No half measures at Allied Domecq

Philip Bowman says his group will drink its rivals under the table.

Few gave Philip Bowman much of a chance when he took the helm of Allied Domecq two years ago. Then it was a corporate basket case, reeling from a series of bad deals and management shake-ups. Today, it is considered the coming force in wines and spirits, and the man who gets into more scrapes than Dennis the Menace is eyeing some bigger prizes.

In five years' time, Bowman believes, there could be just three big-league drinks producers, and one of them will be Domecq. His annual report proclaims that the company is "about brands and people". It still is, but now consolidation is on the horizon. "We are determined to play a part in that," says Bowman, "and over the course of the next few years, I suspect the industry will look quite a bit different to the way it looks today."

That sort of talk would have been presumptuous when he joined Domecq in November 1998. The Nineties started badly for the company, with a £100m foreign exchange loss and later the departure of chairman Sir Derrick Holden- Brown. The decade looked as if it was heading for a grim finale, too, when Domecq's attempt to sell its pubs turned into a tangled mess. Bowman put the £2.7bn deal back on track. The cash he raised went to the shareholders and he succeeded Tony Hales as head of a spirits and restaurants group full of such famous brands as Ballantine's whisky, Beefeater gin, Dunkin' Donuts and 4,600 Baskin-Robbins ice-cream stores. By this summer, the shares had more than doubled to a five-year high since Bowman took over, though they have fallen back a quarter in the market shake-out.

"I think the over-arching issue was trying to restore credibility to the company," Bowman recalls. "Its perception, both in the financial markets and in the media, was really pretty unhappy. We have shown over the last 18 months or so a trend of consistently growing earnings by somewhere north of 10 per cent a share in each of the reporting periods. And we have seen a share price that, apart from the events in America, has moved ahead very strongly, if you adjust for the demerger of the pubs business. Without that credibility we wouldn't have been able to do any deals at all."

Those meeting Bowman for the first time may be surprised that he is so forceful. He can appear very reserved and his conversation is peppered with phrases like "I think" and "probably". That conceals a steely negotiator and strategist who is not afraid to fight. He takes gambles that often seem be about to go awry but usually make it to the winning post.

Take the recent £300m battle with New Zealand brewer Lion Nathan for control of Montana, a prime producer of Sauvignon Blanc in New Zealand. Twice Domecq appeared to have lost the battle, before emerging victorious.

"Montana is a great business," Bowman says. "It has a strong position in its domestic market and has been very successful in exporting into the UK and the US. One of the attractions of Montana was to get those export skills. The other was they make some bloody good wine."

Demand for good wine is growing. "In most of the developed world, spirits are at best static. People tend to pay more for wine and there is keen interest in the premium end of the market. It is increasingly profitable to be in and we have significant distributor capacity."

Bowman keeps a close eye on business developments Down Under. His mother is Australian, he was born in Melbourne and he has an Aussie passport. But he betrays little of his roots. He looks and speaks more like a man who was educated at Westminster and Cambridge, and qualified as an accountant. Yet Australia was the scene of one of the most dramatic events in his, or anyone's, career.

Bowman had climbed the corporate ladder at Bass and become finance director before being offered what seemed his dream job, chief executive of the Australian retailer Coles Myer. But it proved a traumatic move as he blew the whistle on A$18m (around £6m) of transactions with a company controlled by the Coles Myer chairman. After a noisy shareholders' meeting and subsequent litigation, Coles Myer clawed back A$12m, but Bowman felt he had to leave the firm.

He returned to Britain and another stiff challenge, becoming chairman of Liberty, the upmarket Regent Street store, which had gone through a series of boardroom upheavals. Bowman shouldered the corporate rows, stopped the rot and stayed until Liberty was taken over.

By then he was finance director at Domecq and the £5.5bn auction for the Seagram drinks business was looming. That went to Diageo and Pernod Ricard. Bowman made a bid but decided he only wanted Captain Morgan rum rather than the whole Seagram drinks cabinet. The issue is now bogged down in a courtroom in Puerto Rico. "We stood back and we said: 'One day, if this business is broken up, which brands would we really have been interested in bidding for?' " The answer was Captain Morgan. Everything depended on whether a local distiller, Serralles, could argue that it had right of first refusal over the rum if Seagram was sold to another bidder. If the court agrees, Domecq will take a drink bearing the name of a pirate knighted by Charles II after burning Panama to the ground.

Diageo would suffer a bloody nose if it lost Captain Morgan to Domecq. But in the drinks industry, today's adversary is tomorrow's partner. Relations between the two UK companies aren't warm, though. Bowman usually only sees Paul Walsh, his counterpart at Diageo, at industry events. "Part of my job is to talk to the senior people in all the other industry players. I think I spend more time talking to people at Bacardi, Brown Forman and Remy Cointreau than I do at Diageo. That's probably self-explanatory."

You bet it is, for all three are names that immediately come to mind when Bowman talks of consolidation. "I think the Seagram transaction has made other companies ask where they sit strategically for the future. I think there will be further consolidation and that will be a good thing. The industry needs a company that is more of the scale of Diageo."

The world has changed unnervingly since the horrors of 11 September. Forecasts that Domecq will make a £490m pre-tax profit this year, against an expected £445m in the year that ended in August, must be in doubt. Will people be less willing to spend on drink or will they seek escape into an alcoholic haze?

"It's a very difficult question," admits Bowman. "We dusted off our statistics from the time of the Gulf War. People stopped eating out to spend much more time at home. I think that's something that's going to stay for a certain while. Already there's quite a significant economic downturn in the world and this is clearly going to exacerbate it."

But Domecq will bounce back – and Bowman with it. He always does.