Despite a modestly weakening economy in the latter half of 2007, the spirits and wine industries continue to expand their business in the U.S. market. According to the latest statistics recently released in the Handbook Advance 2008, published by The Beverage Information Group, Norwalk, CT (formerly the Adams Beverage Group), U.S. distilled spirits sales volume rose in 2007 for the tenth straight year, gaining almost 6.0 million 9-liter cases from 2006 to more than 182.4 million cases, an increase of 3.2%. That gain was slightly less than the 3.7% posted in 2006. On the other hand, wine sales in the U.S. gathered even more momentum in 2007, increasing 4.0% overall, compared to a 3.6% gain in 2006. Wine volume grew by more than 11 million 9-liter cases in 2007, from 283.0 million cases to almost 294.4 million, a record. This marks the fifteenth straight year that wine volume grew in the U.S.
As has been reported in previous years, a major driver of the ongoing wine and spirits consumption increases is the American consumer’s continued movement toward high-end products. Even in an economy that has lost a little steam, prestigious wine and spirits brands are still viewed as affordable luxuries by most consumers. Indeed, at a recent press conference, the Distilled Spirits Council of America (DISCUS) released its latest statistics on the state of the spirits industry, which show that spirits suppliers’ gross revenues grew by 5.6% in 2007 to $18.2 billion (based on wholesale case prices). By itself, the superpremium segment of all combined spirits categories grew a hefty 16.4% in 2007; by comparison, the value segment was down 2.7%. And, as one would expect, retail revenue growth once again increased substantially in 2007. According to the Handbook Advance, retail sales (combined on- and off-premise) of distilled spirits advanced 9.2% in 2007 to more than $62.6 billion, while retail revenues of wine increased 10.6%, to exceed $28.1 billion.
Still, several other cultural, demographic and industry-specific trends explain the continuing vitality of the wine and spirits industries: the increasing cultural acceptance of the potential health benefits of moderate wine and spirits consumption; a thriving cocktail culture; the American consumer’s slow but steady movement away from beer ‘ resulting in beer’s falling market share ‘ in favor of wine and spirits. Other trends bolstering the market include: legislative progress in ending archaic blue laws nationwide, with particularly positive results from the growth of Sunday sales (which DISCUS tabs at an extra $212 million in new retailer revenue in 2006); a more spirits- and wine-savvy public that is responding to increasing product education from retailers, restaurateurs, distributors, suppliers and the media; a recognition that beverage alcohol can be a flavorful enhancement to meals; a general modernization of retail outlets, as they focus on making beverage alcohol shopping a more enjoyable and less intimidating experience, especially for women; and the simple fact that the legal drinking age population in the U.S. is growing.
SpiritS Category Overviews
Most spirits categories registered increases in 2007, with flavored spirits, particularly in the fast-growing white spirits categories, once again expanding in volumes and offerings. The largest spirits category, vodka, continued to gain market share with sales of nearly 53.0 million 9-liter cases, a 6.7% gain over 2006. Rum grew 5.1% to reach 24.0 million 9-liter cases, and tequila continued its upward surge with a 9.4% gain to end the year with almost 11 million cases.
The second-largest distilled spirits category, cordials and liqueurs, saw a modest increase of 0.5% to reach 21.5 million cases in 2007, while brandy and cognac climbed 2.2% to achieve nearly 10.7 million cases. Gin registered a 1.5% increase in sales volume last year to end the year with about 11.2 million cases. The prepared cocktails segment decreased by 5.0% to end 2007 just shy of 6.2 million cases.
Among whiskies, straights grew 1.0% to finish the year at 14.7 million cases; Irish grew 17.5%; and Scotch eked out a 0.2% gain to reach just over 9.0 million cases. Canadian whisky showed a slight 0.6% decline, while American blends were also off, down 1.9% to end the year at 5.1 million cases.
Impressive Wine Gains
Last year’s overall gains in wine sales were again driven by table wine, which now accounts for 91.4% of the total U.S. wine market. Led by premium varietals, table wine grew 4.3% to reach 258 million 9-liter cases in 2007, after a 3.7% increase in 2006. Similar to 2006, imported wines showed a larger percentage gain (+7.6%) than domestically produced table wine (+3.1%). Still, domestic table wine comprises about two-thirds of the entire U.S. wine market.
Champagne & sparkling wine continued to bubble up last year (+3.6%), to end the year with more than 13.8 million cases, while the vermouth and dessert & fortified wine sales volumes both declined slightly.
Why Growth Brands?
As in many other industries, ‘brand equity’ is perhaps the most valuable asset a product possesses; perhaps this is especially true in the beverage alcohol industry, where a seemingly inexplicable change in consumer tastes and perceptions can propel or erase a brand’s prospects (remember California Coolers?). As reported previously, a combination of resources, creativity, perseverance, the right economic environment and sometimes just plain luck often lead to the development of a successful brand. It’s no surprise that there are beverage alcohol products in every category and at every price point that, for any number of reasons, have either lagged behind or outpaced their respective competitors. And although identifying category consumption trends is helpful, actual brand activity can often run counter to them (i.e., Crown Royal perennially outperforms the Canadian whisky category).
Thus is the rationale behind ‘Growth Brands,’ our annual report that uses the latest industry results to highlight those wine and spirits brands that have demonstrated noteworthy growth over recent years. These are the brands that in many instances provide the backbone of the wine and spirits business for retailers. They are also the brands to watch, as they grow beyond their natural competition and stake their own successful claims in the marketplace. [The September/October 2008 issue of Beverage Dynamics will publish Beer Growth Brand results.]
SPIRITS FAST TRACK Brands
To attain Fast Track status, a brand must have maintained double-digit sales growth over each of the past four years (with sales of more than 100,000 9-liter cases). As brands expand their volume, this clearly becomes more difficult with each passing year. For example, last year’s Fast Track leader, Jagermeister, saw sales increase by an admirable 160,000 cases in 2007; however, that 5.8% gain on its large sales base was not enough to keep the brand in the Fast Track, and it is now in the Established Growth Brands category. Thus, the spirits brands that are identified here are the cream of the Growth Brand crop, and often among the fastest-selling spirits in the U.S.
This year 14 spirits brands are included (up from 13 last year), and among them are nine vodkas, two tequilas, two rums and one whiskey. There are six brands new to the Fast Track ranking (Seagram’s Vodka, 1800 Tequila, Admiral Nelson Spiced Rum, Pinnacle Vodka, Sailor Jerry Spiced Navy Rum and Pearl Vodka) and the remaining eight brands were included last year.
Once again, vodka dominates, in keeping with national sales trends that saw the vodka category comprise slightly less than 29% of the entire U.S. spirits market in 2007, according to the Handbook Advance. The vodka brands cited here run the pricing gamut from value to premium to above-premium to superpremium. In addition, several of the brand portfolios listed boast a lineup of flavors, which has clearly helped increase sales. Indeed, the explosion of flavors in the category has coincided with ‘ and maybe helped spur’ the expansion of flavors in the spirits industry overall.
At the top of the Fast Track ranking is Grey Goose Vodka, the high-end import from France, which had another amazing year in 2007, gaining an estimated 25.0% in sales to reach more than 3.3 million 9-liter cases. Bacardi purchased the brand three years ago and has continued managing it to phenomenal success. The brand now includes the pear-flavored Grey Goose La Poire, the orange-flavored L’Orange, citrus-flavored Le Citron, vanilla-flavored La Vanille and the original Grey Goose.
Svedka Vodka, purchased last year by Constellation, gained almost 500,000 cases, for sales of more than 1.5 million cases, a 47.6% increase over 2006. Seagram’s Vodka, which was a Rising Star Growth Brand last year, entered the Fast Track this year for the first time. Launched in 2003 by Pernod Ricard USA as a companion to its top-selling Seagram’s Gin, the brand moved to the newly formed Infinium Spirits in 2005. Also boasting a lineup of flavors, Seagram’s Vodka notched 890,000 9-liter cases in 2007.
Three Olives, another superpremium imported vodka with a broad portfolio of flavors, vaulted to an eye-opening 220,000 cases last year to 850,000 9-liter cases. Newly formed Proximo Spirits purchased the brand from White Rock Distilleries in fall 2007. For its part, White Rock is shepherding another successful vodka into the Fast Track ‘ Pinnacle Vodka, which also features a range of flavors and has had success with a blue-hued PET package. Pinnacle grew by an amazing 74.2% in 2007, to end the year with 263,000 cases.
Both UV Vodka, from Phillips Distilling, and Vincent Van Gogh Vodka (Luctor International) include extensive flavored vodka portfolios. For its part, UV jumped an impressive 35.9% last year, eclipsing the half million case mark for the first time, while Van Gogh notched a healthy 160,000 9-liter cases. Tito’s Handmade Vodka, a micro-distilled spirit hailing from the Fifth Generation distillery, located in the unlikely location of Austin, TX, grew sales by one-third last year, hitting 213,000 cases. The final vodka on the list is Pearl, distilled in Canada and sporting four flavors in addition to the original: pomegranate, plum, coconut and blueberry. Pearl reached sales of 135,000 cases last year.
Continuing as one of the industry’s fastest-growing brands is Patron, the line of superpremium tequilas, which increased sales by about 555,000 cases to end 2007 at 1.63 million cases, a whopping 51.6% gain. Another line of superpremium tequilas, 1800, is included here for the first time. The brand notched 505,000 9-liter cases, growing more than 16% in 2007.
Far and away the top-selling Irish whiskey in the U.S., Jameson has been a perennial member of the Fast Track. In 2007, it posted a 23% gain, representing about 100,000 cases, to achieve sales of 540,000 cases. The other tequila in the Fast Track is 1800, featuring a portfolio of superpremium offerings. The brand gained 16.1% last year, eclipsing the half million case mark.
Both Admiral Nelson Spiced Rum and Sailor Jerry Spiced Navy Rum are first-time members of the Fast Track, the latter first introduced in 2003 while the former has been on the market for much longer. The success of both brands reflects the popularity of flavored rums. Admiral Nelson increased sales 20% last year to reach 330,000 9-liter cases, while Sailor Jerry jumped a hefty 60% to end 2007 at 200,000 cases.
SPIRITS RISING STAR Brands
Twelve spirits brands met the criteria for a Rising Star this year, one less than last year. Only two of them are returning Rising Stars ‘ Pama Pomegranate Liqueur and 10 Cane Rum ‘ and, interestingly, there are as many liqueurs cited here (four) as there are vodkas. There are also two rums, a gin and a tequila.
The liqueurs include Pama, from Heaven Hill Distilleries, which notched sales of 60,000 9-liter cases its second year on the market. The pomegranate-flavored liqueur was the first widely available spirit to use that flavor, and since its launch, pomegranate has become a favorite of spirits producers, appearing in other liqueur brand line extensions and a number of vodkas.
Three other liqueurs debuted in 2007 to some success and warrant watching. Wide Eye, an energy drink liqueur, is a prepared cocktail schnapps with extra caffeine, available in three flavors: Pomegranate Spice, Mango Chill and Cherry Bomb. Wide Eye, from Barton Brands, retails for about $20 for a 750 ml bottle and enjoyed sales of 27,000 cases in 2007. Kajmir, from Constellation, is a 40 proof vanilla-flavored liqueur, made from a blend of brandy, vodka and vanilla. Priced at approximately $19 for a 750 ml bottle, Kajmir sold 20,000 9-liter cases since its debut last year. St-Germain Elderflower Liqueur, imported from France by Cooper Spirits International, is made from elderflower blossoms picked in the French Alps and macerated in eau-de-vie. The 40 proof liqueur has a suggested retail price of $30-$32 and comes in a noteworthy, upscale bottle.
The four vodkas qualifying as Rising Stars have each been on the market barely a year, with the exception of p.i.n.k., which debuted the second half of 2006. Imported from Holland by the p.i.n.k. Spirits Co., p.i.n.k. Vodka is a so-called ‘energy’ spirit that is distilled five times, featuring a blend of caffeine and guarana. The brand retails for $38 to $40 for a 750 ml bottle and sold 16,000 9-liter cases last year. Sobieski Vodka, from Imperial Brands, boasts a Polish heritage and is quadruple-distilled there. Priced at $12-$13 for a 750 ml bottle, Sobieski notched a handsome 50,000 cases its first year on the U.S. market. Equally successful was Russian Standard Vodka, also fairly new to the U.S.; however, the brand is also the top-selling vodka in Russia. Imported by Remy Cointreau USA, the superpremium vodka has been sponsoring several Russian-inspired programs (such as a Russian Film Festival, etc.) and other life-style events in its major markets. It sold 42,000 9-liter cases in 2007. Finally, McCormick Distilling debuted 360 Vodka, the ‘green,’ eco-friendly superpremium vodka that comes in a green bottle. The brand is quadruple-distilled and filtered five times, however, its positioning emphasizes the fact that the bottle is made from 80% recycled glass and all print and label materials come from recycled paper. In addition, the production process apparently reduces a variety of pollutants dramatically. The brand saw sales of 16,000 9-liter cases last year.
E&J Gallo is behind the leading Rising Star, New Amsterdam Gin, which launched just last year. The 80 proof, domestically produced gin, retailing for approximately $13 for a 750 ml bottle, hit 100,000 cases in its first year on the market. Tommy Bahama Rum, from Sidney Frank Importing, also had a stellar initial year, reaching sales of 50,000 9-liter cases in 2007, as did the tequila El Diamante del Cielo, which hit 32,000 cases in 2007. Imported by Blavod Extreme Spirits, the brand’s name means ‘diamond in the sky.’ The tequila line includes a Blanco ($40), Reposado ($50) and Anejo ($60).
Finally, 10 Cane, from Moet Hennessy USA, a superpremium rum that uses the juice from freshly pressed sugar cane in its production process, returns as a Rising Star. The high-end Trinidadian rum reached 30,000 9-liter cases last year, a 50% gain over 2006 sales.
SPIRITS ESTABLISHED GROWTH Brands
Most of this year’s 27 Established Growth Brands represent a cross-section of the largest and most successful spirits brands in the U.S. These brands are often leaders in their respective categories, and in many instances, make repeat appearances as Established Growth brands. To deliver sales gains year after year is no easy task, so these brands must be commended for maintaining their positive sales momentum despite ever-changing consumer taste trends and evolving macroeconomic conditions. They are, for the most part, mature brands that have been on the market for years, brands that enjoy a loyal following thanks to ongoing brand-building efforts.
Overall, the Established Growth Brands reflect the range of spirits Americans are consuming, from prestigious superpremiums to everyday value brands to a host of recognizable, quality spirits in between. Of the 27 brands, 17 are imports, and almost every major product category is represented ‘ there are eight vodkas, one gin, four rums, three tequilas, three brandy and cognac brands, two liqueurs and six whiskies (one Scotch, two Canadians and three bourbon/American whiskies). Prepared cocktails is the only unrepresented category.
The variety of price and product type among these top-growing brands serves to underline one tenet of the industry’s conventional wisdom ‘ that consumers approach different consumption occasions by purchasing different classes and types of spirits.
This year, all the Established Growth brands sold more than 550,000 9-liter cases in 2007, with 15 of them eclipsing 1 million cases. Once again, Bacardi, the top-selling spirit in the U.S., saw impressive gains. The brand grew 5.0% last year, adding another 450,000 cases for a total annual volume of 9.45 million 9-liter cases. Captain Morgan Original Spiced Rum increased sales by more than 200,000 cases last year to reach 5.75 million 9-liter cases. Absolut increased just shy of 200,000 cases, breaking through the 5 million case mark, while Jack Daniel’s eclipsed 4.74 million 9-liter cases. Diageo’s Crown Royal increased sales 5.0% to approach 3.9 million 9-liter cases, while that company’s Jose Cuervo brand expanded sales to 3.85 9-liter million cases.
Other noteworthy Established Growth Brands include Jagermeister (up 5.8%), at 2.9 million 9-liter cases; E&J Brandy (up 5.4%), to reach 2.74 million 9-liter cases; Skyy Vodka (up 5.3%), to reach 2.39 million 9-liter cases; Hennessy Cognac (up 6.6%), to almost 2.38 million 9-liter cases; and Stolichnaya Vodka (up 4.3%), at 2.18 million 9-liter cases.
For its part, Ketel One Vodka, which gained 6.0% to end the year just shy of 1.86 9-liter million cases, recently entered into a deal in which Diageo agreed to pay $900 million for global rights to sell, market and distribute the brand.
At these volume levels, double-digit percentage growth by any brand is noteworthy and three brands achieved that distinction this year. Malibu, from Pernod Ricard USA, hit sales of just under 1.67 million 9-liter cases, a 10.0% rise; Burnett’s Vodka, from Heaven Hill Distilleries, gained 20.0% in 2007, to move 750,000 9-liter cases; and Juarez Tequila, marketed by Luxco, increased sales 22.2% to end 2007 at 550,000 9-liter cases.
Other top performers include Sauza Tequila (up 5.6%), Bombay Sapphire (up 4.0%), Johnnie Walker Black (up 5.2%), Maker’s Mark (up 8.1%), Wild Turkey (up 5.0%), Cruzan Rum (up 6.3%) and Grand Marnier (up 5.3%), among others.
WINE FAST TRACK Brands
Last year’s Wine Fast Track included nine brands: three imports and six from California, with more than half of them priced below $10 retail. This year, the Fast Track exploded with 21 brands qualifying and features 12 new Fast Track members. The remaining nine ‘ Foxhorn, Barefoot Cellars, Smoking Loon, Crane Lake, La Crema, Salmon Creek, Casillero del Diablo, Nobile and Wolf Blass ‘ made the cut yet again by notching double-digit growth on sales of at least 100,000 9-liter cases on 2007.
As the number of qualifiers has expanded, so has the range of price points. While several competitively priced value wines appear here, so do several brands priced between $10 and $20, along with some reserve collections priced above $20. This broader swath of the pricing spectrum could very well reflect the impressive 4.3% sales volume increase in table wine in 2007 and the 10.6% increase in total retail wine revenues. Premium pricing is a notable dynamic in an expanding segment of the wine market, however, value pricing still plays a major role in most consumer buying decisions.
Of the 21 Wine Fast Track brands, 13 are from California; in fact, the top nine on the list hail from California. Three are imported from Italy and one each comes from Washington State, Chile, New Zealand, Australia and Spain.
Leader Barefoot Cellars enjoyed a phenomenal 2007, posting a 66.7% sales increase to 4 million 9-liter cases. Amazingly, just three years ago, the brand sold a mere 475,000 cases. Meanwhile, Foxhorn continued its growth, gaining 350,000 cases, to end the year at 2.95 million 9-liter cases. Smoking Loon jumped another 175,000 cases in 2007 to reach 1.22 million 9-liter cases, while Crane Lake improved sales by more than a third, breaking the 1 million case mark to register sales of 1.2 million 9-liter cases.
In its fifth year on the market, Constellation’s Black Box bag-in-box wines grew 37.1% just shy of 800,000 9-liter cases. Depending on the market, the 3-liter premium wine packages sell from just under $20 to the mid-$20 range, offering four varietals sourced in California and an Australian shiraz. Kendall-Jackson’s premium-priced La Crema gained 16.1%, to reach sales of 650,000 9-liter cases.
The Wine Group’s Concannon brand graduated from the Rising Star category to the Fast Track this year. The brand vaulted 16.7% to 420,000 9-liter cases in 2007, on the strength of its two lines: Selected Vineyards, which retails between $10 to $11 per 750 ml bottle and includes five varietals with grapes sourced from California’s Central Coast; and the Reserve line, priced several dollars higher and featuring six varietals sourced from grapes at its Livermore Valley Estate.
The value-priced Salmon Creek, from Bronco Wine, grew 12.9%, selling just under 400,000 9-liter cases. New to the Fast Track is Simi, another above-premium (and in some cases superpremium) California wine brand, which increased 14.3% to also knock at the door of 400,000 9-liter cases.
Also new to the Fast Track is the tenth wine on the list and the first import to appear: Castello di Gabbiano, an Italian brand imported from Tuscany by Foster Wine Estates Americas. The brand gained 19.9% to reach 361,000 9-liter cases last year.
Red Diamond, in the Ste. Michelle Wine Estates portfolio, hails from Washington State. Another Rising Star graduate, the brand skyrocketed 38.9% last year, hitting 300,000 9-liter cases. Casillero del Diablo, a label of the Concha y Toro line imported from Chile by Banfi Vintners, increased sales by 25.0% last year to achieve 295,000 cases. Another import, Nobilo, a New Zealand wine brought in by Pacific Wine Partners, saw sales jump by more than 12% to reach 251,000 cases.
E&J Gallo’s Frei Brothers label reached 250,000 9-liter cases in 2007, a 19.0% gain. The brand features a Reserve line retailing in the $15 range. Red Truck, which was purchased a few years ago from Cline Cellars by 585 Wine Partners, is maintaining its initial success under the new owners, attaining 243,000 9-liter cases. The well-known Wolf Blass, a superpremium Australian wine imported by Foster’s Wine Estates Americas, gained 12.2% to end 2007 at 230,000 cases, while Kris, imported from Italy by Winebow, gained 30.7% to move 200,000 9-liter cases. Made in the Trentino-Alto Adige region, the brand’s U.S. popularity rests largely on its Pinot Grigio. New to the Fast Track is the cleverly named 7 Deadly Zins, from California’s Michael David Winery. A blend of primarily zinfandel with small amounts of petite sirah and syrah sourced from seven different vineyards in Lodi, the brand gained 45.5% to reach 160,000 9-liter cases. Liberty Creek, a line of entry-level varietals from E&J Gallo, hit 160,000 9-liter cases last year, a 28.0% increase.
Finally, there are two sparklers included in the Fast Track: Segura Viudas, the line of Spanish cavas imported by Freixenet USA, which increased 15.6% to reach 150,000 9-liter cases, and Mionetto, the effervescent, affordable prosecco from Italy. The brand gained 18.3% in 2007 to finish at 142,000 9-liter cases.
WINE RISING STAR Brands
The Wine Rising Stars category is clearly a reflection of the trends in the overall wine industry. Consolidation is intensifying, with the major wine conglomerates increasingly purchasing mid-size (and sometimes larger) wineries as well as reaching around the globe to initiate and expand U.S. distribution of new and established international brands. The marketing and distribution muscle of the large wine companies dramatically drives the growing recognition and sales of these brands. In addition, the evolving approach to wine marketing and label design appears to be effective in making wine more accessible to a broader base on consumers, who are apparently drawn to the wacky, cute and quirky presentations, meant to spur them to give the bottle with the funny looking graphic or name with a clever turn of phrase a try.
Once again this year, there are labels with penguins, fish, moose, monkeys, horses, owls, koalas, cats and one wine that has a different label/critter for each varietal, to name a few. There are also guitars, hangers and high heels, as well as plenty of fun and puns. And those are only the wines on our Rising Stars list.
Indeed, it appears as if the wine industry is intent on expanding its appeal to American consumers by softening the oft-criticized intimidation factor of wine and wine labels. A case in point many Old World wine marketers simplifying labels by emphasizing varietal names. This is not a dumbing down, per se; it is a change of emphasis. Still, the wine itself must appeal to consumers’ tastes, and this year’s Rising Stars include wines with depth and character as well as a number of easy-drinking fruit-forward wines made to please the mainstream American palate.
There are 27 Rising Stars this year, compared to 33 last year, with 12 hailing from California, four from Australia, two each from France, Italy, Spain and Germany, and a single wine each from Chile, New Zealand and South Africa. Nine of the brands are new, while 18 return from last year.
Once again, the top Rising Star wine is from Australia ‘ Little Penguin, marketed by Foster’s Wine Estates Americas. The line features six varietals, and gained another 20.8% in 2007, breaking the 1-million case barrier. On the market four years now, the brand will graduate to the Fast Track next year if it keeps growing at a double-digit rate. The same holds true for the FishEye, Tisdale and Menage a Trois brands. FishEye, a California wine from The Wine Group, added 300,000 cases to reach 950,000 9-liter cases, and offers its portfolio of varietal wines in 750 ml bottles with colorful labels as well as in bag-in-box packages. Tisdale, from E&J Gallo, grew more than 50.0%, hitting 550,000 9-liter cases in 2007. Trinchero Family Estates’ Menage a Trois gained more than 70.0% last year, jumping to just shy of 500,000 9-liter cases. The brand blends three varietal grapes (thus the name) into its White Table, Red Table and RosÃ© offerings.
Other notable West Coast Wine Rising Stars include the following: 3 Blind Moose (Centerra), offering four varietals priced in the $10 sweet spot. The brand increased sales to 350,000 9-liter cases, a 59.1% gain. Edna Valley Vineyard (Diageo Chateau & Estates), jumped 27.0% to reach 293,000 9-liter cases, and the premi