the ICON platform
• Innovate in new brand development

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Geographic Focus

• Dont fight on all fronts
• Have a basket of lo to hi risk options ie
  Emerging to Mature
• Set rigorous criteria for market priority
• Monitor against hurdles
• Dont be afraid to pull out

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Modus Operandi- The Strategic Imperatives Curve
Mature Market
Emerging Market
Post Mature Market
Market Brand TFG
Seed Brand
Mature Brand
Growing Brand
Defend Brand Equity
Improve Merchandising Display
New
Maximise Volume
Brand Extension
Consumer Loyalty
Brand Switching

Awareness
and Image Roll-out
Drive
Distribution/ Full Distribution
Consumer Trial On Premise
Top-end Quality Distribution
Strategic Image-Building Promotion
Trade Education

Consumer and Trade PR
New
Key Opinion PR
Premium Pricing

New
Brand Information
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Effective Tools
Icon.
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Our ICON creative vehicle has

• Instant recognition
• Creative excellence
• Outstanding recall
• No limits

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Summary You Need

• Consumer Insight
• Differentiated Proposition
• Geographic Focus
• Market Access
• Modus Operandi
• Effective Tools
• Appropriate Monitoring
• Bravery.BeliefFlexibility !

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Supporting World Class Brands
Competitive Edge through our Supply Chain
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Supporting World Class Brands
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Supply Chain
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Support Our Brands Key Issues

• Increasing pace of brand change major re-packs
• All our core brands have been re-packed over the
  past two years
• Pressure for shelf-ready packaging
• Greater customer service expectations
• Delivery reliability
• Flexibility of response
• Shorter order-shipment lead times
• Distributor demand forecast inaccuracy, creates
• Customer service risk
• Inefficiency extra costs, e.g premium or above
  standard costs
• Extra stock wastage
• Use packaging to give our Brands a competitive
  marketing edge
• Selectively increase costs to increase shelf
  stand-out and consumer appeal

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Support Our Brands 2006-7 Key Objectives

• Customer service excellence
• On-time-in-full delivery above 98
• Improved year-on-year feedback from our annual
  distributor survey
• Effectively launch our major brand change
  projects
• Highland Park re-pack
• Macallan Finesse
• Re-pack Lancelot to Kingdom
• Fully align ourselves with distributor supply
  chain activities
• Support global hub concept
• SKU harmonisation
• Logistics review
• Selectively shorten order-shipment lead times
• Improve production plan stability via Infor AP /
  AS systems investment
• Review shipping routes / providers and remove
  process bottlenecks.

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Support Our Brands Highlights Customer Service
Excellence
Service dips 2003 Project 40 glass
issue 2004 Guala spinners issue
2007 YTD is 99.1
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Support Our Brands Highlights Distributor
Customer Service Survey

• Key points issues
• Year-on-year / competitive improvement (green)
• Communication accuracy timeliness, reliable
  deliveries
• Flexibility when things change
• Order- shipment lead time

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Support Our Brands Highlights

• Core brand major
• packaging change
• All four core brands
• repacked over past
• three years

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Scotlands Leading International Premium Spirits
Company
Lean Manufacturing
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Scotlands Leading International Premium Spirits
Company
Lean Game
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History of Improvement

• Ad hoc Improvement
• Total Quality
• Continuous Improvement
• 6
• Lean Manufacturing

• BS5750
• ISO9001
• ISO14001
• BS/OHSAS18001

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Lean Update

• Pilot project update
• Lean Principles
• Improvement Process
• Value Stream Analysis
• Next steps

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Pilot Team

• Team facilitated by Industry Forum
• Myself as Change Agent
• Senior management support
• X-functional team
• Line specialists

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Scotlands Leading International Premium Spirits
Company
Value Stream Analysis
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What is a Value Stream Map?
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Value Stream Mapping Activity Programme
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Three Types of Work

• Value-Adding
• Any process that changes the nature, shape or
  characteristics of the product, in line with
  Customer requirements.

VALUE ADDING ACTIVITY
OPERATIONS

• Non Value-Adding
• Work carried out, which is necessary under
  current conditions, but does not increase product
  value.

WASTE
WORK

• Waste
• Operations unnecessary for work and can be
  eliminated immediately

NON-VALUE ADDED
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Value Stream Analysis TEG Group Operations
CASED WAREHOUSE
BLEND MARRY
WHISKY TRANSPORT
WHISKY TRANSPORT
COOPERING
TOTAL
BOTTLING
MALTING
MATURATION
DISTILLATN
V S A
V A
N V A
WASTE
TOTAL
Primary Focus
Secondary Focus
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Potential Action to Prevent Impact

• Two main Improvement Options available
• 1 Increase use of higher Productivity Lines
• Eliminate use of Overflow Lines use
• Ensure all possible work completed on line 1
  Blends or 8 Malts
• Ensure all Routings Optimised
• Potential Capital Investment to enable new work
  on Line1
• 2 Improve OEE
• 4 Main Sources of Losses Identified
• Line Stops During Production
• Ramp Up Down time
• Ramp Down Time
• Change Over Time

Recommended as Main Focus for Improvement Efforts
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The 7 Measures of QCD
The 7 key measures of quality cost delivery,
when used together, provide an overall analysis
of performance

• Not Right First Time (NRFT)
• Delivery Schedule Achievement (DSA)
• People Productivity (PP)
• Stock Turns (ST)
• Overall Equipment Effectiveness (OEE)
• Value Added Per Person (VAPP)
• Floor Space Utilisation (FSU)

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Calculating OEE

• OEE
• Availability x Performance Rate x Quality
• Percentage Availability
• Actual Operating Time vs Planned Run Time
• Percentage Performance Rate
• Actual number of parts producedvs maximum
  number we could have produced in operating time
• Percentage Quality
• Good units produced vs Total units produced

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Changeover Activity Benefits
7 Measures of Quality Cost Delivery OEE
(Overall Equipment Effectiveness) and PP (People
Productivity) selected as the key areas for
focus Action Understand the key losses from
The OEE data
OEE Calculated at 16
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Line 8 OEE Losses
Action Understand the greatest areas of loss in
availability
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Increase in Line OEE

• Availability Key Area of Loss. Value at
  Diagnostic 43

• Key Losses
• Machine Changeover
• No Labour
• Major Breakdowns

Pareto
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Increase in Line OEE

• Main Actions to Countermeasure Losses

Changeover Reduction Activity
Major area of overlap with Changeover due to
labour planning
Not priority area of focus, overlap with
Changeover
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Set-up Improvement
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Targeting Performance Losses
Full review of and improvement made to the
performance data capture process to ensure that
Key Areas for improvement are Identified and
actioned quickly
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Line-Side Data Collection
Action Address key areas of opportunity through
application of structured problem solving
techniques
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Speed Losses
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Opportunity
Line 8 volume Increase of 78, 096 Cases PP 29.3
Cases / Man Hr 2665 Man Hrs Assuming Volume
taken from Line 10 52,000 Cases ( PP 16.6 )
Line 11 26,096 Cases ( PP 19.7 ) Total Man
Hrs originally 4457 Man Hrs Therefore
Productivity Saving 4457 2665 1792 Man
Hrs Annualised 7168 Man Hrs At 20 per Hour
143,360
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Summary of Results
Output per hour is going up.
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Summary of Results
Productivity is going up.
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Summary of Results
Changeover time is going down.
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Summary of Results
OEE up by 49
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Result Update October 2007
Current OEE 43
Original OEE 16
OEE is up by nearly 200
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Result Summary
Success

• Quality
• Cost
• Delivery

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As is Transport Process
Bottling Tanks
Tamdhu
G/glassaugh
Parkmore
Macallan
H. Park
Spey Group
Glenrothes
G/turret
3rd Party Spey
Buchley
GWR
Blend Tank
Blend TLV
3rd Party South
N.B.
N. Fill TLV
NF Tank
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Future State 2
Gathering Warehouse (N)
T
Gathering Warehouse (S)
T
GWR
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Result Summary
Success

• Quality
• Cost
• Delivery

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MGFG Blend Old Process
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MGFG Blend Old Process
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MGFG Blend Old Process
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MGFG Blend Old Process
Process continues till 7 off full tankers have
arrived and been emptied.
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MGFG Blend New Process
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MGFG Blend New Process
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MGFG Blend New Process
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MGFG Blend New Process
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MGFG Blend New Process
Process continues till 5 off full tankers have
arrived and been emptied.
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MGFG Blend New Process
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Tangible Benefits
D M A I C
Reduced number of tankers used Down by
14 Improved tanker utilisation
Savings circa 60k Negotiate cheaper
rates Stopped splitting Grouse grain tankers
gt 1 man hr per tanker 1 less operator
circa 20k Improved cycle times In-situ
turn-round from 5 to 4 hrs Improved labour
efficiency Smoothed pattern of work at GWR and
NB Reduced overtime tbc Less cask
movements (roughly half) From 90 to 60 casks
per blend North British Supply performance
From lt50 to 100
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Value Stream Analysis 3 Levels
CASED WAREHOUSE
BLEND MARRY
WHISKY TRANSPORT
WHISKY TRANSPORT
COOPERING
TOTAL
BOTTLING
MALTING
MATURATION
DISTILLATN
V S A
PROCESS STEPS
MATERIAL FLOW and INVENTORY
INFORMATION and SUPPORT
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Lean Improvement Process
Scotlands Leading International Premium Spirits
Company
5 Basic Principles Value Stream Mapping Future
State Vision Inventory Reduction Manufacturing
Strategy
Steering Team
Inputs
Process
Outputs
5S
Efficiency
In-Team Continuous Improvement
Cross-functional Task Forces
Waste Reduction
SMED
Target Areas
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Supply Chain Highlights
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Supply Chain Dynamics
COMPLIANCE
TECHNICALSUPPORT
IMPROVEMENT
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Supply Chain Strategy
Consistent Supply Chain Priorities Support our
Brands Operating Cost Reduction Operational
Excellence People Development
Edrington Group Goals Grow our core brands
into leading premium positions Innovate to
create new sales opportunities Acquire premium
brands in other spirit categories Build
Maxxiums strength to drive our brand
development Provide the right facilities and
skills to fulfil our plans Gain more ownership
of our core brands
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2006-11 Bottling Strategy
2002 had 15 Lines
1
6
7
8
20
10
11
12
13
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HP Repack Line 1 Palletiser Mothball
- Line 5 - Line 12 Remove Line 5
12 Move Line 3 Install Line 2 Decommission
- Line 7 - Line 10 Upgrade Line
13 - Higher speed - Include
50ml Decommission -Line 3
Year 1 5 work to L6,L7,L14

Line 12 post-Dewars
12 Lines
(2006-7)
10 Lines
Year 2 Line 3 to No2 Hall

(2007-8)
9 Lines
Year 3-4 Line 7 and some Line8 work to Line
2 Line 10 work to line 2
(2008-10)
8 Lines
Year 5
Line 20 work to Line 6
(2010-11)
7 Lines
Year 5
Line Retention,Maintenance and Upgrade Phase
Line 3 work to Line 13
(2011)
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2006-7 Bottling Line Loading

• Line 1 handles 55 of our factory output

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Operating Cost Reduction Highlights
Premium Cost Reduction

• 89 reduction via
• Efficiency improvement
• Targeted investment
• New flexi-working
• Overall supply chain mgt.
• Attention to cost detail
• Challenging real need
• Clear prioritisation

Simultaneous Headcount Reduction Dec. 2003
507 Dec. 2004 446 Dec. 2005 457 Dec. 2006
440
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Operating Cost Reduction Highlights

• Asset utilisation up by 33 over five years
• 15 lines reduced to 10
• Line 1 major investment
• Fastest whisky line in the world up to 10
  bottles per second!
• Packaging value engineering
• 45 reduction

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Operating Cost Reduction HighlightsGWR Stock
Reduction

• Packaging
• 16 reduction
• over 5 years

• Cased Goods
• 35 reduction
• over 6 years

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Operating Cost Reduction HighlightsLean Pilot
(Line 8) OEE

• Lean pilot (Line 8)
• Productivity Improvement
• O.E.E now 45

• Packaging Waste
• 55 reduction over 5 years
• Each 1 saves 250,000 p.a

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People Development

• Involvement
• Cross-functional Task Forces
• In-team Improvement Groups
• Focussed communications to improve involvement
  buy-in
• Better business understanding
• Team social development
• Attendance improvement
• Major operational cost
• Awareness monitoring processes
• Refined procedures disciplinary standards
• Working together through a Partnership approach
• Dealing with day-to-day operational issues
• Change management
• Improving training development
• Yellow and Green Belt Six Sigma Training

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People Development Highlights

• Corporate Social Responsibility
• Our values - Independence, Involvement,
  Innovation Integrity
• Our consumers responsible drinking approach
• Our communities - biggest employer in Drumchapel,
  Glasgow
• Robertson Trust relationship
• Over 7 million p.a profit distribution to
  Scottish good causes
• Employment package
• Final salary pension (31 employer contribution)
• Share reward / share-save schemes
• Full sick pay from day one absence
• Communications
• Numerous examples of good practice
• Flexi-working
• Key component of OT reduction
• Work life balance
• 2005 trials made permanent in S.S.C / production
  functions
• Biannual attitude surveys
• Keep trying to improve - communications,
  involvement training

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People Development Highlights2006 Attendance
Improvement

• Historical GWR attendance has averaged 95.7

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Environmental Impact
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Environmental Impact

• Reducing our energy consumption

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Supply Chain Dynamics
COMPLIANCE
TECHNICALSUPPORT
IMPROVEMENT
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Change Thinking
FINISHED FILES ARE THE RESULTS OF YEARS OF
SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE
OF MANY YEARS
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Change Thinking
FINISHED FILES ARE THE RESULTS OF YEARS OF
SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE
OF MANY YEARS
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• Lecture Outline
• Personal Background
• The Edrington Group
• Our Brands
• Supporting World Class Brands

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The End
INDEPENDENCE INNOVATION

INTEGRITY
INVOLVEMENT

• Please enjoy our brands responsibly