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Premixed Cocktails a SPECIAL ALL-DIGITAL ISSUE Vol A SPECIAL ALL-DIGITAL ISSUE VOLUME 3 ISSUE 1 April 2014 SPIRITS A Distilled Look at What’s Working in HARD LIQUORS ◗ Market Overview ◗ Building a Brand ◗ Premixed Cocktails A SPECIAL ALL-DIGITAL ISSUE Vol. 3, No. 1 April 2014 CONTENTS 4 3 Viewpoint In Spirit and in Truth 4 Q&A with Diana Pawlik The distilled beverage market has seen many changes through the years, particularly as consumers shift from focusing on brand name and bottle image to products they connect with on a more personal level. 7 What Comes First, the Business 7 or the Brand? by Matt Anderson Craft spirits may be all the rage, but breaking into the business is not for the fainthearted. Distributor negotiations, transportation costs and heavy competition from big-dollar brands are but a few of the challenges. Premixed Cocktails – Then and Now •• 11 by Mark Newman The notion of “premixed cocktails” can evoke memories of the 1980s, wine coolers and slightly odd malt-liquor concoctions. However, ready-made cocktails originated almost 140 years ago—and innovative iterations continue to take hold. Copyright © 2014 VIRGO Publishing, LLC. All rights reserved. The publisher reserves the right to accept or reject any advertising or editorial material. Advertisers, and/or their agents, assume the responsibility for all content of published advertisements and assume responsibility for any claims against the publisher based on the advertisement. Editorial contributors assume responsibility for their published works and assume respon- sibility for any claims against the publisher based on the published work. Editorial content may not necessarily reflect the views of the publisher. Materials contained on this site may not be reproduced, modified, distributed, republished or hosted (either directly or by linking) without our prior written permission. You may not alter or remove any trademark, copyright or other notice from copies of content. You may, however, download material from the site (one machine readable copy and one print copy per page) for your personal, noncommercial use only. We reserve all rights in and title to all material downloaded. All items submitted to SupplySide Beverage Insights become the sole property of VIRGO Publishing, LLC. SupplySide Beverage Insights • April 2014 2 beverageinsights.com VIEWPOINT Alive and Well in the Spirits World egardless of any weakness in the U.S. economy, the world of spirits continues to see increases by R segment of 3 percent to 7 percent compound annual growth rate (CAGR), according to Beverage Marketing Corp. That’s amazing! Spirits supplier revenues are up 4.4 percent to $22.3 billion, an outstanding $928 million gain. U.S. volume alone was up 1.1 percent in 2013 to 206MM cases. Another interesting factoid is that one would have perhaps thought—given the economic weakness since 2008—that value-priced spirits would be garnering great increases. But that’s not the case. As a matter of fact, they are down 1.3 percent; premium liquor sales are up 1.6 percent, high-end at plus 7.2 percent and super premium at a gain of 6.2 percent. From a preference perspective, whiskey—once the darling of the business— fell for years as the go-to spirit. During the last five years though, it is back in the game and growing, seeing a 6.2 percent increase in sales last year alone. Eighty percent industry growth is a lot to brag about if you are a single malt, Canadian or Scotch blend, all components of this growth number. If you are an imbiber, surely you’ve witnessed how hot the tequila category is, with volumes up 6.6 percent and increased revenues of 7.9 percent—impressive for sure. Vodka is up a mere 1.1 percent but has 66MM cases. Last year, more than 800 new items hit the retail store shelves as line extensions and brand-new entrants. All the activity is very cool for the industry. Carbonated soft drinks continue to tank, and the only other real growth can be seen in bottled water and energy—leaving wine, beer and additional large categories closer to flat or losing. It’s great to see the health of the spirits world still building, especially considering the category was around long before the advent of Coca-Cola, 125 years ago. Cheers—to your health! James S. Tonkin Co-Founder of SupplySide Beverage Insights Founder and President of Healthy Brand Builders (480) 596-6360 SupplySide Beverage Insights • April 2014 3 beverageinsights.com In Spirit and in Truth A Q&A Overview of the Distilled Beverage Market iana Pawlik is vice president, marketing, Spirits & DGlobal Imports at Constellation Brands—a global wine, beer and spirits company with a broad portfolio of premium brands. She is an accomplished marketing executive with nearly 20 years experience in beverage alcohol, consumer goods and fashion. Pawlik is responsible for developing and executing the company’s long-term growth strategies, new brand initiatives and defining her brands as leaders in the market. Prior to her current role, Pawlik served as vice president, marketing, Vincor Canada (a Constellation Brands division). Her day-to-day responsibilities included the strategic management and development of the domestic wine portfolio with brands such as Jackson-Triggs, Inniskillin, and some of Canada’s leading estate wineries in Niagara and Okanagan. In this Q&A, Pawlik shares insight into the distilled spirits segment. Beverage Insights: Who’s drinking spirits? Diana Pawlik: Spirits are consumed by just about every type of person above the legal drinking age. It isn’t about who is drinking it, but more about how that is of interest. There are people who are making simple cocktails at home or drinking spirits straight, and others who consume most of their spirits outside the home at restaurants, lounges, bars and nightclubs. Spirits consumption has become more about the occasions, where cocktail culture has re-emerged and mixology is at the heart of the category. Vodka has certainly been leading the growth in the category, but now we are seeing resurgence in brown spirits; the flavor across key categories that helped to fuel the growth in vodka is now doing the same in brown spirits. Beverage Insights: What are some of the biggest challenges faced by spirits brands? Pawlik: One of the biggest challenges is the continuing fragmentation within the category. In vodka, there is a low barrier of entry, therefore it is relatively easier to access IN THIS ISSUE from a supplier perspective. With other spirits such as Viewpoint p. 3 bourbon and whisky, there is an aging process; ingredients Business or Brand p. 7 make a significant difference and craftsmanship plays an Table of Contents p. 2 even greater and important role. SupplySide Beverage Insights • April 2014 4 beverageinsights.com Beverage Insights: How can a spirits brand can stand out from the competition—is packaging everything? Pawlik: Packaging certainly helps, but is not everything. You need to have all of the pillars—marketing, advertising and the integrity of the product. It is about the whole package vs. the packaging. Beverage Insights: What role should brand extensions play in a spirits brand’s business development strategy? Pawlik: Line extensions help innovate and ignite growth for a brand, to set and capture trends whilst recruiting new consumers. However, it is important to grow and continue to develop the core franchise of a brand and not rely solely on the newest extension to drive growth. Beverage Insights: How are certain niches faring, whether organic, infusions, gluten-free, reduced calorie, etc.? Pawlik: Niches following trends come and go, but what remains a constant is that consumers are always looking to try new things, and also need a point of familiarity and context to embrace. Bringing new products to market is an exciting proposition that should be approached with a good measure of enthusiasm and diligence, as some trends propose longevity reflective of shifts in consumption— and others are quite fleeting. Beverage Insights: How has the spirits market changed through the years? Pawlik: The spirits industry has certainly faced some significant changes— one being the emergence of flavors into the vodka category, which we are now seeing migrate across the category, proliferating it more in the brown spirits category as well. While a few years IN THIS ISSUE back it was about image and bottle service, now it is about Viewpoint p. 3 authenticity and craft, and the story and providence behind Business or Brand p. 7 the product. q Table of Contents p. 2 SupplySide Beverage Insights • April 2014 5 beverageinsights.com Proprietary Flavor Systems for Spirits and Cocktail Mixers Allen Flavors has developed unique flavor profiles for various spirits including vodka, rum and liqueurs. Our Research and Development and Flavor Creation laboratories can collaborate on projects involving alcoholic beverages, cocktail mixers or combinations of the two. Our custom flavor creation team enjoys a challenge so give us a call at 908-561-5995 or visitwww.allenflavors.com to learn more today! You can also watch a short video to learn more about Allen Flavors by clicking here. What Comes First, the BUSINESS or the BRAND ?by Matt Anderson first dipped into the spirits business in late 2008. Having built a still in my I garage—made of two kegs welded together, 30 feet of copper piping and a Bunsen burner—I was open for business. Charging $60 a bottle for my “Gin, Sweat and Tears,” business was booming. Today, we distill with one of the most respected distillers in the Pacific Northwest, using ingredients and equipment surpassed by none—yet we can barely survive on the miniscule margins shaved for us as pittance after cutthroat distributor negotiations and transportation costs.
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