Mad For Malternatives

SALES OF ALTERNATIVE MALT BEVERAGES ARE EXPLODING. WILL THE TREND LAST?

By now, you think you’ve seen it all. You watched dry beer turn as parched as the Dust Bowl. Packaged draft turned into a one-trick pony. Ice beer melted almost as fast as a snow ball in Palm Beach. Clear beer was invisible to consumers from the very get-go. Micros, despite popping up by the hundreds, got so micro they disappeared altogether.

Smirnoff Ice sold about 22 million 2.25-gallon cases last year, giving life to the flavored, spirits-branded malt beverage segment.

Hold onto your hats because here come malternatives. The flavored malt beverage category, including hard lemonades, malt-based coolers and a new breed of spirits-branded alternative malt beverages, grew 26% last year, according to Morgan Stanley Forecasting. Sales this year are expected to more than double, compared to 12% growth for imported beer and only about 1% for domestic beer.

Smirnoff Ice, in its first full year of distribution, sold about 22 million 2.25-gallon cases, single-handedly creating a new segment within the category. This spring, another half dozen major new brands have been introduced, increasing the competition and raising the stakes. Can the market support them? Will the trend last, or be a fleeting fad, just the latest gimmick in the industry’s bag of tricks to try to boost sales?

Five years ago, when the first wave of alternative malt beverages swept ashore from places like Australia and the U.K., major brewers here looked on cautiously from the sidelines. Hard lemonade and fruit-flavored malt brews suddenly became the rage with nearly 60 new entries in the space of a year, most from small producers.

Coors, which had already introduced Zima, the first “malternative,” in 1993, took a pass. Miller Brewing tested the waters with a lemon brew, but decided not to get wet. Anheuser-Busch dabbled with a couple of test products and eventually settled on Doc Otis lemon brew.

The introduction and instant success of Smirnoff Ice, however, has created a whole new ballgame. Attaching a spirits brand name to a malt-based beverage has given spirits companies and brewers a new way to market to consumers. So much so that these new products may quickly create their own segment of what was already a growing category.

Facing flat sales despite an influx of new legal drinking age consumers, the beer industry has been quick to take advantage of the trend to flavors this time around. In February, Anheuser-Busch launched Bacardi Silver in partnership with Bacardi, one of the world’s largest spirits brands.

Miller quickly followed with the March launch of Skyy Blue in partnership with Skyy Spirits. Then in quick succession, Miller announced an alliance with Allied-Domecq to produce Stolichnaya Citrona and Sauza Diablo, and another partnership with Brown-Forman to make a yet-to-be-named Jack Daniel’s malternative. Stoli Citrona and Sauza Diablo both bow this month with a national rollout in June. The Jack Daniel’s-flavored product will be available this summer.

Finlandia is testing a flavored malt beverage in Australia and Puerto Rico this summer, and may introduce it here by the end of this year or early next. Others are sure to follow.

Coors, with 10 years already invested in the Zima brand, is taking a different tack. Leveraging the Zima brand name, Coors is launching Vibe this month in selected markets including Atlanta, Boston, Cleveland, Columbus, Houston, Denver, San Diego and Pittsburgh. Roll-out to additional markets will be gradual.

Timing Is Right

Whether the market can withstand this onslaught of brands in so short a time remains to be seen, but the timing seems right. Zima, in fact, was probably ahead of its time.

The fact is that every generation has had its alternative beverage for young entry-level drinkers not yet accustomed to the taste of beer, wine or spirits.

This spring saw the launch of Bacardi Silver, a partnership between Anheuser-Busch and Bacardi USA, and Skyy Blue, an alliance between Miller Brewing and Skyy Spirits.

“There has always been the consumer who looks for flavored beverage alcohol,” said Marlene Coulis, director of new products for Anheuser-Busch, “someone who doesn’t like the taste of beer and doesn’t want to move to spirits.”

Distillers, brewers and vintners have been adding flavors and fruits to their products for centuries to make them more palatable. Liqueurs and cordials, for example, were created to disguise the harsh taste of alcohol.

More recent generations have seen their own alternatives. The ’60s offered sangria and Boone’s Farm. Popular beverages in the ’70s were sweet rosé wines like Lancer’s. The ’80s brought us wine coolers. Then came Zima, hard lemonades, ciders and teas. And every generation has had its favorite sweet mixed drinks — rum and cola, rye and ginger, Tom Collins, daiquiris, sours, margaritas — the list goes on.

The new generation of entry level drinkers is unusual in that it has grown up on an incredible variety of flavors in a wide range of food and beverage products. These consumers are used to a tremendous number of choices, from flavor varieties of a single product like oatmeal to the wide range of products in each category that are available to them. In the past decade, consumers have seen an explosion of new products in the beverage aisle, from flavored teas to energy drinks.

“Across a lot of categories, consumers, especially those from 21 to 27, are demanding a lot of flavors in food and beverages,” said Ann Stickler, director of strategy and new business development at Miller. “I think these products are exciting, unlike just another beer. People are looking for different flavors.”

This generation also is more sophisticated than its predecessors. Fueled with information in an ever-shrinking world, these consumers are very brand-conscious and aren’t afraid to spend money on brands they perceive to offer quality and image. The new breed of malternatives does just that.

Young consumers today have shown strong preference for superpremium and even ultrapremium brands and a willingness to pay for them. So, when brands like Smirnoff, Skyy, Stolichnaya, Bacardi, Sauza and more attach themselves to a new beverage product, consumers sit up and take notice. Consumers are well aware of these brands, and more will likely become aware as a result of malternatives.

Miller Brewing and Allied Domecq have joined forces to create Stoli Citrona and Sauza Diablo, both of them bowing this month.

It also doesn’t hurt that both the spirits companies and brewers behind these new products are spending heavily to raise that awareness. Smirnoff spent an estimated $50 million last year to market Smirnoff Ice, which equates to about $2.39 a case. Guinness/UDV plans to spend twice that on the brand this year to make sure the product is more than just a fad.

Anheuser-Busch is spending an estimated $50 to $60 million this year on Bacardi Silver. Miller is spending an estimated $40 million on Skyy Blue, and budgets for Stoli Citrona and Sauza Diablo likely will be comparable on a pro-rated basis.

“Compared to our $10 million on Skyy Vodka, Miller’s $40 million on Skyy Blue is like quadrupling our ad budget,” said Gerard Ruvo, senior vice president of sales at Skyy Spirits.

In other words, everyone wins — assuming consumers like the products.

What spirits-branded malternatives also offer that most malternatives haven’t to date (with the possible exception of Zima) is a sophisticated image. Coolers and hard lemonades are positioned more as refreshment for regular folks when a beer might not be appropriate or desired because of its taste. The new malternatives appeal more to those who aspire to today’s cocktail culture, but want something a little less potent than spirits.

“We want to make sure the product and the package carries a higher level of sophistication than beer,” A-B’s Coulis said of Bacardi Silver. “It’s priced higher than our beer brands, and everything we do reflects that. Our p-o-s is more upscale. There are fewer items and they’re higher quality.”

Ads also portray these brands as a social lubricant like beer, but on a more sophisticated level. Packaging plays a significant role to raise awareness among consumers so they know what to ask for when they try them at bars and restaurants. Skyy Blue’s package, for example, mimics Skyy Vodka’s upscale cobalt blue bottle. And initial focus for all the new brands will be in on-premise accounts where consumers often first “discover” new brands.

While brands will be pushing sampling on-premise, display in off-premise is important. Brands will be encouraging retailers to use classy new point-of-sale materials to build displays. Promotion plans for most of the new brands hadn’t yet been set earlier this spring, but strong support is anticipated.

Zima, from Coors Brewing, has revamped its product as well as launching Vibe in selected markets this month.

Zima is responding to the competition and the new consumer interest in the category by revamping the product. New ads and a $1 million under-the-cap promotion tied to CBS’ “Survivor 4” in April and May signaled the changes. A slightly different formulation will appear in new smooth glass bottles in metallic six-pack carriers with new graphics and a sleeker, more modern logo by June.

Stumbling Blocks

While the new products appear to be poised to take the market by storm, it won’t all be smooth sailing. The brands face opposition not only from competition, but from consumer advocacy groups as well.

The biggest concern is whether these products mislead consumers into believing they contain a distilled spirit rather than malt-based alcohol. The Bureau of Alcohol, Tobacco and Firearms is taking a close look at the way in which these products are labeled and marketed.

Words on labels such as “flavored malt beverage made with natural flavors containing vodka” won’t be allowed under new rules issued by ATF because they suggest to consumers that the products actually contain distilled spirits. Though taking the words “vodka” or “rum” off the package may have some impact on sales, spirits brand names are still going to drive interest and sales. And consumers are still likely to be confused, assuming that a name like Smirnoff, Bacardi or Sauza means the product actually contains vodka, rum or tequila.

Seagram’s Coolers has launched a couple of new flavors and has recently settled in with United States Beverage, the company that also markets Hooper’s Hooch (below), which also recently introduced orange and berry flavors.

The other concern voiced by industry watchdogs is the fact that like beer, these products can be advertised on television. That is giving spirits companies a way around the network-television ban on liquor advertising. Promoting spirits-branded malternatives will encourage young consumers to step up to spirits brands, opponents say.

Marketers are taking the criticism seriously and taking responsible action. Guinness/UDV has promised that at least 70% of the target audience of any media it buys must be legal drinking age or older. And it has devoted a substantial portion of its media budget to a responsible drinking campaign.

Miller and Allied-Domecq noted that they would take pains to address ATF and advocacy group concerns about labeling and marketing before their products are introduced.

Hard lemonades also stirred up a storm of controversy when they hit the market. Marketers were accused of promoting the “alco-pops” to underage consumers. That storm blew over, however, and it’s likely this latest will, too.

Got Lemons, Make Lemonade

For their part, hard lemonades continue to make inroads and are helping the category increase its volume and share. After the initial influx of brands several years ago, the category has settled down with survivors like Mike’s Hard Lemonade from Mike’s Hard Beverages getting stronger.

Two Dogs was acquired by Pernod Ricard recently, giving that spirits company an entree into the malternatives category. The brand should benefit from its new parent company’s size.

A-B’s Doc Otis dropped “Otis” to become just “Doc’s” this spring. Humor-based ads and a product-based spot to raise awareness of what the product is are part of $19 million in support this year. A sailboat-themed program this summer reinforces appropriateness of outdoor usage as well as how refreshing and drinkable the product is.

United States Beverage has become a major player in the malternatives category, having picked up Hooper’s Hooch, Rick’s and Seagram’s Coolers. Hooch introduced orange and berry flavors this spring, giving consumers even more choices.

“Look at what the product is inside the bottle,” said Jerry Greenstein, vice president of marketing. “Smirnoff Ice is a lemon-citrus flavor, just like Hooch or Mike’s. So is Bacardi Silver and Skyy Blue. Lemonades reignited this category, but flavors will differentiate products in the category.”

The company is betting that the wide range of flavors among its three brands will help all of them grow. To help promote its new flavors, Hooch is supporting them with a “Play Hard” sweepstakes promotion offering consumers chances to win a trip to Italy and motor scooters among other prizes.

Now that there are even more products in the category that address a wider variety of usage occasions, growth may be even stronger.

“If you look at international trends and how the category has done in the U.K. and Australia, you’ll see 10 years of growth, and it continues to grow,” Stickler said. “We don’t have the sense that it’s a fad at all, so we intend to get out there with strong brands, brands that carve out the most unique spots.”

Industry experts, in fact, suggest the category could grow to represent anywhere from 5% to 7% of beer industry sales. The category also appeals almost equally to men and women, which opens up new opportunities for marketers, but also poses new challenges.

“It requires a new way of looking at and advertising the brand,” Stickler said.

Skyy Blue, for example, is playing up the visual appeal of its packaging and buying space in women’s magazines as well as men’s.

Coors has given Zima a more masculine look and targets advertising to men, but has tried to make them appealing to women as well. Vibe, on the other hand, targets male consumers even more directly.

Best of all, however, so far the products seem to be bringing new drinkers and incremental sales to the malt beverage industry.

“What’s great is that it’s almost all incremental to the beer business,” Stickler said. “Only about 40% of sales is coming from beer drinkers.”

Should you hop on the bandwagon? Tastes do change. But even if malternatives eventually lose their luster with consumers, it ought to be a heck of a ride. *

The 1990s were an excellent decade for the California wine industry. Robust economic growth and lifestyle demographics, generally favorable to upscale consumer products, benefited the premium varietal wine market and the peponderance of California producers who found themselves prospering in an extraordinary “sellers” market.

In 1999, the U.S. wine market reached the close of the 20th century up 5% from the previous year with the total including a huge (26%) spike in sparkling wine shipments destined for millennium celebrations. The market moderated to 3% growth in 2000, although shipments of table wine (including California, other states and imports) still hit a record high. Excluding coolers, the total U.S. wine market also reached a new pinnacle, in spite of huge declines for sparkling wines.

The trend of upscaling to better quality varietal wines remained a pervasive U.S. market driver, even as growth stalled slightly in the fourth quarter. Demand for high-end California table wines remained strong and premium wine producers with sufficient inventories generally enjoyed solid growth. Premium wine market leaders such Robert Mondavi, Beringer-Blass Wine Estates, Kendall-Jackson and Beaulieu Vineyard all posted strong increases from already large volume bases.

A Window of Opportunity
for Quality Foreign Producers

Although global wine production has outstripped demand for many years, much of the wine lake had little appeal to American consumers. Recent vineyard and winery upgrades have elevated quality in old world wine regions and in newly emerged exporting nations. A new wave of wine company investment across national boarders has intensified, producing savvy interntional exporting companies with marketing programs targeted at the U.S. In addition, the dollar reached its highest level in relation to the French franc and Italian lire in 15 years (when imports last captured their highest share of the U.S. market.). Importing companies capitalized on favorable exchange rates, and bottled still wine imports to the U.S. surged by 8.2 million cases in 2000. Although Italy, France, Spain, Germany all achieved market penetration, 40% of the imported table wine increases came from the Southern Hemisphere. Wines from Australia, Chile and Argentina all hit consumer-friendly price points in upscale packaging well suited for mass market on- and off-premise outlets. From a smaller base, wines from New Zealand and South Africa also attracted strong trade attention and consumer sell through.

A Look at Food Store Sales

ACNielsen/Adams Business Research food store reports illustrate the pervasive consumer shift upward in purchase patterns in 2000. Sales of all table wines $7 and above (American and foreign) advanced by 1.9 million cases (+22%), while everyday wines (below $7, and which make up 80% of food store volume) declined by 380,000 cases, or 1%. Most of these losses were in large-sized generic wines (jugs, priced below $3), which by themselves declined by 920,000 cases (-4%). Wines in the high premium range were only 20% of total volume but represented 43% of dollar revenues, while everyday wines were 80% of the volume but just 57% of the revenues.

According to ACNielsen/Adams, the greatest absolute volume growth in food stores was in the $7 up to $10 price category, which grew by 1.3 million cases, up 22%. Newly bearing vines primarily from California’s Central Coast became the foundation for “Coastal” brand line extensions hitting these price points from Mondavi, Beaulieu, Beringer, Callaway and Villa Mt. Eden. Other brands in this important niche include Meridian, Farallon, Hawk Crest, Indigo Hills, Rosemount Estates, Clos du Bois and Echelon from the Chalone group.

Brands at higher price points also grew rapidly. From a smaller base, wines in the $10 up to $14 category jumped 23%, while wines in the $14 and over segment climbed 18%. In contrast, wines in the fighting varietal price range of $3 up to $7 grew by only 3%.

Chardonnay achieved the largest growth among all varietals, gaining nearly 1.1 million cases, or 12%. Merlot was the second-largest gainer, growing by over 800,000 cases, or 17%. With an increased supply available, Cabernet Sauvignon sales climbed by over 500,000 cases, up 12%. Among other varietals, Pinot Grigio (+44%) and Pinot Noir (+20%) both grew rapidly, but White Zinfandel declined 5% in part because of cannibalization by low-alcohol, flavored varietals.

The Big Picture

With all its wealth relative to other nations, only one-quarter of U.S. adults are wine drinkers, according to recent Wine Market Council research. Exporting nations have always viewed this narrow consumer base for wine as an obvious marketing opportunity but success has been elusive. U.S. table wine consumption (including imports) remained smaller than dessert wine volume until 1968. Imported table wines that were about 26% of U.S. consumption at their peak in 1984, plunged in the last half of the 1980s to about 12% by 1991. This period saw the rise of California “fighting varietals” priced at ($3-$7 per bottle), which emerged from varietal planting excesses of the 1970s. That era’s weak dollar also benefited California’s finest high-end producers and California Cabernet appeared on East Coast wine lists that previously featured primarily Bordeaux. New premium wineries opened in coastal regions from Mendocino to Santa Barbara and California premium table wine grew substantially — but in a stagnant overall market. Interest rates were high, the dollar weak, phylloxera hit California’s most prestigious vineyard regions, and vocal anti-alcohol forces in the U.S. Congress threatened new “sin taxes” and onerous label regulations. Wine marketing was no fun and consumption languished.

Premium California table wine supply lagged the demand that developed as the U.S. economy strengthened in the ’90s. The surprise “French Paradox” broadcast health revelations blunted anti-alcohol sentiment giving the California Wine Institute, Women for WineSense and other industry groups research supporting more balanced legislative policies toward wine. A new wave of imported table wines packaged with consumer-friendly varietal designations gained ready acceptance.

In a 1983 benchmark study, Gomberg-Fredrikson & Associates segment California table wines into categories that have become industry standards. Wines below $3 per 750 ml bottle (mostly generic blends packaged in large sizes) made up the Economy or Jug wine sector. California premium wines were primarily those identified by varietal and selling above that level. This category was subdivided into Popular Premiums ($3-$7), Super Premiums ($7-$14), Ultra-Premiums ($14-$25) and Luxury wines priced at above $25 per bottle. At that time, GFA found that total premium volume was about 10% of wine sold but represented approximately $27% of winery revenues. By the year 2000, California premium shipments had reached 63% of volume and represented 87% of revenues.

At mid-year 2001, the California wine industry is in transition to a much more competitive environment. More and better wines are being made all over the world and many are in excess supply. Imports, which also rose significantly in the buoyant markets of the late 1990s, are once again at appoximately 20% of U.S. table wine consumption. Inventory supply and demand has finally reached a balance for most California producers and large increases are anticipated from newly bearing vineyards in 2001 and upcoming vintages.

As the U.S. consumer has continued to move upscale, California’s popular premium wines have largely taken the place of jug wines as “house pours” and form the foundation of most restaurant wine-by- the-glass programs. These wines when added to jug wines, now make up the “everyday” table wines from California and represent about 73% of California volume.

Chardonnay, now in abundant supply, and Merlot, also reaching high inventory levels, will become very competitive with newly popular imports in the $6.99 category this year. “High Premium” wines (everything above $7 at retail) will also benefit from expected drops in grape prices across most varietals in the upcoming vintage. The “ratchet up” effect that has characterized recent California wine pricing should mediate eventually in all price segments.

Think brandy or cognac, and you may envision holding a snifter by the fire or a glass of eggnog at a holiday party. Just the spirit for the upcoming season. But brandy isn’t a hit just at the holidays anymore. While brandy volume spikes during the winter months, year-round sales are steadily growing.

Total brandy and cognac sales were up 5.9% last year to nearly 8.7 million 9-liter cases, according to the Adams Liquor Handbook 2001. Cognac alone grew at an even faster pace, but sales at nearly all price levels are growing. Category performance also has been steady for several years, putting it in an enviable position, especially among brown goods producers.

A number of trends have driven brandy’s success in recent years. Traditional brandy drinkers — think residents of the three largest brandy markets, Wisconsin, Minnesota and northern Michigan — stick with what they know. The urban culture of African-American and Hispanic consumers is moving to the suburbs, along with beverage preferences. Younger adult consumers are turning on to the sophistication these products offer. And, as with many other categories, consumers are trading up.

All these trends are leading not only to category growth, but a plethora of new products aimed at capturing more of these diverse consumers.

Sticking With Tradition

The holiday season already upon us is a great time to merchandise brandy and cognac. In addition to being perceived as a special gift, consumers associate brandy with relaxing at home with friends. And what better time to get together with friends than the holidays?

“Research says brandy consumers are very loyal; it’s their drink of choice year round,” said Susan Overton, marketing director at Heaven Hill Distilleries, which markets Christian Brothers. “But there’s definitely an upswing in the fall as others also drink more brandy. This is the season when people look forward to a glass of brandy by the fire.”

The big domestic brands continue to use the holidays as a springboard to build product awareness and strategy for the rest of the year. Christian Brothers, which grew 4.8% last year, is offering a cross-merchandising mail-in rebate in many markets, pairing brandy sales with savings on firelogs or eggnog.

The brand’s VSOP was repackaged last year in a clear bottle to better communicate the rich color and value of the product. Marketing efforts into next year will be directed to the trade.

Major focus next year will be placed on Christian Brothers Amber. Several consumer promotions are planned to help build the brand at retail and reinforce Christian Brothers’ quality image.

Paul Masson brandy is promoting a brandy “Martini” made with Amaretto and cherry juice this winter in addition to traditional holiday gift boxes. The brand grew 13% last year to more than a million cases. It’s ad campaign — the Paul Masson brandy moment — is all about being comfortable at home with friends and appears nationally in print media like Vibe, Esquire, Stuff, Golf, Savoy and GQ.

“Paul Masson is growing about twice as fast as the category, which is an enviable position to be in,” said Peggy Fox, director of marketing for Canandaigua Wines. “People are very positive about it. They’re drinking it straight and mixed, so it’s not just a male drink. And while we’re not ignoring women or ethnic groups, we’re aggressively going after the Caucasian audience of men 29 to 45.”

New this fall are 200 ml and 375 ml sizes of Paul Masson VSOP, which was introduced last year. The brand also has plans for a 50 ml package for VSOP and a 100 ml size for VS to drive impulse sales near the register.

Category leader E&J Brandy saw sales rise 8.4% last year to 2.2 million cases. The brand expects sales this year to surpass last year’s by about the ame margin. The brand has been appealing to new users by promoting the mixability of both its VS and VSOP to younger consumers. A partnership with Cadbury-Schweppes has helped demonstrate the brand’s versatility.

For the holidays, E&J is introducing premium-priced Single Vintage Brandy that is available in limited quantities. The seasonal product will be different every year. All the E&J brandies are supported with a comprehensive national merchandising program including a fireplace display, gift boxes and drink recipes.

The brand expects to follow up the holidays with a national cross-promotion at retail in the first quarter of next year.

The retro trend defined by the return of classic cars, clothes and cocktails also is having a positive impact on brandy sales. “As retro cocktails become more fashionable, brandy drinks are coming back, adding to category growth and discovery,” said Tim Laird, senior brand manager for Korbel Brandy.

Korbel Classic is upgrading its packaging and offering a holiday eggnog promotion with recipes and drink ideas this fall. The brand also has introduced Gold Reserve VSOP in test markets to bridge the gap between brandy and super-premium cognac.

“We’re trying to create some excitement in this category because it hasn’t gotten the same visibility as vodka, single malts or bourbon,” Laird said.

Capturing Urban Culture

“Cognac growth continues to rocket, outstripping almost every other spirit category but vodka,” said Larry Neuringer, category director for Remy Martin at Remy Amerique. “Urban culture continues to transition to pop culture. As that culture moves to the suburbs, cognac is getting new users who see it’s not your father’s drink in a snifter.”

Leading Brands of Brandy & Cognac

(Thousands of 9-Liter Cases)

Source: Adams Liquor Handbook 2001

Remy is sticking to a strategic pricing strategy that positions its VSOP in a premium position. The brand has seen sales double in the past two years — sales were up 22.3% last year to 489,000 cases — pleasing retailers, according to Neuringer. Brand support also includes promotions and advertising, including one of the biggest radio spends in the category.

For the first time, Remy also is actively marketing its own VS. It renewed its focus on the product two years ago and recently revamped the packaging. The product has been rolling into AfricanAmerican test markets this fall.

Another product aimed at the urban hip-hop culture that has embraced brandy and cognac is Remy Red. A cognac and fruit juice blend, Red crosses over into the liqueur category, and offers even more mixability than traditional cognac.

Hennessey sales, too — up last year to nearly 1.4 million cases — have been driven largely by ethnic segments, particularly African-Americans. But its popularity is expanding among Hispanics and Asians as well, according to Elizabeth Sorota, vice president, group project director for Hennessey.

A new ad campaign bowing in February positions Hennessey as a premium brand for consumers who can differentiate one cognac brand from another. Media will include print, outdoor and spot radio. The brand also plans some exciting programs for both VS and VSOP next year.

Breaking With Tradition

Urban culture is becoming increasingly popular with younger consumers, and brandy and cognac are among many of the upscale beverages that appeal to these consumers.

“What resonates with young urban adults is what’s hot,” said Stephanie DeBartolomeo, marketing director for Courvoisier. “They’re embracing cognac. Our challenge is to position Courvoisier as hot, fashionable, breakthrough and cutting edge.”

To capture the essence of fashion, Courvoisier is doing unexpected things such as incorporating designer martini and highball glasses into its gift packs instead of snifters, along with party guides and drink ideas. Print and radio ads feature urban R&B and rap artists who make Courvoisier their own, as well as showing people having a good time with cocktails made with the brand.

Young consumers are in many ways more sophisticated than previous generations. They’re well-traveled, informed and relatively affluent compared to their parents at the same age. They look for products that offer both quality and image and aren’t afraid to spend money on above-premium products.

“Younger consumers are turning on to brandy as a flavorful alternative to vodka and something a little more sophisticated,” said Overton. “Brandy also has a smooth flavor that is an easy drink to pick up and start consuming. It’s not so much an acquired taste as bourbon or single malt.”

Korbel is even launching a product designed especially for younger drinkers to help bring them into the category. Korbel XS (for “extra smooth”) is enhanced with vanilla, orange essence and spices. The result is an easy-drinking brandy that also mixes well with everything from fruit juice to energy drinks.

Trading Up

Young consumers aren’t the only ones looking for sophistication, however. The strong economy for most of the past decade led many consumers to trade up, and the brandy and cognac category benefitted as a result.

“A broader theme than the popularity of urban culture has been `populux,’ luxury for all,” said DeBartolomeo. “Cognac is something people can have that’s very aspirational, and a brand like Courvoisier fits the mold perfectly. It has a leg up on other spirits out there because it’s very authentic with a lot of heritage, but now it’s even more acceptable and approachable because it’s a sociable and mixable product.”

A lot of brands are capitalizing on the continued shift to ultrapremium brands. The more exotic and special a brand is perceived to be, the better in many cases.

“Cognac is like wine,” said Sorota. “The more you drink, the more you know and learn and the more you want to discover about the product. Consumers also want to differentiate themselves further by drinking something special.”

To that end Hennessey is introducing Hennessey Private Reserve, which will be priced and aged between Hennessey XO and Paradis. Paradis also is being relaunched with new packaging. Both products will get full trade and pr support.

Remy Martin, too, has seen its XO business grow significantly “due to market segmentation and new niches such as casinos, Asians, older consumers and Wall Street,” said Neuringer. The brand does a lot of hand-holding with these consumers through brand ambassadors, special events and public relations.

Courvoisier is pushing a 200-year-old cognac in high-end gift-giving guides to burnish its image among the cognoscenti.

Unusual brandies from other countries, including Spain, Mexico and Italy also are seeing an upsurge in business. Ethnic groups who consumed these brands in their homelands are slowly introducing them to their neighbors here.

Cardenal Mendoza, for example, one of few Spanish brandies still aged using the solera method, is building visibility and brand image in key markets here in the U.S.

“It’s a process of education, reminding people of the brand’s heritage,” said Ricardo Febres, marketing manager at Shaw-Ross International Importers. The brand is conducting a bartender recipe contest in four markets to generate new cocktail ideas. Off-premise, it has a strong tasting program in key markets.

What The Future Holds

While no one yet knows what effects the cooling economy or the September terrorist attacks will have on brandy and cognac sales, most marketers believed the category will weather the storms.

“There’s tremendous uncertainty right now, and no one is sure what the impact will be,” said Sorota, “but the total category is very strong.”

That very uneasiness, however, could be an unforseen boon to category sales.

“In times of uncertainty when the pace of change accelerates, people look for an island in the stream, a little place where they can get a break from cell phones and television news and look for something that comforts them,” said Neuringer.

Since a lot of brandy and cognac is consumed at home with friends or curled up in front of the fire, times like these could be made for the category.

Mike Sherer is a Seattle-based writer and consultant specializing in beverages and foodservice.

Brandy Primer

Brandy essentially is distilled wine. The word comes from the Dutch “brandewijn,” used to describe the “burnt” or boiled distilled wine 16th century Dutch traders brought back from Spain and southern France. Its origins date back to the 7th century when Arabs around the Mediterranean experimented with the alembic stills they invented to make perfume.

There are three basic types of brandy:

* Grape brandy — made from distilled fermented grape juice (wine).

* Pomace brandy — made from pressed grape pulp, skins and stems that are left after the grapes have been crushed to extract their juice for winemaking. Italian grappa and French marc are the two best known examples. Not surprisingly, they’re more raw and rough edged than traditional brandies. Some, however, are aged in seasoned casks to take the edge off, resulting in a very elegant product.

* Fruit brandy — made from fermented juice of other fruits. Examples include kir (cherries), Calvados (apple brandy from Normandy), poire (pear) and others. They’re often referred to generically as “eaux-de-vie” (waters of life).

Cognac is brandy made in the Cognac region of France, just north of Bordeaux. The region is divided into six growing areas. Like Champagne, brandy not made in the Cognac region cannot carry the Cognac appellation. Similarly, armagnac (an even older version of French brandy than cognac) is made in the Armagnac region.

There are no age statements on cognac, but many brandies from around the world have adopted some generally accepted terms developed to differentiate cognacs. These include:

* VS/VSP/Three Star. Very Superior or Very Superior Pale usually has been aged a minimum of two years in new oak casks. Most are aged four to five years.

* VSOP. Very Superior Old Pale must be aged for a minimum of four years. The industry average is 10 to 15 years.

* XO. Extra Old cognacs are at least six years old, but usually are 20 years or older. Most older cognacs are transferred to seasoned casks after a few years while they continue to mature. The oldest are stored in glass jugs to prevent them from taking on too much woodiness.

Many Spanish and Mexican brandies are aged using the solera system. Brandy is aged in a series of sherry casks. When brandy is drawn off from the the last cask, no more than a third of its volume is removed. That’s replaced with brandy from the next cask in line, and so on. The first cask in line is then filled with newly distilled product. The resulting blend may contain brandy that has aged for 30 years or more. The best Reservas are aged 12 to 15 years; Gran Reservas are aged from 17 to 20. Cardenal Mendoza recently introduced a product to commemorate its two hundreth anniversary that includes brandy from an original solera.

California brandies generally have a lighter flavor profile and cleaner palate than imported brandies, making them good mixers. Most are aged from 2 to 12 years.

With retailers looking for every edge they can get to make this a prosperous holiday season, merchandising materials provided by major suppliers is one way to brighten up a store’s decor as well as spur customer interest in specific brands. From gift and added-value packaging to spectacular point-of-sale displays, the following is a sampling of the latest holiday merchandising.

Absolut Holidays

The Absolut Spirits Co. is offering a wide array of merchandising materials using the theme, “Absolut Season.” The brand’s mega mass display features three-dimensional snowflakes that move independently around a festive image of an Absolut bottle. There are also ceiling danglers that highlight Absolut Mandrin and Citron. Other p-o-s materials include a deluxe case card, shelf talkers and recipe brochures with seasonal multi-brand cocktail recipes.

Party Profits

Bacardi USA has a full line of festive point-of-sale materials to help spur sales of Bacardi Rum this holiday season. Using the tagline, “‘Tis the Season To Join the Party,” Bacardi Light and Bacardi Gold are being promoted via mass case stacking pole toppers and pole topper banners, vertical danglers, two-sided case cards and take-one recipe books and holders, highlighting holiday party ideas. In addition, the brand is offering consumers handsome holiday gift boxes.

Sales Stuffers

Canadian Club, from Allied Domecq Spirits USA, is offering decorative pole toppers and case cards with the theme, “The Stockings Were Hung by the Chimney With Care” along with its broader “Can You Handle a Whiskey Drinking Woman?” theme. The brand also has gift-wrapped 750 ml, 1 liter, and 1.75 liter sizes., as well as a value-added gift set that features 750 ml Canadian Club Reserve and a stainless steel-logoed silver flask.

Holiday Goose

Sidney Frank Importing is offering a lineup of special holiday gift sets for Grey Goose Vodka and Grey Goose Vodka L’Orange, imported from France. Both brands are featuring a package of two Martini glasses along with a 750 ml bottle in a handsome holiday box. In addition, the brands also are offering an elegant gift set of a 375 ml bottle along with two, frosted egg-shaped candles.

Perfect Profits

Christian Brothers Brandy, from Heaven Hill Distilleries, is telling consumers that it’s “Perfect For The Holidays” in a variety of merchandising materials. The festive holiday wreath case cards are complemented by holiday gift cartons for all the Christian Brothers brandies. Pole toppers and shelf talkers round out the seasonal assortment of point-of-sales aids.

A Turkey for Turkey Day and Beyond

Austin, Nichols & Company is highlighting Wild Turkey 101 and 80 proof gift cartons, designed to complement each other and enhance the appeal of Wild Turkey floor displays. In addition to decor kits for existing Wild Turkey mass displays, Austin, Nichols is also making pole toppers, case cards, case wrap and floor decals available to retailers.

Real Holidays

Jim Beam Bourbon, from Jim Beam Brands, is featuring a rotating pole display that shows the outside of an inviting local bar and then revolves to reveal friends celebrating inside with a 3-D bar scene, stage and band. Themed, “Real Friends, Real Bourbon, Real Music,” the scene is also repeated in case cards. Both Jim Beam White Label and Black Label are offering colorful holiday gift boxes. In addition, Black features a gift set with two logoed rocks glasses.

The Family Spirit

Jack Daniel’s Tennessee Whiskey, from Brown-Forman Beverages Worldwide, is offering case cards and shelf talkers that feature the Jack Daniel’s family of brands in different holiday settings. A richly appointed cocktail table is set in front of a lavish window display that shifts from the small-town atmosphere of Lynchburg to a seasonal suburban scene.

By Robert Plotkin

Shooters are the Rodney Dangerfield of mixology. They get no respect, which is a pity, because ounce for ounce they pack more marketing potential than most other cocktails and drinks. Granted, marketing shooters may require a bit more effort than others. Recipe names might have to be toned down, suggested glassware may have to be changed. Nevertheless, like color TVs and tax refund checks, shooters have a nearly universal appeal.

For one thing, they’re fun, interesting and contemporary drinks. Since most shooters are served neat or straight up, the quality of their ingredients can be more fully appreciated. And by promoting some of the vast array of shooter recipes available, you can also facilitate the turnover of slower moving inventory and provide customers more ways to use standard brands.

So whether you subscribe to the theory that what people drink in bars on Friday nights is what they look to buy in your store on Saturday, or supplying your clientele with creative ideas on how to use what’s on your shelves drive sales, taking another look at shooters makes good retail sense.

CATERING TO EVERY TASTE

At the onset, the word “shooters” encompasses a large and diverse body of drink recipes; ranging from the elegant and sophisticated to the radically bizarre. Shooters are anything but one-dimensional. Long gone are the days when the breadth of the category consisted of a shot and a beer, or a shot in a beer. Today’s shooters are made with nearly every product on your shelves and cater to every taste imaginable.

The Svedka S&M.

The key is to select recipes that target your clientele’s particular tastes. For a swank clientele, for instance, consider promoting shooters as “neat cocktails,” recipes such as the Grand Alliance, which is equal parts of Disaronno Amaretto, sweet ‘n’ sour and Champagne served in a chilled sherry glass; or the Touque Wrench, which uses Midori, orange juice and Champagne; or the Lobotomy, which is a blend of Disaronno Amaretto, Chambord, pineapple juice and Champagne. Change their names to best suit your crowd and you’ve got some highly promotable specialties.

Because of their great taste and dramatic presentation, layered concoctions are ideal for an upscale clientele. Candidates include the Inverted Nail, which uses Drambuie with Glenfiddich on top; the Caribbean Sunset, a combination of Kahlúa, Chambord and Tia Maria; the Neutron Bomb, which features Kahlúa, Bailey’s Irish Cream and butterscotch schnapps; or the Ninja, using Midori, dark crème de cacao and Frangelico.

PROMOTE POPULAR INGREDIENTS

Most retailers, however, cater to a clientele that are well-acquainted with shooters. The key to whetting their appetites is to promote recipes that feature popular ingredients, such as the Yellow Jacket, a blend of Jägermeister, Baeren Jaeger and Kahlúa; the Mexican Itch, which uses El Tesoro Añejo Tequila, Grand Marnier and fresh lime juice in a salted shot glass; and the inflexible Rigor Mortis, which features Absolut Vodka, Disaronno Amaretto and equal parts of orange and pineapple juice.

Our survey of those shooters riding the crest of popularity include the Oatmeal Cookie (Goldschläger, Jägermeister, an Irish cream like Baileys or Carolans and DeKuyper Buttershots Schnapps), the Cement Mixer, (Absolut Citron and an Irish cream like Baileys or Carolans); the Duck Fart (a layered shooter made with Kahlúa, an Irish cream like Baileys or Carolans, and Crown Royal); and the Florida specialty Sammy Jager (equal parts of sambuca and Jägermeister).

SOMETHING A LITTLE WILDER

If these are too tame for you, you may want to consider promoting two New Orleans specialties. The Oyster Shooter is a Gulf specialty made with Tabasco sauce, horseradish, cocktail sauce, draft beer and a raw oyster. The Bloody Nose is a fiery combination of Absolut Peppar, horseradish, Bloody Mary mix and a raw oyster served in a chilled rocks glass. So who needs a half shell?

Other specialties currently sporting celebrity status include the Jamaican Tennis Beads, a blend of Malibu, Midori, crème de banana, vodka and a splash of pineapple juice and cream; and the provocative Sexual Chocolate, a decadent combination of Jägermeister, an Irish cream like Baileys or Carolans, Kahlúa and dark crème de cacao.

The Purple Hooter is an enduring classic made with Chambord, vodka, sweet ‘n’ sour and a splash of 7-Up. Another is the Maui Wowie, which is a blend of Malibu, Midori, pineapple and orange juice; and the Cocaine Shooter, a concoction made with vodka, Chambord, Southern Comfort, orange juice and cranberry.

THE SHOOTER GOES UPTOWN

“When done right, a shooter is a compressed cocktail, a thing of beauty,” contends Dushan Zaric, partner and operator of Cocktail Conceptions, a popular new bartending school in Brooklyn that takes a culinary approach to the classic American bar. “It is open to the same creative approach applied to other cocktails. Shooters should be balanced, elegant and seductive. All of the same ingredients that regularly find their way into cocktails can be featured in shooters.”

The major spirit producers apparently agree. Shooters are something of a hot commodity, appearing in most of their marketing campaigns for both off- and on-premise establishments. Shooters are in.

Heaven Hill enlisted the services of mixologist extraordinaire Dale DeGroff to assist in promoting Hpnotiq. He dubbed his creation the Pom Pilot Sex, a simple yet luxurious combination of Hpnotiq and pomegranate juice. Another classy shooter in their fall portfolio is Hpnotiq Blue Shot, which features equal parts of Hpnotiq with the chilled superpremium vodka of your choice.

Jim Beam and DeKuyper have rolled out a highly creative shooter program, one that features the Sour Apple Drop, a shooter made with Absolut Citron, DeKuyper Pucker Sour Apple Schnapps and triple sec; and the Blue Drop, which combines Absolut Citron, DeKuyper Pucker Island Blue Schnapps and triple sec. The ingredients in both drinks are shaken over ice and strained into a sugar rimmed shot glass. Their current repertoire also includes the alluring Red Headed Slut, a concoction made with DeKuyper Peachtree Schnapps, Jägermeister and cranberry juice.

Brown-Forman and Southern Comfort intend to shake things up with several new libations, including the Southern Hurricane Shooter (Southern Comfort, pineapple juice and grenadine), the Alabama Slammer Shooter (Southern Comfort, Amaretto, sloe gin and orange juice) and the Soco Lime Shot, an amazingly refreshing combination of Southern Comfort and lime juice.

TEQUILA SHOOTERS

As one would expect, the major tequila brands are well represented in the shooter arena. Popular from Manhattan to Manhattan Beach is the Three Amigos, a field tested concoction made with equal parts of Jose Cuervo Especial Tequila, Goldschläger and Rumple Minze Schnapps. The appropriately named Cuervo Fire Alarm features Jose Cuervo Especial topped with Cholula hot sauce.

On the other end of the spectrum is the Sauza Banana Blow Shot, a drink made with Sauza Gold Tequila, crème de banana, pineapple and fresh lime juice and dollop of whipped cream.

Finally, as evidence that his culinary approach to mixology yields sensational results, Zaric points to two truncated cocktails currently being promoted at haunts in New York. The Vodka Nikolai is made with semi-frozen Stolichnaya Vodka and a lemon wedge coated on one side with sugar and on the other with ground espresso. The New York Sour Shooter features Wild Turkey Rye, lemon juice, simple syrup and a splash of fresh orange juice. The ingredients are shaken and then a thin layer of dry red wine is added on top.

The bottom line — shooters give your clientele one more creative outlet to enthrall their guests and another method for you to empty your shelves.

Selected Shooter Recipes

Looking for some creative shooter recipes to whet the appetites of your clientele?
Try these puny elbow benders on for size. –RP

GRAND ALLIANCE

• Sherry glass, chilled
• 1/3 fill Disaronno Amaretto
• 1/3 fill sweet ‘n’ sour
• 1/3 fill Champagne

TORQUE WRENCH

• Presentation shot glass, chilled
• 1/3 fill Midori
• 1/3 fill Champagne
• 1/3 fill orange juice

SVEDKA S&M

• 1 oz. Svedka Vodka
• 1 drop Pandon extract
• Grenadine

Dip shot glass into dish filled with grenadine. Quickly bring into bowl with sugar and push down slowly. Poor Svedka into shaker filled with ice. Add Pandon extract, shake and fill shot glass almost to rim.

INVERTED NAIL

• Sherry glass
• Layer ingredients
• 1/2 fill Drambuie
• 1/2 fill Single Malt Scotch

TUACA POUSSE CAFé

• Cordial or pousse café glass, chilled
• Layer ingredients
• 1/4 fill grenadine
• 1/4 fill White Crème de Menthe
• 1/4 fill Midori
• 1/4 fill Tuaca

B-52

• Cordial or presentation shot glass
• Layer ingredients
• 1/3 fill Kahlúa
• 1/3 fill Baileys Irish Cream
• 1/3 fill Grand Marnier

YELLOW JACKET

• Rocks glass, chilled
• 3/4 oz. Jägermeister
• 3/4 oz. Baeren Jaeger
• 3/4 oz. Kahlúa

MEXICAN ITCH

• Presentation shot glass, chilled Salted rim optional
• 1/3 fill Añejo Tequila
• 1/3 fill Grand Marnier
• 1/3 fill fresh lime juice
• Lime wedge garnish

RIGOR MORTIS

• Rocks glass, chilled
• 1 1/2 oz. Absolut Vodka
• 3/4 oz. Disaronno Amaretto
• 1 oz. pineapple juice
• 1 oz. orange juice
• Shake and strain

OATMEAL COOKIE

• Rocks glass, chilled
• 1/2 oz. Goldschläger
• 1/2 oz. Jägermeister
• 1/2 oz. Irish Cream
• 1/2 oz. Butterscotch Schnapps

CEMENT MIXER

• Rocks glass, chilled
• 1 oz. Absolut Citron
• 1 oz. Irish Cream

DUCK FART

• Presentation shot glass, chilled
• Layer ingredients
• 1/3 fill Kahlúa
• 1/3 fill Irish Cream
• 1/3 fill Crown Royal

SAMMY JÄGER

• Presentation shot glass, chilled
• 1 oz. Sambuca
• 1 oz. Jägermeister

Cold Weather, Hot Profits

As most of the country falls into a winter chill, there’s no reason that retailers can’t see their profit picture warm up. Here’s a selection of supplier merchandising materials to help show retailers the way.

Drinks-To-Go

Finlandia, from Brown-Forman Beverages Worldwide, is offering materials to highlight classic cocktails that can be made with the imported vodka. In addition, in markets where legal, there is a Finlandia co-pack carton with a featured juice or Bloody Mary mix.

Drinking It In

In what has become an annual event, St. Pauli Girl imported beer from Germany is offering a collectible poster of this year’s St. Pauli Girl in conjunction with Playboy. The poster, featuring Neriah Davis, this year’s St. Pauli Girl and a March 1994 Playboy Playmate, is freely available to consumers in display bins specially designed to merchandise the posters. There is also a consumer purchase program via take-one brochures for selected St. Pauli Girl merchandise.

Valentine Sales

Luna di Luna’s Merlot/Cabernet, from A.V. Imports, will spark romance this Valentine’s Day, with an exclusive heart-shaped candle and a bottle necker. The red bottle is perfect for Valentine’s Day, and the candle, which is available on 5,000 cases of the 750 ml “Ferrari” red bottles of Merlot/Cabernet, adds a special finishing touch. The wine will be supported in-store with a striking red and gold themed bottle necker and case card that coordinate with the current “Get Some” ad campaign.

Snake Charmer

Tsingtao beer, imported by Barton Beers, is setting off on an auspicious year with mertchandising materials highlighting the Chinese Year of the Snake. In addition to case cards, there are calendar posters, hanging lanterns scroll calendars and hanging firecracker (simulated) displays.

Shakeout and consolidation have come, as they must, to the beverage alcohol industry’s emerging e-commerce sector. Once promising platforms have disappeared, some swallowed by competitors, and promising new partnerships appears the rule of the day.

But as e-commerce coalesces in the business’s consciousness it brings with it the promise of lower B2B costs, a wealth of strategic information, unprecedented customer contact and product variety — in short, a far more efficient industry than ever before.

Earlier this year, a pair of major mergers have helped reshape the landscape, in one instance forming what one communications and technology solutions company is referring to as the first national wine retailer.

For retailers and brand owners, the web remains many things: a way to hawk wares, establish rapport with old and new customers, learn more about consumer likes and dislikes and bring targeted promotional offers as near as their cell phones.

Now, several of the country’s best-known retailers are going further, coming together to form an enterprise whose package of integrated marketing solutions brings together beverage alcohol industry suppliers, wholesalers and retailers to generate compelling information and buying opportunities for consumers.

Online On Course

The stakes are, of course, high. Wall Street analysts Salomon, Smith, Barney have estimated the online wine retail market will reach $1.5 billion, or 10%, of the estimated $15 billion wine market by 2003. Helping realize that potential have been two recent mergers that should go a long way to tying the disparate parts of this industry together, to the benefit of all.

eVineyard purchased Winebuyer.com and its assets last September. Then, this past April, it bought wine.com, which some months earlier had merged with wineshopper.com.

New York City-based BevAccess and Indianapolis, IN-based eSkye Solutions Inc., competing communications and technology solutions companies serving the beverage industry, merged in late April of this year, creating a single national platform to address the technology and communication needs of the industry. The combination creates a national private trading exchange through which beverage alcohol retailers, distributors, suppliers and control states can, executives claim, conduct business more efficiently than ever before possible.

BevAccess says it has agreements with distributors in over 40 states to enable their customers to electronically access their products and services. The network is active in major markets, including Illinois, New Jersey, New York, Massachusetts, Michigan and Texas, with pilot programs in Georgia and New Hampshire.

The consolidation comes as anything but a surprise. Analysts have been foretelling major restructuring throughout all of e-commerce for close to two years, beginning, said Brett Lauter, vice president and chief marketing officer for eVineyard Inc. in Portland, OR, “when everyone was just putting a dot.com behind their name and getting venture funding.” What wasn’t expected, he added, was “the little fish swallowing the big fish. But we expected it because our business model is really the one that made the most sense when you really drilled down into it.”

“In the internet as a whole there has been a pretty extensive shakeout,” noted Helen Gregory, vice president of marketing for BevAccess., “most recently with wine.com and wineshopper.com selling its remaining assets to eVineyard.”

The trend is also welcome. When it comes to B2B, said Eric Blanz, web site director for New York City wine retailer Sherry Lehmann, “The problem is that in the wine industry you work with distributors, and for any given wine you may have one, two, three or more. All your distributors have different kinds of computer software, and they’re at different stages of technological development. Some of them, literally, hardly use computers at all, while some of them are extremely sophisticated.”

The result, then, is that “you don’t have a way you can interface with all the myriad distributors you use because everybody’s using something different,” he added. “That part of the industry is definitely antiquated vis-a-vis financial industries, where it might be easy to share information or do business-to-business dealings via the internet. In our industry, that is still something that’s down the road.”

Setting A Standard

The merger of BevAccess and eSkye “is really about creating a single platform, or standard, for the industry,” said Gregory. She sees the industry now in a position to develop a level of standardization “and all the efficiencies and cost reductions that derive from that by working with one company, one technology partner.”

The merger allows the companies to expand their geographic reach and, more importantly, pass along more efficiencies to customers, retailers, wholesalers and suppliers.

“When you’re looking at retailers, wholesalers and suppliers, it’s not so much e-commerce as it is technology adoption,” Gregory pointed out. “Our company is much more than just an e- commerce channel. I think that’s one interpretation of what’s happening today. Orders are now being placed on line, and that has implications for all three tiers in the way that communications and access to information are changing and evolving very quickly.”

That greater access to communication and information means the industry can make more informed decisions. For retailers, they relate to which products to carry and what type of investments to make. Wholesalers can help make the process more efficient and ultimately more cost effective. Said Gregory, “It’s far less expensive to process and handle an electronic order than it is to process and handle a manual order.”

Such systems do not, she stresses, mean the end of the salesperson, who remains in her estimation a “critical linchpin in the process.” Indeed, that role has been changing with or without technology, becoming more service oriented.

“Basically what we’re doing is consolidating channels to enable an electronic exchange,” explained Gregory. “As in any other industry, an electronic exchange is a fraction of the cost what it currently costs.”

BevAccess has done “an impressive job of integrating their online technology and national publishing services in key markets,” said J. Smoke Wallin, founder and CEO of eSkye Solutions. “It is clear that while the industry is eager to adopt the benefits of an online network, there is an overwhelming demand for a unified effort with common standards.”

The ability to create a single national network serving the entire industry, added Mark Sanders, CEO of BevAccess, is “a powerful proposition. We have both made significant progress working toward this goal on our own, but it is now very clear that the best way to accomplish this is to bring our companies together.”

Four of the top U.S. alcohol wholesalers — Charmer-Sunbelt Group, Glazer’s Wholesale Distributors, Young’s Market company and the Romano Brothers Beverage Company — have closed a strategic investment round with BevAccess.

Barkley Stuart, executive vice president of Glazer’s Wholesale Distributing Co., is quoted in a release as saying that the industry will “benefit greatly from the single online solution created through the merger… We anticipate increased efficiencies and cost reductions associated with electronic order processing…”

National Wine Seller

Lauter said he and his colleagues explored the idea of going into the B2B side as the newly merged eSkye and BevAccess have done. Instead, they decided over the last couple of months to “stay focused, and not battle it out there.”

eVineyard is the only company that “took the time, especially from the B2C perspective, to go and acquire retail licenses for the various states we do business in,” said Lauter.

Being a licensed retailer means it is vital to have a constantly updated inventory. The site presents the inventories of its wholesaler partners. “We actually modified the winebuyer.com B2B technology to use it as a supplier extranet,” said Lauter. Wholesaler partners can actually update the inventory in real time. “We’ve just started doing this with a couple of them but we’ll expand it more this year.”

eVineyard can ship wine to 29 states (and Japan), with Hawaii and Wyoming coming aboard in July after opening their direct-shipping laws. At least three more states should be added by year’s end. The site also sells gifts and accessories.

To date, eVineyard has received just over $20 million in funding. The company expects to achieve profitability in 2001.

Lauter feels e-commerce is about to change the face of the industry forever. He pointed out that there has not been a national retailer of wine “because of the different state-to-state laws. We are becoming the first national wine retailer. That is one of the most obvious things it’s offering.”

With 10 current logistic centers (California, Florida, Massachusetts, New Jersey, New York, North Carolina, Ohio, Oregon, Texas, and Virginia), eVineyard sells premium wines to each of the country’s top 10 wine markets, reaching over 75% of the United States market for off-premise premium wine sales.

Leading Retailers Leading

Retailers are also getting their acts together. WineISIT.com is a national marketing company that provides top wine and spirit sellers in the United States with retail channel sales and marketing opportunities and solutions using the Internet. The site offers web hosting and marketing services to selected wine and spirit retailers, who in turn form a network of licensed wine and spirit stores in states capable of receiving and fulfilling orders from both online and in store purchases.

WineISIT is the brainchild of eight award-winning wine and spirits retailers who collectively own more than 250 individual stores around the country and can boast of, as company literature noted, “gener ations of experience with real customers and real stores.” They are:

• ABC Fine Wine & Spirits of Orlando, FL (Charles Bailes, III)
• Applejack Wine & Spirits of Wheatridge, CO (James Shpall)
• Centennial Liquor Stores of Dallas, TX (Jim Vanderveer)
• Don’s & Ben’s of San Antonio, TX (James Pfirrmann)
• Duke of Bourbon of Canoga Park, CA (David Breitstein)
• Kappy’s Liquor of Everett, MA (Bob Selby)
• Prime Wines & Spirits of Buffalo, NY (Burton Notarius)
• Spec’s Wines, Spirits & Finer Foods of Houston, TX (John Rydman)

Using technology and the Internet, WineISIT seeks to strengthen the relationship between merchants and their customers, and will allow online shoppers to learn, chat, find, buy and enjoy all there is about wine, spirits and other beverages in a user-friendly online forum.

The site exists, according to Prime Wines & Spirits’ Notarius, a former Beverage Dynamics Retailer of the Year, in order to promote customer relationship marketing. “This is not just an e-commerce web site, although will be able to do e-commerce on it eventually. Basically, we gather up the e-mails and snail mails from our members. Then we make those names available to receive information and e-mailings from brand owners.”

Basically, he explained, the venture is “a large data-mining model. You make an offer to customers, you have the information about them, you know everything they’ve bought. Then you segment your customers.”

E-commerce “by itself doesn’t work right now because you can’t support it,” said Notarius. “There’s not enough profit in acquiring the names and the cost of getting customers is too costly, so everybody’s going out of business except eVineyard. I still think they will have a tough time with the margins while they’re trying to get enough critical mass.”

Retailers, he continues, “don’t have a way to talk to (customers) individually. You have all these larger stores that are not quite as personal. You may know your best 5% of your customers, but you don’t know much about the rest.” Now, with all this electronic information available, stores can identify a customer’s name and address; you can map it to a database containing as many as 200 characteristics.

Looking Ahead

E-commerce and technology adoption “will accelerate very, very quickly” in the years ahead, BevAccess’s Gregory believes. The next five years should see what she terms a “considerable” adoption at all tiers of the industry.

Lauter sees the internet helping expand America’s overall wine-drinking population. He pointed to Wine Institute research showing large numbers of wine drinkers above the age of 40. But 50% of his customers are under 40, and 70% under 50. “That really goes to show that we are expanding the wine-drinking population for the 25 to 35 year olds, which really helps the industry.”

Blanz said the internet serves his store quite nicely by doing just what it’s doing — presenting consumers with a selection to die for.

Sherry-Lehmann.com offers more than 3,000 wines for sale, with about 2,400 active at any one time. Anywhere from 15 to 100 new wines are added per week. Ultimately, the number of wines will probably reach over 4,000.

At present, he added, work on the site consists of “tinkering” with the process to make it more user-friendly. “Right now there are no plans to make a fundamental change — like, say, add a bunch of vintage reports of food recipes. Basically, the philosophy is to keep it a content-heavy web site. People can find and buy wine and not too much extra stuff.”

Strategies vary, and the cyber world in which they are implemented is changing all the time. But even a grand old business like wine and spirits can’t help but be impressed by the efficiencies and economy of motion these changes promise.

From fast-food restaurants to car dealers, from department stores to airlines, businesses of all types talk about the importance of customer service. According to Burt Notarius, owner of Prime Wines & Spirits in Kenmore, NY, it is especially important for beverage retailers.

“Customers aren’t sure what’s in those bottles and they aren’t sure they want it,” he said. “Take gift-buying. Unless we make the customer comfortable enough — giving them the customer service they need to choose a gift — they will turn to something that is not as complex, like candy or jewelry.”

Even if the customer is determined to buy beverage alcohol, customer service is crucial. After all, said Jack Stoakes, chief executive officer of Liquor Mart in Boulder, CO, “Anybody can offer the same products that I do. Customer service is the only thing that sets us apart.”

At Prime Wines & Spirits in Kenmore, NY, an Information Center functions in a variety of service-related ways for customers.

Mark Michelson, principal of Michelson & Associates, an Atlanta-based market-research firm, and president of the Mystery Shopping Providers Association, agreed. “All kinds of surveys have shown that customers rank service just behind product availability and location in importance,” he said. “So when there are two competitors across the street from each other, carrying the same products, customer service is the only difference.”

THE MILLION-DOLLAR QUESTION

So, what is customer service? It’s one of those things that can best be defined the way Justice Potter Stewart once famously defined obscenity: people know it when they see it. “My basic motto is I treat people they way I like to be treated,” said Brian Hue, vice president and general manager of the two-store Cork ‘N’ Bottle chain based in Covington, KY.

The more difficult question is: How can retailers make sure their customers get good customer service?

By far, the most important part of the equation is the retailer’s employees.

“Knowledgeable personnel who are not pushy are the number-one asset of a store,” declared Dan Manning, vice president of Haskell’s, a Minneapolis-based chain that will soon be opening its sixth location. Gerald Clifford of House of Bacchus in Rochester, NY, agreed, saying, “Good customer service comes from the employees, 100%.”

Unfortunately for retailers, today’s job market is marked by extremely low unemployment rates; the national average is hovering around 4%, although in some areas it is even lower.

This makes it difficult to find good people. And according to a recent front-page article in The New York Times, the worst crunch for workers is in the lower pay ranges for jobs such as — yup — sales clerks.

Many beverage alcohol retailers find themselves offering more pay. Cork ‘N’ Bottle’s Hue estimated that his operation offers about 20% higher wages than its competition. Others offer perks. Liquor Mart, for example, gives its employees bus passes, invitations to its wine-tasting dinners, held in area restaurants, and even movie tickets.

And still, these retailers have a hard time hiring experienced people. The result: many find themselves working hard to improve the employees they can find. “With today’s job market, if you find someone who comes to work regularly, you need to work on them and bring them along,” said Liquor Mart’s Stoakes.

Yet, much of customer service — the happy attitude, the friendliness, the energy and patience required — seems to stem directly from the employee’s personality. Many retailers, including Stoakes, do find themselves shuffling their people around until they find the best position for them. Someone who doesn’t have the best people skills, for instance, might work out best in the stockroom.

Even among his salespeople, Burt Notarius notes which are more outgoing and likely to relish the “meet and greet” aspect of sales versus those, who, though very knowledgeable, prefer to hang back and wait for the customer to ask a question. Someone else, with a talent for detail, might be the best one for handling party planning. He places them on the floor according to their strengths.

Notarius finds himself in a relatively good position when it comes to hiring. Because Prime Wines & Liquors is so well known, people with an interest in working in the beverage industry come to him. Indeed, many wholesalers tell applicants to go to work for Prime in order to learn more. One of Notarius’s managers, who had worked for a beverage chain in Texas, now commutes to Prime all the way from Toronto.

Another had worked as the beverage manager at a country club. A third is a chef who wants to learn more about wine. “Getting people from the restaurant and hospitality business is a good start,” said Notarius. “They’ve got the right customer-service attitude.”

Even still, he said, “it is definitely hard to find people who can talk to customers.” Of the ten people working in the wine area of his store, he finds that three of them are exceptionally talented at customer service. “And there is a talent to this,” he said. “Definitely not everybody can do this, not even someone who wants to and works hard at it.”

Notarius’s ideal wine salesperson is outgoing, knows how to read a customer’s “cues and clues,” and knows how to sell. “They know how to listen, think and speak clearly,” he said. And in wine, where many people have a passion for learning all they can, this means “knowing how NOT to tell all they know.”

When Dan Manning of Haskell’s is interviewing potential employees, he looks for those “who are comfortable during the interview, who look directly at people, who can relate well socially.”

Then, Haskell’s starts the training process, which begins with working in the back room and eventually moves to working on the sales floor under the supervision of an experienced employee.

MAKE NICE

Many retailers say you can’t train a person to be nice. And at least one retail operation which tried saw its efforts backfire. In 1998, Safeway, the second largest supermarket chain in the U.S., began to more strictly enforce its five-year-old “Superior Service” program, which, among other things, required employees to smile at every customer. The stores were regularly tested by mystery shoppers and those employees who did not do well in the mystery shopper’s 19-point report were sent to special training courses, which according to newspaper accounts, were quickly dubbed “clown school” and “smile school” by employees. Eventually, 12 of the chain’s 150,000 employees filed grievances. Most were women who said that the requirement to smile at every customer led to incidents in which male customers harassed and propositioned them.

Cork ‘N’ Bottle’s Hue doubts that such customer-service training programs work anyway, calling them “hokey and trite.”

“So, you go into Kroeger’s and the employee [of the month] can see themselves on the wall,” he said. “I don’t think people care about things like that.”

He prefers to lead by example and spends a lot of time on the sales floor. “I work with our people personally, demonstrating how I want things done,” he explained. “They see the climate of our stores and catch on.”

Indeed, many retailers find that being on the sales floor is crucial. Not only can they see for themselves what kind of customer service their store is providing, but the presence of a manager is in itself good customer service.

“Customers don’t necessarily talk to me, but they see me and know they can talk to me if they need to,” said Liquor Mart’s Stoakes.

While retailers with a smaller number of stores can keep their finger on the pulse of customer service this way, many chain operators find that they need to bring in “mystery shoppers.” These are people who act like ordinary customers but who, in fact, report back to the retailer on the service they encounter. Some retailers are able to use friends and relatives for this task. Others prefer to use professional shopping services, which charge anywhere from $30 to $200 per shop, depending on the complexity of the task they are given.

“If you’re asking the shopper to fill out a one-page, 20-question assessment, that would be at the lower end,” explained Michelson. “Some mystery shopping companies are able to actually videotape the transaction. That would be at the high-end.”

Michelson advises retailers to plan what they want their shoppers to do carefully. “Focus on actual behavioral issues, things you can change, not satisfaction-oriented issues,” he said. “Don’t ask them to rate the person’s friendliness. Instead, ask things like ‘Were you greeted within 2 minutes?'”

While trying to prescribe exactly how employees must act in order to be friendly may not work, having some rules or guidelines does make it easier to communicate to employees just what you want. Many retailers, for example, tell their employees to greet every customer who enters and, when a customer asks where something is, they tell their employees to take them there, rather than just point. Others have rules about opening additional check-out lanes when a certain number of customers are in line.

Keep in mind, though, that employees need some leeway to deal with a specific situation. Take, for example, the common service of carrying customers’ packages to their cars. “You need to be careful. Some men take offense, like you are implying that they can’t carry something that heavy,” said Stoakes. There have also been incidents in which female employees feel uncomfortable accompanying a male customer to his car.

“There’s a place for written rules,” said Hue, “but you also want your employees to think outside the box. If you’re out of the 1.75 size the customer wants, then you want your employee to think of selling them a liter size and a 750 for the 1.75 price. Now, you’ve treated the customer right and you’ve taken care of the problem.”

And, other retailers note, you have to give your employees the opportunities they need to provide good customer service. A big issue: scheduling enough employees so that they can attend to the needs of customers. “It’s how you divide up their functions,” said Notarius. “Most [retailers] want their employees to be handling both customers and stocking. But you want to have people free to take care of the floor, to meet and greet customers. About five years ago, though, I separated the stock work from sales in the wine department. Now, the people on the floor spend about 80% of their time with customers and do only some minor stocking.”

The operation’s computer system is also an important consideration. Does it allow for fast check-outs? Can employees use it to quickly access information? Does it provide customers with receipts that clearly list the products they purchased and the discounts they’ve received?

Both Notarius and Stoakes have done something else to ensure that customers can get the service they need. They set up customer-service centers in their stores and manned them with their best employees. “These are the people who know how to give refunds or how to make recommendations,” said Stoakes. Both retailers noted that it is important that such a center be very visible. “It tells people where to go when they need help,” said Notarius.

One old saw in the retailing world is that it costs 20 times more money to attract a new customer than it does to keep an old one. Another old saw is that customers who like you will tell all their friends. “And word-of-mouth is the greatest advertising in the world,” said Haskell’s Manning.

In a word, three of the most important things in retail are “Service, service, service.”

Cheryl Ursin is contributing editor to Beverage Dynamics and Cheers. Her writing has also appeared in The New York Times and other publications.

Going the Extra Mile

Here’s a sampling of some of the all-important small details that some retailers provide to ensure extra-special customer service.

FREE GIFT BAGS AND BOWS.

“The cost of a mylar silver bag and a bow is minimal,” said Dan Manning of Haskell’s, Minneapolis, MN. “And it makes the customer smile.”

REAL EXPRESS LANES.

“Our express lane is open at all times,” said Jack Stoakes, of Liquor Mart, Boulder, CO. “Having a closed express lane is a double negative.”

PURCHASING ON THE GO.

“We have customers who call us on their car phones,” reported Brian Hue, Cork ‘N’ Bottle, Covington, KY. “We can have their purchases ready for them at the check-out as soon as they arrive.”

POSTCARDS.

“We printed up special Haskell’s postcards that say, ‘Thank you for shopping with us.’ We send them out after we’ve set up a party or done a home delivery. It’s amazing how many comments we’ve received about them,” said Manning.

THE LITTLE THINGS.

“It’s eliminating the little aggravations,” said Stoakes. “It’s having shopping carts that run right and making sure the aisles are clear so customers can navigate them. If customers come here after having a bad day, we want to take those chips off their shoulders. And it’s amazing the reactions you get when you do.”