LOUISVILLE, Ky. (WDRB) – When Paul Varga started working at Brown-Forman Corp. in the late 1980s, the first product he had to sell wasn’t Jack Daniels Tennessee Whiskey or Old Forester, America’s original bottled bourbon.

It was the California Cooler, a fruity, carbonated wine beverage that the Louisville-based spirits giant paid top-dollar for in 1985, only to see the faddy category fizzle to nothing within a decade.

Wine coolers were one way Brown-Forman tried to diversify in the 1980s as the old-school whiskey business was in freefall. During that era, the company strayed even further from its roots, buying a crystal and china maker and a luggage manufacturer.

“We had a very different portfolio back then,” said Varga, who would ultimately ascend to the top to the company after working on Jack Daniels, Brown-Forman’s signature brand.

Varga, a 54-year-old Louisville native who took over Brown-Forman in 2005, announced last week that he will retire at the end of year. Chief Operating Officer Lawson Whiting, a Brown-Forman veteran, will take over in 2019.

During his 13 years as CEO, Varga steered Brown-Forman back to its brown-liquor roots. And while sales didn’t balloon during his tenure, the company’s profits and market value did.

Garvin Brown IV, chairman of Brown-Forman’s board of directors and a member of the Louisville family that controls the company, said on a conference call Wednesday that Varga has been “the most successful CEO in our industry’s modern era.”

Brown credited Varga with growing the market value of the company – now about $26 billion – by “ roughly six-fold” while helping to spur the “the renaissance of the American whiskey category in this country and around the world” through Jack Daniels, Brown-Forman’s biggest product.

A review of Varga’s tenure shows he reshaped the company to take advantage of the revival of whiskey while jettisoning categories like popular-priced wine, the china and luggage businesses Brown-Forman bought in the 1980s, and even Southern Comfort, a sweet liqueur that was once the company’s No. 2 product.

Varga presided over booming sales in Jack Daniels – the bourbon-like whiskey made in Tennessee – and Woodford Reserve, the premium bourbon brand Brown-Forman created in the late 1990s. He also bought into high-end Mexican tequila and, most recently, Irish whiskey and single-malt scotch.

Varga’s moves didn’t make Brown-Forman a bigger business – sales were $3.2 billion in the year ended April 30, compared to $2.7 billion in fiscal year 2005, when Varga took over. But the company’s profit margin has more-than doubled over the period.

“In retrospect, it’s a great thing that I and the employees weren’t paid on the sales level; we wouldn’t have done as well,” Varga, who was paid nearly $9 million in 2017, said in an interview on Thursday. “… I noticed over each phase of my tenure I could never really step-change the sales.”

Tim Ramey, a stock analyst who has followed Brown-Forman for more than a decade, said Varga has shown a “willingness to play for the long-term at the expense of the short-term,” which has benefited the company.

Ramey, of Pivotal Research Group, cited Brown-Forman’s 2007 purchase of Mexican tequila maker Herradura, including the el Jimador brand.

He said the $776 million sale, which he called expensive at the time, diluted the company’s profits for a few years before ultimately paying off after Brown-Forman recast el Jimador with a premium price.

Ramey added that Brown-Forman’s decision to sell Southern Comfort in 2016, and to then invest in Irish whiskey and single-malt scotch, might have seemed “wildly stupid in the short-term” because Southern Comfort still contributed a lot of sales and profits, even though it was in decline.

“If you take a 20-year view, it probably was incredibly bright,” he said.

Varga: Bourbon boom has decades to run

Varga’s run at the helm Brown-Forman largely overlapped with the whiskey boom that began in the early 2000s.

Jack Daniels, Brown-Forman’s best-selling product, more than doubled sales during the period, reaching 25 million nine-liter cases in the year-ended April 30. Varga expanded the franchise with variations like Jack Daniels Tennessee Fire and Jack Daniels Tennessee Honey.

Bourbon, meanwhile, was such a negligible part of the company’s business when Varga began that Brown-Forman didn’t list its sales in its annual reports.

While Brown-Forman still sells 25 times more Jack Daniels than bourbon, the company’s original product from its 1870 founding has made a big comeback.

In the year-ended April 30, Brown-Forman sold 900,000 cases of Woodford Reserve and Old Forester, its two main bourbons, according to figures released earlier this week.  That’s up from 200,000 cases in calendar year 2005, according to historical data provided by the company.

The bourbon boom has led Kentucky distillers to invest more than a $1 billion expanding their capacity in recent years, according to the Kentucky Distillers Association, but Varga thinks the expansion may have decades to go.

He said industry figures show American whiskey consumption, while having risen sharply since the early 2000s, is nowhere near its previous peak around 1970.

“People are always wondering, how long will this go?” Varga said. “…My easy math says we may have another 32 years… just to get back to where we were in the year 1970.”

Not a Brown, but a family name

Varga is the third person who is not a member of the controlling Brown family to lead Brown-Forman. He followed Owlsey Brown II, a great grandson of company founder George Garvin Brown.

But Varga, who grew up in Louisville’s Highlands neighborhood, attending St. Xavier High School and the University of Kentucky, had his own family connection that helped him get his foot in the door at Brown-Forman, even though he didn’t realize it.

Varga’s late great uncle, whom he did not know well, had worked at the company, but Varga didn’t know that when he came to interview for a summer internship at Brown-Forman while in college.

Employees of Brown-Forman, meanwhile, mistook Varga for the son of their former co-worker, he said.

“Several people who interviewed me told me, in the past tense, how much they loved my father … And I started to wonder whether something had happened to my father because they were referring to him in the past tense, and of course, it was my great uncle,” he said. “I had to clarify the situation. But I will tell you, it absolutely helped to have the same last name.”

After finishing graduate business school at Purdue University, Varga weighed job offers from Brown-Forman and from Whirlpool, the large appliance company.

“I remember thinking, do I want to do washing machines or whiskey?” he said. “Obviously it worked out quite well.”

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2018 WDRB News. All rights reserved.