Chalk it up to NAFTA, or perhaps the major influx of Hispanic immigrants in recent years. Maybe it’s the popularity of warm Mexican beaches among vacationers, especially in winter, or the appeal of the country’s laid-back attitude. Whatever the reason, Mexican spirits and beers are hot, and not just with a Hispanic audience.

With Cinco de Mayo just around the corner, now is a good time to take advantage of Mexican brands. While Cinco de Mayo is mostly celebrated in markets with large populations of Mexican-Americans, it is becoming more mainstream.

“Just as they say everyone’s Irish on St. Patrick’s Day, everyone’s Mexican on Cinco de Mayo,” said Jay Brooks, beer buyer for the Beverages, and more chain based in San Francisco. “Because of the big Hispanic population in California, there are lots of parades and parties, even if people don’t know what the holiday commemorates.”

In markets where the date is more well known, many people use the holiday as a reason to socialize with friends and kick off the summer season a little early. You can use it, too, to draw attention to some of the fastest-growing spirits and beers in the industry. Tequila has become particularly trendy, especially high-end brands. Allied-Domecq’s Sauza, for example, was the industry’s top percentage gainers among major brands last year. The company’s Kahlua brand also was among the top five fastest-growing brands. Corona Extra, the best-selling imported beer in he U.S., has been one of the beer industry’s top growth brands for several years running.

Merchandising Key

Putting Mexican spirits and beer brands out where customers can become familiar with them is the first step. “We don’t gear up a whole lot for Cinco de Mayo, per se. We had more Hispanic customers come in for Fourth of July celebrations than for Cinco de Mayo last year after handing out flyers,” said Mike McCullough, Hi-Time Cellars, Costa Mesa, CA. “But we make sure we have adequate amounts of Mexican beers and always have end-caps of tequila. We have 120 different types of tequila now and as many Mexican beers as I can get”.

Themed displays can draw attention to brands you want to feature. Shoppers Discount Wine & Spirits, Madison, NJ, puts up a big beer display, a mass display of Jose Cuervo tequila and a rack of high-end tequilas and dresses them up with yellow, orange and other bright festive colors. “We add piñatas to make the displays exciting and fresh lemons and limes, so you can’t miss it,” said Gary Fisch, co-owner.

Even if customers in your market aren’t familiar with Cinco de Mayo, fiesta-themed displays with added touches such as Mexican sombreros or piñatas, can put your customers in the mood for celebrating. Beverages, and more, the California-based chain of beverage alcohol superstores, have found that leaving displays up for a few weeks after Cinco de Mayo broadens the appeal to more customers. “Cinco de Mayo used to be a short window, just a week or so,” Brian Bowden, spirits buyer for Beverages, and more! “If we keep a display up for a month, we get a better chance of hitting everybody.”

Cross-merchandising can give you an opportunity to make your store supply central for your customers’ party needs. Beverages, and more, for example, adds chips, salsas, Margarita mix and glassware to its Cinco de Mayo displays.

Many retailers also cross-merchandise other spirits along with several tequila brands. Merchandise Cointreau and Grand Marnier, for example, for margaritas. Display Mexican brandies along with mixers and drink suggestions. Don’t forget to include Kahlua in your displays for drinks like the “Brave Bull” (Kahlua and tequila). Feature other brands that might appeal to your customers as part of a fiesta celebration.

“Buchanan’s Scotch, for example, is not a big Scotch brand,” said John Rector, Sigel’s Liquors, Dallas, TX, “but it’s big in Mexico. We have merchandise out two weeks ahead of time and try to group things together for that audience.”

Give your employees an added incentive to create displays and merchandising ideas that will really move product. Bowden runs display contests among the stores once in a while to encourage staff creativity. He offers something like a restaurant gift certificate to the winner.

Promote Good Foreign Relations

Get the word out about featured brands. Cinco de Mayo is a significant holiday in his market, so Rector advertises specials and features in a local newspaper. Retailer Fisch puts out a newsletter in late April letting his customers know what products to look for before and after the Cinco de Mayo celebration. Bowden prints in-store flyers in April advertising specials primarily on tequilas and brandies.

Since so many of the high-end tequilas are relatively new on the market, it helps to educate customers on all the nuances among the different types.

“Because high-end tequilas are taking off, we’re now doing a permanent section for them,” said Brett Pontoni, general manager of the Binny’s Beverage Depot, Chicago. “Chain-wide, we run a number of spirits seminars, and we’re doing a lot with tequilas. Although their knowledge is growing, people still don’t know a lot. As better mescals come onto the market, we try to merchandise them and introduce them to our customers. The best people to sell high-end tequila to are Scotch, bourbon or brandy drinkers. We sell it the same way.”

Tequila has become so popular in its stores that the chain, which also includes Gold Standard and Liquor Chalet stores, is buying single barrels of tequila from Jose Cuervo and bottling it under its own label as 1800.

At Beverages, and more, Bowden incorporates tasting notes and ratings into point-of-sale materials for high-end tequilas.

“About 15 of the 60 to 70 tequilas we carry are rated 85 or better,” he said. “Wine consumers are coming over for $40 bottles, and they’re looking for number ratings.”

“We do a lot of merchandising with tequilas, especially the high-end, which are moving very well,” said Dan Manning, vice president of Haskel’s, Minnetonka, MN. In addition to putting tasting notes on shelf talkers, the stores are moving them around to feature them in better spots and they’re doing lots of tastings. Manning is even considering changing the chain’s annual riverboat wine-tasting cruise to a beer and tequila tasting this summer.

Supplier Support

Many suppliers are getting behind Cinco de Mayo in a big way and can offer you help with displays, p-o-s materials and promotions. Here’s what just a few of the brands are up to this year.

TEQUILAS.Allied-Domecq’s Sauza brand is pushing “Sauza de Mayo” this year with materials for major case displays. Brand activities will be hyped on its web site.

Recently launched Margaritaville tequila from Seagram will heavy up its “Just Arrived” program in introductory markets. By summer, distribution will expand nationally, and the brand will co-sponsor the Jimmy Buffet tour. Seagrams’ other new tequila brand, the high-end Don Julio, is being supported with shelf and case card materials that include tasting notes and some of the brand’s heritage.

Two Fingers, imported by Heaven Hill, kicks off an ongoing on pack offer during Cinco de Mayo — a collector’s shot glass. The brand offers a different version every year. Point-of-sale materials feature the brand’s tagline “Think of what you can do with Two Fingers” tied in to Cinco de Mayo. Heaven Hill’s El Conquistador brand is supported with shelf talkers that feature tasting notes.

BRANDIES. The two major Mexican brandies, Presidente and Don Pedro, are both imported by Allied-Domecq. Presidente will come out with a gift pack containing two signature highball glasses and drink recipes on the back panel to promote the brand’s mixability. The “Margarita Presidente,” made with Presidente and Sauza, is the best-selling margarita at Chili’s Grill & Bar, according to Alejandro Cortes, Allied-Domecq’s marketing manager of Mexican brandies. The brand hopes to do a tie-in to the presidential election this fall with new drink recipes.

Don Pedro is coming out with a music video called “Millennium Dance.” Featuring a popular female Mexican singer, both the music and the video will be promoted to on-premise accounts and dance clubs that cater to Hispanic demographics.

BEERS. Category leader Corona has a variety of p-o-s materials available with the theme “Lime it up with the drinko for Cinco.” A colorful cantina display features Corona and Corona Light graphics. Other merchandising materials include countdown calendars, pennants, neckers, posters, static stickers, and case cards. T-shirts with the graphic theme can be used for promotions.

Sol is taking the opposite tack with its Cinco de Mayo promotion. Called “Keep your Cinco simple,” the promotion tells consumers the “cinco” simple steps to an enjoyable celebration: 1) chill; 2) open; 3) skip the lime; 4) enjoy; and 5) go back to “uno.”

Check with your local distributors for programs being offered by other spirits and beer brands. The more you do to merchandise Mexican brands early, the better your sales are likely to be during the key summer selling season.

“Cinco de Mayo used to be an on-premise holiday, but now it’s a cross-ethnic celebration,” said Bowden. “It’s a reason to celebrate the season. It’s becoming a good holiday for us.”

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

Cinco de Mayo

Often confused with Mexican independence day (actually Sep tember 16th), Cinco de Mayo is Spanish for “fifth of May.” The holiday commemorates a victorious battle the Mexican army fought with the French in 1862 at Puebla. Led by General Ignacio Zaragoza, Mexican troops vanquished a force sent by Emperor Napoleon III that was better armed and three times as large.

Unfortunately, the French later gained control of Mexico City and took over the government. Five years later, however, Mexican resistance and pressure from the United States forced France to withdraw its troops.

PHOTOGRAPHY BY JOHN MONTANA

The histories of the United States and Mexico have been inextricably entwined since the early days of both countries. In the 19th century there were land and border issues that were ultimately resolved with the transfer of large portions of land in what are now the states of Texas, Arizona, California and New Mexico. But regardless of where the border lay, the cultural influence of Mexico on California and the Southwest has been undeniable. The region’s largest and most charming cities, Los Angeles, San Francisco, San Diego, San Antonio and Santa Fe, to name a few, reflect that influence to this day. Mexican-inspired food has become one of the most popular cuisines in American restaurants and has become ubiquitous on the menus of America’s family-style chain restaurants. And the influence carries over into the beverage portion of the menu as well. According to polls of bar and restaurant owners, the Margarita has been the most popular cocktail in America for well over a decade.

Much like the way Mexican cuisine has evolved as chefs have experimented with the basic idea, so has the Margarita. Once strictly lime-flavored, there are now recipes that call for all kinds of fruit variations (mango, strawberry, tangerine, cranberry, et al.). Instead of generic triple sec, many trade-up Margaritas use Grand Marnier, Cointreau or another orange-flavored liqueur to further vary the taste profile. The one ingredient that hasn’t changed is the primary one — tequila.

After dramatically outperforming the rest of the distilled spirits industry for more than a decade, tequila suffered a setback in 2000 and 2001 due to a shortage of agave. This in turn caused a dramatic increase in production costs resulting in higher prices. Unable to secure a supply of product at a bargain price, a number of lower-end brands dropped out of the market as a result. The tequila supply situation seems to have stabilized, and the category appears to be back on the growth track.

But even with the temporary setbacks the category has experienced, the growth pattern over the last few years has been impressive. According to Adams Handbook Advance 2004, last year total tequila consumption was up 6.4% nationally. On a relative growth basis, no spirit category can rival the performance of tequila over the past 15 years. Total consumption, which was only 4.4 million 9-liter cases in 1990, had risen to 5.9 million cases in 1997 and reached its highest point ever with more than 7.6 million cases in 2003.

Sauza (Allied Domecq), which upped sales by 100,000 cases nationally last year, is featuring this co-pack in the spring.

“Tequila over the past year has made a tremendous comeback,” said Jose Chacon, senior brand manager for Allied Domecq’s Sauza family of tequilas. “We’re seeing growth across the board,” he said. “That’s been one of the positive things about our business. We have a pretty well-balanced portfolio with offerings in premium, superpremium and ultrapremium and while the bulk of our business is still in premium, we’re seeing tremendous growth across the board on all our items. The Sauza brand has grown primarily by one key factor. We have a very strong brand proposition for consumers. Some players chose to play with the quality of the product; we chose to limit the global expansion of the brand. Quality is still paramount.

“The other piece that’s helping us and differentiates us from other players out there,” he continued, “is that since we have a full family of tequilas, we have a lot of ways to bring people into the franchise. Consumers want to explore and they want to experiment, but they want to do it under a safer environment. So exploration within one brand has been very strong over the last few years.

“Third, we are supporting the business tremendously. We say, ‘We are a tequila and we’re proud to be a tequila.’ We launched a global campaign last year under the umbrella ‘Get Lost.’ We’re doing a lot of things on-premise and off-premise and it’s really working. The numbers that we’re seeing on the business support that.”

According to numbers compiled by Adams Beverage Group researchers, the Sauza brand family remained second in the category by a wide margin and picked up 100,000 cases in volume nationally (+9.9%) to finish the year at the 1.1 million case mark.

The line of Jose Cuervo tequilas (Diageo) continues to dominate the category.

While Sauza and a number of other brands have shown strong and consistent growth, the category leader remains Diago’s powerhouse Jose Cuervo brand. In 2003 Cuervo, which was virtually unaffected by the category’s problems in 2001 and 2002, had its eighth consecutive year of increased volume. With sales of more than 3.2 million cases nationally (+1.9%), Cuervo accounts for around 43% of the category’s overall volume.

Of the top ten tequila brands, only two, Montezuma (#3) and Rio Grande (#10) failed to show growth last year. Both, however, had experienced huge volume increases in 2002, and their respective ­1.5% and ­4.3% declines still put them far ahead of their consumption figures for 2001.

For the rest of the category, growth nationally in 2003 ranged from modest for Juarez (+1.3%) to impressive for 1800 Reposado (+7.3%) to phenomenal for Patron (+51.9%), Margaritaville (+22.6%) and Cazadores (+41.7%).

Cinco Gold

Like most brands in the category Jose Cuervo has traditionally tied its Mexican heritage to the Cinco de Mayo holiday, one of Mexico’s officially celebrated independence days. This year’s effort is an integrated promotion under the banner, “Grab For The Gold,” scheduled to kick off in April and to run through June. Brand marketers are using a mix of web, print and radio advertising and displays in off-premise outlets. Consumers who purchase special bottles of Jose Cuervo Especial during the “Cuervo de Mayo” holiday timeframe will receive $5 off CuervoNation merchandise, including items such as flags, volleyballs, coolers, shot glasses, foldable chairs, visors, poker sets, T-shirts, available exclusively on CuervoNation.com. In states where monetary incentives to consumers are not allowed, alternate neckers and shelf pads will simply direct consumers to the website.

Stand Out From The Crowd

Two Fingers Tequila (Heaven Hill Distilleries) recently debuted new labels.

As the tequila category has grown, the competition among suppliers within the category has grown even more intense. As more and more brands crowd each other for space on retailers’ shelves packaging takes on even more importance than usual. An attempt to “enhance shelf presence” was among the reasons given for the recent package redesign of Two Fingers Tequila. While keeping the brand’s familiar opaque black bottle, the new design uses different colored foils to identify the silver and gold tequilas and adds a number of Mexican motifs around the traditional brand logotype. “As a long time category leader with much equity built up in the name, logo and bottle, we believe the label upgrade will help keep Two Fingers Tequila visible and in demand among today’s consumers,” noted Susan Wahl marketing manager for brand importer Heaven Hill Distilleries. A number of point-of-sale materials are available to support the redesign including case cards, floor bins and shelf talkers all of which show the new packaging and carry the tagline, “Do It With Two Fingers.” The relaunch, which should be on retail shelves by April, is also being supported with Margarita salt or shot glass on packs, where legal.

Not Just Tequila

While the spirit most associated with Mexico in the minds of most Americans is undoubtedly tequila, there are other products as well. Although Mexico is not thought of as a wine-drinking or wine-producing nation, early Spanish settlers did attempt to bring their viticultural tradition with them. The most visible product of that tradition in Mexico are the brandies produced by Allied Domecq. Presidente is the most prominent of these products in the U.S. with annual sales in excess of 200,000 cases. It has a strong base of consumers in the Hispanic communities, particularly among Mexican-Americans. In fact, in Mexico, where it is an enormous brand, it reportedly outsells tequila. Allied Domecq also brings in Don Pedro and Azteca de Oro brandies, which had combined sales of about 75,000 9-liter cases in 2003.

El Tesoro (Jim Beam Brands) is one of a host of increasingly popular high-end tequilas.

The most well-known non-tequila Mexican spirit brand is undoubtedly Kahlúa. Since the late ’90s the brand’s momentum has somewhat stalled, and it suffered a third consecutive year of decline in 2003 with a 3.3% loss in volume. Still, it remains a major distilled spirits brand with sales of approximately 1.3 million 9-liter cases last year. Other coffee-flavored Mexican brands like Kamora and Copa de Oro that have tried to mine the same consumer base have not fared any better than the leader. All retain a loyal following among their traditional consumers but have not managed to make inroads with new audiences.

Allied Domecq has taken numerous steps to offset the brand’s decline including updating the look and content of Kahlúa’s website to give it a hipper and more contemporary feel. At the same time, traditional successes for the brand are also receiving a fresh approach. A recent example was Kahlúa’s Valentine’s Day promotion with Russell Stover chocolates. In addition to offering coupons for both brands, the promotion offered a recipe for a Kahlúa White Russian and suggested using a single Russell Stover chocolate as a Valentine garnish. “Research has shown that both Kahlúa and Russell Stover share the same target consumer–women and men, ages 30-44, who are looking to unleash their true energy and playful sides,” explained Adrienne Nagy, marketing manager for Kahlúa when announcing the promotion.

Newer to the market than the coffee-flavored Mexican liqueurs is Tequila Rose, from McCormick Distilling. The 34 proof Tequila Rose is a strawberry-flavored cream liqueur mixed with tequila, giving consumers a rather unique alternative when choosing a Mexican spirit.

Still, the ability to appeal to a diverse audience has always been part of the success strategy of the Kahlúa brand, and with that in mind retailers should make it and other Mexican liqueurs part of any Mexican-themed Cinco de Mayo promotions they organize. The same can be said for Mexican brandies. Together with tequila, Mexican beer and appropriate snack foods, all of these Mexican spirits can help retailers turn this exciting holiday into a profitable fiesta. *

Leading Brands of Tequila

(Thousands of 9-Liter Cases)

(p) Preliminary. Source: Adams Beverage Group Database

Clip-And-Post Margarita Recipes

Basic Margarita

• 1 1/2 oz. tequila
• 3/4 oz. fresh lime juice
• 1/2 oz. triple sec or Cointreau

Shake ingredients with ice. Strain into chilled, salt-rimmed cocktail glass.

Frozen Margarita

• 1 1/2 oz. tequila
• 3/4 oz. fresh lime juice
• 1/2 oz. triple sec or Cointreau

Combine all ingredients in blender with one cup crushed ice. Process until slushy (about five seconds).

Blue Margarita

• 1 1/2 oz. tequila
• 1 oz. Rose’s lime juice
• 1/2 oz. blue curacao

Follow instructions for basic or frozen margarita.

Strawberry Margarita

• 1 1/2 oz. tequila
• 1 oz. Rose’s lime juice
• 1/2 oz. strawberry liqueur
• 4 large strawberries (fresh or frozen)

Combine all ingredients in blender with one cup crushed ice. Process until slushy (about five seconds).

Melon Margarita

1 oz. tequila

1 oz. Midori Melon Liqueur

1 oz. Rose’s lime juice

Follow instructions for basic or frozen margarita.

Orange Margarita

• 1 oz. tequila
• 1/2 oz. orange vodka
• 1/2 oz. triple sec
• 1 1/2 oz. orange juice

Shake with ice. Strain into chilled cocktail glass (sugar rim optional). Garnish with orange slice.

All-In-One Margarita

Ready-to-drink cocktails, in many categories, have been a popular alternative for consumers for years, and ready-to-serve Margaritas are no exception. Naturally, the most popular is Authentic Jose Cuervo Margaritas, made with Jose Cuervo Gold tequila. The brand recently debuted an updated label, which features imagery of the Mexican countryside as well as a back label that describes the history of the Margarita. Another version of RTD Maragritas comes from McCormick Distilling, which introduced Tarantula Azul Ready-To-Drink Margaritas last year. Joining it are four additional Margarita flavors: Mango, Strawberry, Melon and Berry. The drinks, which are 5.5% ABV, are available in four-packs of 200 ml bottles.

You can bet that when the clock struck midnight on January 1 this year some of the celebratory bottles uncorked contained beer as well as more traditional champagne. There are good reasons to celebrate. Sure, we made it into a new millennium without the world coming to an end or even any major Y2K glitches. More importantly though, if you make, buy, sell or even drink beer, the beer industry is back.

Last year the beer industry posted its strongest volume gains in nine years. After stagnating through most of the 1990s, beer volume grew by 1.6% in 1999, according to Adams Beer Handbook 2000, a healthy rate that represents an industry-wide gain of more than 42 million 2.25-gallon cases.

Brewers, wholesalers and retailers have had even greater cause for celebration, though, for several reasons. First, much of the industry’s growth has come from light beer and imported beer, which has helped dollar volume and margins grow even faster than total barrelage. Sales of imported beer rose 10.5% in 1999, while light beer gained 5.9%. Pricing also has firmed after several years of deep discounting during the summer selling season to chase volume. Both domestic brewers and importers have seen small price hikes stick with little resistance from consumers. Prices, for the first time since 1991, are keeping pace with the Consumer Price Index. And, the industry is seeing a mini-boom in the number of legal-age drinkers entering the market.

After years of forced optimism, however, what really has dispelled brewers’ past gloom is realization of what promises to be a rosy future. “Obviously, that’s great news,” said August Busch IV, vice president marketing for Anheuser-Busch, about the industry’s performance, “but it’s only the beginning. Projections indicate that we are now at the leading edge of what should be an extended period of industry growth. Total industry volume is expected to grow at approximately 1.5% per year for the next 10 years.”

AUGUST BUSCH IV Vice President, Marketing Anheuser-Busch “Obviously, we want to grow our market share as much as possible, but we think that can be accomplished while smaller brands succeed in the marketplace.”

BILL HACKETT President Barton Beers “Light beers account for more than 40% of domestic volume but only 10% of imports. That’s a huge volume opportunity.”

JOHN BOWLIN President and CEO Miller Brewing “One recent survey found that 86% of those surveyed say drunk driving is one of the most important public health problems facing the country. When our industry acts and when we let people know about the pro grams we support, public reaction is very positive.”

BILL BITTING President Pabst Brewing “Our purchase of Stroh has had an impact. It helped fill up capacity in brewing facilities, which drives gross revenues…That’s better for everyone.”

As anyone in the business will tell you, being part of a growing industry is a lot more fun than competing in a flat or declining market. But growth is not without its own unique challenges.

A SMALL WORLD AFTER ALL

At the same time the industry is starting to grow again, it’s also starting to contract. Consolidation is playing a major role at all levels in reshaping the business. Beer brands are finding themselves aligned with new parent breweries, new wholesaler alliances or, at worst, being squeezed out of markets — and existence — altogether.

JIM KOCH President Boston Beer Co. “There continues to be a shakeout of marginal players. Last year was the first year there were more brewery closings than openings.”

ROB KLUGMAN Senior Vice President of Development Coors Brewing “We’re seeing a lot more of both horizontal and vertical consolidation in the wholesale tier.”

MIKE FOLEY President (former) Heineken USA “There will continue to be fewer, bigger, better wholesalers in the U.S. as we go forward. They will handle retail customers more efficiently, with better service.”

TIM KELLY President Guinness Bass Import Co. “It wouldn’t surprise me, for example, to see imports’ share of market here [in the U.S.] grow to 20%.”

KURT WIDMER President Widmer Bros. Brewing. “People are gaining confidence in craft brands that have been out there a long time.”

BILL YETMAN President Beck’s NA “The fun went out of the business for a while. Now the fun is back. The beer business is still a people business, one-on-one, people talking to people.”

MARC PORTELANCE President Labatt USA “Regionalism is a challenge in figuring out how to get the most out of brand resources.”

Brewer consolidation, though painful, is one of the best things to happen to the business in recent years. Among the major domestic brewers, the three-way deal that liquidated Stroh Brewery, giving Pabst most of its brands and Miller most of its brewing facilities, helped put the domestic beer business back on track. Surprisingly, though most of Stroh’s brands were in the sub-premium category, the deal stabilized premium prices.

“Our purchase of Stroh has had an impact,” said Bill Bitting, president of Pabst Brewing. “It helped fill up capacity in brewing facilities, which drives gross revenues. Brewers were chasing volume to keep capacity up. With excess capacity taken out and existing capacity filling up, the industry is more stable, so there’s less price cutting. That’s better for everyone.”

A similar phenomenon is happening in the craft and micro segment. After a couple of years of flat sales, volume is on the rise even as the number of brands declines. “There continues to be a shakeout of marginal players,” said Jim Koch, president of Boston Beer Co. “Last year was the first year there were more brewery closings than openings. That benefits strong brands like Samuel Adams.”

With fewer brands making more efficient use of smaller brewing capacity and sales volume growing, brands that are left standing are healthier and happier. Consolidation among brewers, however, is happening on a global scale, and as the world gets smaller, beer business in the U.S. will continue to change and evolve. Brewers who are finding it difficult to grow share in their own markets are pursuing growth in other markets through acquisition.

LEADING DOMESTIC BEER BRANDS
(Thousands of 2.25-Gallon Cases)

Source: Adams Beer Handbook 2000

Last year, SAB got a foothold in the European beer market with its purchase of Pilsner Urquell. The merger and acquisition activity this year has heated up considerably, first with Interbrew’s purchase of Whitbread, then Scottish & Newcastle’s acquisition of Danone’s French brewing operations, including the Kronenbourg brand, and most recently Interbrew’s bid for Bass Brewers.

The acquisitions not only mean new alliances and new economies of scale for brands, but possibly a great deal of new clout for imported brands here in the U.S. “The industry is becoming more global, the world is becoming a smaller place,” said Tim Kelly president of Guinness Bass Import Co. “The U.S. beer business is not as segmented as it is elsewhere in the world. Around the world there’s a lot more share for more brands. It wouldn’t surprise me, for example, to see imports’ share of market here grow to 20%.”

THE BIG GET BIGGER

Despite recent relief, pressure on margins has been so great for so long that consolidation is leaving its biggest mark on wholesalers. Consolidation for some has been the key to growth in a competitive market; for others it’s been the key to survival.

“People said there would be a Bud wholesaler and one other guy in each market in five years,” said Bill Yetman, president of Beck’s NA. “That was five years ago. The challenge now is how to get not only distribution in a given market, but as Mr. Busch says, share of mind.”

Share of mind is probably the concern of many brewers, as wholesalers continue to consolidate. Anheuser-Busch’s then-controversial “100% share of mind program,” begun five years ago, has convinced many A-B wholesalers to forego carrying other brands, including high-margin imports. Consolidation has often left distribution of both Miller and Coors, as well as “all others” to the only other wholesaler in town. That makes it more difficult for smaller brands to get distribution, and get the attention they need when they do have a slot in the warehouse.

It’s said that on one day of the year we’re all Irish. But these days, St. Patrick’s Day isn’t the only time things Irish are being celebrated. Celtic pride has spread as far and wide as the far-flung Irish themselves, often putting the country and its people in the news. Today, Ireland has the fastest-growing economy in the European Community. Its culture and music are becoming mainstream in countries around the world, and Irish pubs appear to be proliferating in major cities throughout Europe and North America. The Irish, in fact, saved civilization, according to historian Thomas Cahill.

It’s no wonder so many people claim ancestral ties to an O’Connell, O’Brien, Kelly or some other Irish clan come St. Patrick’s Day.

While Cahill claims that Irish monks rescued the world from interminable Dark Ages, some of the long-lasting contributions the Irish made to civilization include the inventions of whiskey, dry stout and cream liqueurs.

WATER OF LIFE

In days before refrigeration, food often could be a little “off,” leading to an upset stomach. Alcohol, a natural antibiotic, served a useful purpose as a digestive aid. So, when 6th Century Irish monks first made grain alcohol with an alembic (a type of pot still originally used to make perfume by the Moors), the resulting beverage was called uisce beatha, or “water of life.”

Now, Irish whiskey is enjoyed on its own merits. Though volume is relatively small (with the category representing just 0.2% of total distilled spirits consumption in the U.S.), the category has seen steady growth in the past decade despite a decline in brown goods sales overall. That growth (the top six Irish brands were up 6.5% in 1998, according to Adams Liquor Handbook and that growth continued in 1999) has encouraged distillers to introduce new products recently.

The number of distilleries in Ireland fell from nearly 2,000 in the late 1700s to essentially two in the 1960s. Since 1966, most Irish whiskey brands have been produced either by the Middelton Distillery in the south or the Bushmills Distillery in the north. Independents, like Cooley, have sprung up in recent years to offer a number of new brands.

“Interest in whiskies is growing, and people’s knowledge and understanding of whiskey is growing,” said Larry Kass, group marketing manager at Heaven Hill. “We’re in a great discovery phase of Irish whiskey. They’ve been out-shouted for years by other whiskies.”

Indeed, Irish whiskey sales are growing not only because of interest in all things Irish, but also because of their accessibility, which makes them appealing to U.S. consumers.

Because of the way they’re made, Irish whiskies are considered to be much smoother than other types of whiskey. Irish whiskies are made from a combination of malted and unmalted barley. The malted barley is dried in closed kilns, unlike Scotch whisky which is made with malt dried over open peat fires, giving it its characteristically smoky taste. Most Irish whiskies also are distinguished by the fact that they’re triple-distilled in copper pot stills instead of twice or even once in the faster column still as other whiskies are.

Distillers and importers are playing up that smoothness to broaden their consumer base. “In the Irish whiskey category, there are two segments where the volume lies,” said David Dorsey, vice president and brand general manager of Scotch and Irish whiskies at Brown-Forman. “One consists of older, middle income, college-educated men of Irish decent. They account for 60% of the volume and they’re very loyal to brands. We don’t want to offend them, but to get to newer drinkers who may include Irish whiskey in their portfolio, we need to send a lifestyle message.”

Bushmills is capitalizing on the opportunity by tying the brand to another product younger consumers have popularized — coffee. This winter, the brand is twisting the Irish coffee concept with materials that support the theme “Not your average Joe.” In the summer the theme will change to “Cooler than your average Joe.” The brand expects the program to tie in with a major coffee company.

The brand also is pushing recipes for drinks like the “Bushfire” shot in on-premise accounts to raise awareness and help drive off-premise sales. Also in the works is a new ad campaign that will likely break in May.

Jameson, too, is trying to break out of the mold. “The category has traditionally focused on its Irish heritage,” said Jeff Agdern, Jameson brand manager at Austin, Nichols. “Consumers in the U.S. have not been exposed to the tremendous quality of Irish whiskies. The new outlook on Jameson is to position it as a premium spirit, not just an Irish whiskey versus Scotch whisky.

Jameson isn’t abandoning its Irish heritage, but sales promotion and public relations programs will be refocused along the theme of the new ad campaign, “What’s the rush?” Brand displays leading up to St. Patrick’s Day will encourage consumers to celebrate at their own pace. A mail-in offer lets consumer send away for a home party kit that includes T-shirts, hats, inflatables, buttons, drink recipes, games and songs.

Beyond St. Patrick’s Day, Jameson will focus on getting consumers to enjoy life. Off-premise accounts will be supported with a sweepstakes that offers consumer a chance to win “the world’s most unrushed vacation.” On-premise accounts in key markets will get visits from massage teams to encourage people to meet with friends and relax after work instead of fighting rush hour traffic.

Tullamore Dew also is looking to markets with large numbers of target demographics, 30-year-old males familiar with whiskies. “It’s a big opportunity for us to increase distribution,” said Liam MacHale, brand manager at Allied-Domecq. “We’re not going back to our older consumers. They already know the brand.” New print ads incorporate features of Ireland, like one that shows a rugby player, but focus on brand attributes with the tag “tough country, smooth whiskey.”

Smaller Irish whiskey brands are leveraging consumer interest in high end spirits and unique products such as single malt Scotch, single barrel bourbon, and 100% agaves.

Heaven Hill, one of the few independent U.S. distillers, likes to tout the fact that the two Irish whiskies it imports — The Tyrconnell and Kilbeggan’s — are produced by Cooley, an independent distiller in Ireland.

The Tyrconnell also has the distinction of being a pure pot still single malt whiskey. Heaven Hill is positioning it as a step up from traditional Irish whiskies and an alternative to single malt Scotch. Kilbeggan, a moderately priced, light blended Irish whiskey, has found its strength in non-traditional markets such as Virginia, North Carolina and Florida. Both brands will have retail p-o-s support for St. Patrick’s Day.

The big distillers also hopped on the specialty product bandwagon several years ago. Bushmills Single Malt has grown to about 8,000 cases annually. Jameson introduced Jameson Gold last year, a blend of 8-to-20-year-old whiskies seasoned in sherry casks. It’s positioned between Jameson 1780 and the high-end Middleton Rare. This year, Jameson is promoting a limited edition 15-year-old pure pot still “Millennium” whiskey in numbered bottles.

Other specialty brands include Cooley Distillery’s Connemara, a peat-smoked single malt; Knappogue, a single-malt, single-cask whiskey; Bunratty, an Irish poitin (also spelled ‘poteen,’ pronounced po-cheen), which is a fiery home-brewed style Irish whiskey; and coming in February, Clontarf.

Distilled and marketed by the team of former R&A Bailey execs who launched Boru Vodka, Clontarf will be available in three versions — classic blend, deluxe blend and single malt.

CREME DE LA CREME

Almost as Irish as whiskey, though a relatively new category, Irish creams have become a real tradition during the holidays and are now starting to make inroads as a more all-occasion cordial.

For the most part, as Baileys goes so goes the category. With 54% of the Irish cream category, Baileys tends to influence not only sales of creams in general, but other liqueurs such as Kahlúa as well. This year, Baileys is focusing on the indulgent nature of the product, but making it more relevant to consumers’ everyday experiences.

“Baileys doesn’t create special moments,” said Dan Butler, program development manager at UDV North America, “it enhances a special moment with indulgence.”

Part of the strategy this year is to “de-seasonalize” the brand. “We want to educate consumers on product form and drinking occasions,” said Craig Jodan, consumer marketing manager, “giving them less formal ways to drink the product on less formal occasions.”

Instead of focusing on St. Patrick’s Day, for example, Baileys is promoting a more generic Irish program throughout February and March. The “Doors of Ireland” will be the consumers’ “door to indulgence,” inviting them to enter the Baileys experience through different means.

A near-pack or write-for offer (via bottle-neckers) will provide consumers with a CD containing contemporary Irish music, e-postcards, drink recipes, Baileys screensavers and Baileys commercials. The CD also will direct consumers to the Baileys web site.

Local market radio promotions will reward winners with either the CD or a home pub kit containing coasters, a trivet, glasses and the Baileys story. Where legal, radio stations may hold live remotes from both off- and on-premise locations.

During the summer months, the brand will push “Baileys Blendz,” a program to merchandise the product’s versatility in cold drinks. Off-premise accounts get aggressive sampling support, drink recipe brochures and a glassware offer along with traditional p-o-s support.

Carolans, the number-two brand in the category, has been besieged by several low-priced contenders introduced in recent years, and has seen its share erode somewhat as a result. Though specific plans for this year weren’t available as of this writing, the brand’s not going down without a fight, according to Allied Domecq’s Liam MacHale.

“Alternative variations of creams have potential, but they’ll come and go,” he said. “There will be a falling out of those that only spend on price promotions, not image. Brands like Baileys and Carolans will still be here. We’ll fight to secure our position so new entries are less of a threat.”

O’Mara’s, a wine-based as opposed to whiskey-based cream, continues to enjoy success by virtue of alternative avenues of distribution. “We’ve been able to add to the cream market because we can be distributed in more avenues, such as supermarkets,” said Susan Overton, brand manager at Heaven Hill. “It’s good for the category and for O’Mara’s that we can be sold in different outlets.”

The brand intends to continue a strong sampling program (using bottle-shaped non-alcoholic candies where sampling isn’t legal). For St. Patrick’s Day, the brand will be bringing back the shamrock coffee mugs it introduced during the holidays. Like Baileys, O’Mara’s will be pushing alternative usage during the remainder of the year. This summer, it ties in with local store brand ice cream to promote “Mudslides,” cross-promoted with coupons. Fall will feature a coffee tie-in. The brand will push its versatility with drink and dessert recipes.

Other creams in the value segment, such as Emmets, Sheridans and Saint Brendan’s, will fight it out for attention as new entries scrabble for shelf space.

STOUT CHARACTER

Though Ireland is noted for a number of the products it produces, from wool sweaters to Irish crystal, perhaps nothing is so Irish in character as beer, particularly dry stout, an Irish invention.

Guinness, one of the most widely recognized and consumed brands in the world, continues its February lead-in to St. Patricks Day this year. For the seventh year, Guinness will try to break its own record for the world’s largest toast. This year the Great Guinness Toast is themed “raise a pint, raise the record.” More than 130,000 people in 32 markets registered last year. Guinness hopes to top that this year.

The theme switches over to “raise a pint, raise the roof” for St. Patrick’s Day.

In the meantime, Guinness has brewed up a new strategy to change consumer perceptions about the brand. A new ad campaign breaking in February will focus on the refreshing nature of the brand. To many consumers, the color and reputation of Guinness is forbidding. The new positioning intends to make it more accessible to mainstream beer drinkers.

In addition to advertising, Guinness packaging gets a new look, and cans now are available in eight-packs. New p-o-s materials complementing the graphics are available to support the brand.

Brand promotions in many cases this year also will include Harp and Caffrey’s Ale, and in some instances (such as Halloween) Bass Ale.

Color, in fact, seems to be the biggest barrier to broader consumption that stout producers face. All of them are addressing the problem in one way or another. “Stouts are a confusing style to many consumers,” said Bill Wetmore, commercial manager for Scottish & Newcastle, which imports Beamish. “The average consumer thinks they’re heavy and strong, but they’re actually one of the lowest in calories. You can’t judge this beer by its color. Color is only its sexiest feature.”

Beamish, Ireland’s third largest stout producer, is concentrating on sampling, awareness, and education to get the message across. “We’ve been able to convince more and more retailers that it’s acceptable to have more than one stout in stock,” Wetmore said.

Beamish now has cans in every market in which it distributes kegs, and is in about 40 states. The brand kicks off a wholesaler incentive program this month to help broaden its base so it will be more readily available on St. Patrick’s Day. Scottish & Newcastle also is pushing its John Courage brand with Beamish as a “Black & Tan” combo.

Murphy’s also intends to promote “Black & Tan,” taking advantage of its own two brands, Stout and Irish Amber. That push will last until St. Patrick’s Day, with a sweepstakes tie-in and tasting programs to stimulate trial. During the summer, programs will focus on Murphy’s Irish Amber.

Whether it’s whiskey, cream liqueur or beer, Irish products offer a range of tastes for a variety of occasions. With St. Patrick’s Day fast approaching, it’s not a bad idea to get your Irish up early and start educating your customers on the many ways they can incorporate Irish beverages into their celebration plans.

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

Wearin’ O’ The Green

Since we’re all Irish one day of the year, the one thing you can count on is that many of your customers will be wearing green on St. Patrick’s Day. That means an opportunity for you to see a lot of green at the cash register. Unlike the holidays just past, St. Patrick’s Day is here and gone before you know it. Many suppliers recognize that fact and have designed promotions to try to lengthen the St. Patrick’s Day “window.” And while the holiday seems to have been taken over by beer and babes, remember the host of Irish spirits you have to merchandise. Here are a few ideas from fellow retailers.

* Theme displays. “Theme displays really help,” said Brian Bowden, spirits buyer for Beverages and more!, San Francisco. “Three weeks after the holiday, we get another spike in business when people run out of what they purchased.”

“Right after Valentine’s Day we flip over to St. Patrick’s Day decorations,” said Rick Curtis, Curtis Liquors, Weymouth, MA. “It’s a quick hit, but a concentrated hit.” The stores are turned into Irish pubs with displays that feature all the Irish spirits they carry.

* Tastings. Where legal, sample Irish products. Let consumers compare Beamish, Guinness and Murphy’s at a tasting, or introduce them to other ales they might not have tried, like the recently introduced Caffrey’s. Many Irish creams have a non-alcoholic alternative to give customers a taste of their products. Baileys has a truffle and O’Mara’s offers a bottle-shaped candy. For whiskies, sample Irish whiskies against single malt Scotch and explain how each is made. Host a whiskey tasting at a local restaurant for your customers.

* Cross-merchandising. Display and sample Irish spirits with food. The deli at Schaefer’s, Skokie, IL, features Irish bangers (sausage), rashers (bacon), corned beef and cheeses around the St. Patrick’s Day holiday. The weekend before St. Pat’s, all the departments work together to orchestrate what will be tasted — Irish coffee, coffee with Baileys, beers, cheeses and sausages, for example. Shopper’s Discount Wines & Spirits, Madison, NJ, displays Irish beers near Irish cheeses in the deli department, and will put Irish beers out on display when sampling the cheeses.

* Create impulse sales. In addition to feature displays, put Irish spirits out in other areas of the store, too, to catch the customer’s eye. “We always do a couple little end caps to merchandise different products,” said Ken Lewis, owner of The Party Source, Bellevue, KY. “Over the years, it’s gotten easier to merchandise Irish spirits, particularly at the high end of the market.””It’s a no-brainer to do huge displays of Guinness and Baileys,” said Todd Jacobson, general manager at Happy Harry’s Bottle Shops, Grand Forks, ND, “and, in addition, we’ll play up anything that sounds Irish that week with side stacks and end caps.”

* Advertise. Feature Irish spirits in your weekly newspaper ads a few weeks before the big day.

* Merchandise year-round. Find other occasions on which to feature Irish spirits other than St. Patrick’s Day and year-end holidays. Beverages and more! advertises Jameson or Bushmills about once a quarter as a reminder to customers. Create a holiday, such as a “half St. Pat’s Day” in September, as an excuse to merchandise Irish spirits.

With a little extra effort, you can convince your customers to be Irish on more than just one day a year.

Irish Vodka? What Next?

The Russians have been making their own version of stout for more than a century. Vodka, it seems, is produced by just about every country in the world with a distillery. So, it was probably only a matter of time before the Irish came up with one.

Less than two years ago, a couple of former executives with R&A Bailey formed the Roaring Water Bay Spirits Co. in Dublin. Its first product, Boru Vodka, was launched here a year ago. Available in Original, Citrus and Orange, Boru also has a “Trinity” pack featuring the three flavors in stackable 200 ml bottles.

In time for St. Patrick’s Day, Boru will be available in a 100 proof version. Packaged in a black bottle, Boru Extra Strength Vodka will be supported with display racks, case cards and shelf talkers. Crews from the distillery will do tastings and talks in key markets.

Next up for the new company? No, it’s not tequila. In February, Roaring Water Bay introduces Clontarf Irish whiskey, in single malt and two blends. Clontarf, too, will be available in the stacked sampler pack.

Facing Facts

What category management – or fact-based selling – can do for you.

It and its components go by many names: category management, fact-based selling, shelf management, micro-marketing, schematic development, space management.

But just what is category management?

“Category management is good business practice,” declared Joe Patti, vice president of retail planning and category management for Anheuser-Busch. “It is understanding the consumer/shopper and developing strategies and tactical plans to meet their needs, while also meeting your business objectives.”

Category management is when a retail operation, most often in partnership with a supplier or suppliers, gathers information pertaining to a type, or category, of product, such as vodka, and uses that information to make business decisions. Category management, or as it is often called, fact-based selling, can affect a retailer’s decisions about what products to sell, how many and which brands of those products to carry, how many of each brand to keep in stock, where to put those products in the store and how to arrange them on the shelf.

Creating optimum shelf sets should place “the right product at the right price at the right location.”

“Category management applies an analytical discipline to making decisions about the category. It is about what is best for the consumer and the category,” said Jeff Schouten, group director of category management for Miller. “Prior to category management, the business process or model was all about the deal. Negotiation was king; success was based on negotiating the best deal.”

However, the analysis that goes into fact-based selling can be quite complex.

“Category management is a process in which manufacturers and retailers combine efforts and information to determine the changes needed to a category for maximum returns to the retailer while providing the most efficient assortment for the consumer. The process includes analysis of assortment based on sales and dollars, fair share of shelf to dollar returns, shelf inventory, SKU placement, consumer loyalty, pricing analysis as well as promotional planning for a category,” explained Kristy DeGuisto, category management manager for Allied Domecq Spirits, North America. “The end result would provide a retailer with an easily shopped, consumer-friendly category that is organized with a methodology that a consumer can follow, yet provide price, flavor [and] size options for a consumer to maximize category purchases.”

The starting point for a retail operation looking at a category would be its own sales history for that category. But that — and the sales taking place now — is just the beginning, experts say.

Category management also looks at demographic information about consumers in the store’s area and at the sales history of the category in nearby markets and competing stores. This is traditionally where suppliers come in. They are able to provide retailers with such information, using general consumer data purchased from marketing information companies, such as ACNielsen, IRI [Information Resources, Inc.] and Spectra. These companies collect and analyze vast amounts of information, including point-of-sale data from hundreds and thousands of stores and consumer panel and consumer survey information. This information can help determine what the potential sales of a category could be for the retailer.

“Suppliers can add value by providing [an understanding of] category dynamics and consumer/shopper behavior,” said Patti. “Information on how consumers shop the category in channel (consumer decision trees) and their behavior once they are in the store are valuable for retailers to understand.”

Other suppliers agree.

“Generally speaking, what you are looking to do is simply understand consumer purchasing. How do they buy the product? Why? From where? When? What is their trip frequency? What are the other items in their shopping basket?” said Sam Anderson, a strategic account leader at Brown-Forman.

And the continuing enhancement of computer technology has enabled suppliers and retailers to collect and analyze such information. “Category management is not anything new,” said Anderson, “but technology has enabled us to understand the consumer a little more. When scan data was first collected, we had it, but we didn’t know what to do with it. Now, using technology, we can mine through it and really understand the consumer. The biggest change in category management, for both retailers and manufacturers, has been the technology.”

This technology allows retailers and suppliers to efficiently and effectively use the huge amount of information available to them. The industry has been able to “leverage technology and computer processing advances to automate processes that used to be done in a much more data-intensive fashion,” said Anheuser-Busch’s Patti. “Technology combined with the greater breadth and depth of information (for example, store-level scan data, shopper behavior) has improved our productivity and ability to deliver plans quickly with more targeted insights.”

But what can category management realistically do for a retailer?

When it comes to category management, “an increase in business is the least of expectations,” said Allied Domecq’s DeGuisto. “Implementation of a category management plan will do the following: remove items not selling well in the category, increasing shelf space for exceptionally moving items that may be losing sales to out-of-stocks, it will bring in hot items in the market not currently being sold [by] the retailer and, lastly, it will organize the shelf to place items on the best shelves for their positioning to maximize sales. When done properly, accurately and without manufacturer bias, category management is simply the right product at the right price at the right location.”

Still, retailers do wonder about bias. Here, after all, is a supplier, with products in a category, offering them free advice and support. Who wouldn’t wonder about the advice being given? Is it really meant to grow the category as a whole or is it aimed more at increasing sales of the supplier’s own brands?

Understanding consumer purchasing habits is an important element in creating effective category management programs, suppliers say.

Traditionally, a retail operation works with one supplier, called the “category captain,” on a category. Increasingly, retail operations are also designating a second supplier as the category’s “validator.” Allowing the validator to see the information and advice being presented to the retailer is meant to ensure against bias.

Suppliers are also concerned with the perception of bias but say that the proof is in the pudding, so to speak. A retailer can see, soon enough, what kinds of sales increases occur when a supplier’s program is followed.

“The key to a good working relationship is trust,” said Anheuser-Busch’s Patti. “The retailer must trust the supplier to provide objective, information-based insights that will benefit the category. The supplier earns this trust by providing solutions that meet the retailer’s overall category objectives, not by focusing just on doing things that will grow sales for the supplier’s products.”

Allied Domecq’s DeGuisto agreed.

“Suppliers and retailers can take years to develop a partnering relationship to the category captain level, and from there, it could take several more years to perfect,” she said. “A mutual trust must exist between the two for the objective to be completely successful.”

And, of course, suppliers do benefit when retailers employ category management practices and increase sales. Indeed, suppliers have very good reasons to jump at the chance to help the retailers of their products. According to a recent report about beer, wine and spirits produced by IRI Information Resources, Inc., “the single greatest opportunity [for] increasing merchandising effectiveness . . . appears to be improving retailer execution.”

Clearly, by using better technology and focusing more intently on relevant demographic, sales and consumer-based data, suppliers and retailers are making strides in their approach to successful category management, or fact-based selling, or category optimization, or…

No matter what you call it, it’s all good. *

WHAT’S NEXT?

It’s all a matter of degree, according to Herb Sorensen, president of Sorensen Associates, an in-store research company based in Troutdale, OR.

“Many years ago, the focus was on specific brands. Then the retailer took a broader perspective and looked at the whole category,” he said. “Then, the newest idea, in the last year or so, was to expand beyond the category and look at aisle management.”

[Aisle management considers how categories interact and how they should be placed in relationship to each other in a store. If data shows, for example, that vodka consumers are also likely to purchase rum, it might be beneficial to place those two categories near each other.]

Now, Sorensen Associates has developed a tool with an even wider focus. Called the PathTracker, this tool is meant to analyze and manage the performance of all the aisles and displays in a store.

The idea is ingeniously simple. PathTracker uses radio frequency tags on a store’s shopping carts and baskets. These tags emit a uniquely coded signal every four seconds which is picked up by antennae located throughout the store. The PathTracker system is able to “triangulate” the position of the tags as people wheel their carts through the store. This information is then integrated with information on what these customers actually buy at the check-out.

Basically, the system records how customers shop: how long their shopping trip lasted, which aisles they went into and in what order, how long they stayed in front of particular displays, how fast they moved and what they ended up buying.

So far, Sorensen has used PathTracker in six supermarkets around the country. And the resulting information has showed some interesting trends. Most shoppers the system tracked, for instance, traveled through only one-quarter of their supermarket. In fact, a large percentage of shoppers only traveled into the first 10 to 15 feet of a store aisle. Also, the system’s reports indicate that people prefer to travel in a counterclockwise direction while shopping and, on average, spent $2 more when in a store with a layout that allowed them to move in that direction.

“People also shopped faster near the end of the trip than they did at the beginning,” said Sorensen. “We called that effect ‘the check-out magnet.'”

How can information like this be used?

Most broadly, it helps suppliers and retailers to better understand customers and their shopping experience. Do customers linger for a long time in the beer aisle? Or do they quickly pick up their purchase and go?

It can help a retailer make decisions about the layout of the store. Can the entrance be placed to allow counterclockwise shopping? Can items requiring a lot of thought to purchase be placed near the entrance of the store when customers are naturally taking more time? Are there aisles and categories where shoppers spend a lot of time, but don’t make many purchases? Are there others that aren’t getting the foot traffic but could be a good source of sales?

Sorensen thinks that his system could even become an integral part of the daily operations of a store. “Certainly, right now, it is intended to be a research tool,” he said. “But maybe in 10 years, every store with scanners will have a cart tracking system.”

Why?

A cart tracking system could, for instance, keep the retailer informed about where people are in their shopping trips. “It could alert store managers to open another check-out lane because X number of shoppers are going to be coming — five minutes before they actually arrive,” said Sorensen.

With ever-increasing sophistication, it’s almost as if retailers and suppliers can know how consumers are going to shop, even before the consumers do.

GETTING TO THE CORE OF THE MATTER

Diageo is currently testing a category shelf management tool for spirits in California that retailers can use themselves. Called CORE Store (CORE standing for “Category Optimized Retailer Executed”), it is designed to provide smaller retail operations with a fact-based approach to category management by laying out spirits categories on shelf in the way that consumers like to shop them.

“We know the cognitive associations consumers make and what consumer motivations and occasions influence their purchasing behavior when it comes to spirits,” explained Stuart Barker, Diageo’s director of category management. “In addition, we have a good handle on brand interaction and know how consumers look at the shelf and what cues help them make purchase decisions.”

The support materials for CORE Store include basic spirits category shelving principles, as well as laminated schematics pages. The support materials are created based on statewide and regional category sales data, from companies and institutions such as IRI, DISCUS and Adams Beverage Group, along with Diageo’s own in-house research, and the latest best practices in category management.

“Depending on how much category management work has already been executed,” said Barker, “retail operations can sometimes see business growth of an estimated 1% to 5% by using a CORE Store type approach to optimizing the shelf.”

Arguably, category management is the attempt, using all the available information, to run a retail business in the best way possible.

“A key word in our industry is optimization — specifically category optimization,” said Barker. “Diageo firmly believes in fact-based selling. At the end of the day, Core Store can help increase category sales, improve consumer shopability and reduce out-of-stocks.”

Many of the best independent wine and spirits retailers are multi-generational family businesses and many are long-standing partnerships. Miami’s Foremost Sunset Corners is both. Long regarded throughout Florida’s populous and prosperous Dade County as the place to go to purchase the best in beverage alcohol, the store will be celebrating its fiftieth anniversary in December. Owners and cousins Larry Solomon and Michael Bittel are second-generation partners in the business founded by their grandfather in 1954, since none of the original owners’ children chose to go into the business.

Larry Solomon (left) and Michael Bittel, co-owners of the well-known Foremost Sunset Corners, in Miami, FL.

Both men have been around the business their entire lives. Solomon recalls his first jobs as putting bottles in bags and mopping up the lounge in the days when, like many Florida retailers, the business included an on-premise establishment in the same building, but with a separate entrance. (A decision was made several years ago to close the lounge, which allowed the retail operation to expand and fill the 5,000-sq. ft. building.) As adults, the 50-year-old Bittel claims tenure of 30 years and Solomon, who is two years younger, 25 years.

“The way I’d characterize our store is that we specialize in wines and spirits,” said the understated Solomon. “For the most part, I do the operations and the liquor buying. Michael does the wine buying and the wine selling. But what we really specialize in is providing a lot of service.” He pointed out that unlike the supermarkets, warehouse stores and even large beverage alcohol chains, which deal primarily in heavily branded items, at Sunset Corners the emphasis is on the upper end of the business.

“We are extremely knowledgeable about the products we carry. We’re able to go out and find things for customers, specialty items.”

PHOTOGRAPHY BY MATTHEW PACE

“There’s been a world of changes,” said Bittel of his three decades in the store. “Just look at it item by item. Beers are a very important part of our business. Years ago, it was pretty much domestic beers plus Heineken, St. Pauli Girl and Beck’s. Today, we probably carry 300 different kinds of beers. We’ve got all the Belgian beers and many other specialty and imported beers. Back then, it was about $1.29 for a six-pack of inexpensive domestic beer. Today, you can’t buy a bottle of beer for $1.29.”

SUPERPREMIUMS DRIVE MARKET

“If you look at the liquor category, it used to be that there was a fairly small premium brand business. Everything was dominated by either low-end or mid-range products. Today, it’s almost the exact opposite, where our business is dominated by superpremium products, whether they are vodkas or single malts or tequilas. So, that whole pyramid has been turned upside down over the last 30 years.”

Solomon added, “Over the years, you basically had a low end, a high end and a middle in terms of spirits. Let’s take vodka, for instance. What we’ve seen in this store, and it might be because of our clientele, is that the low end of that category has virtually disappeared, primarily as a result of the introduction of different ultra-premiums. Absolut used to be the major ultra-premium vodka, but that’s not the case anymore. You have brands like Grey Goose, Belvedere, and Ketel One that have all stepped up to the plate. Of course, you still need to have your inexpensive stuff on the shelf, your $10.99 jug of vodka, but at our store those sales are pretty much gone these days.”

Any discussion of distilled spirits in the retail market these days has to include the proliferation of new flavors and line extensions in a number of spirits categories. The big question for retailers is always, which ones do they take and where do they put them? It’s a question that Solomon has faced often in recent years.

“A lot of times it’s the customers who are going to make the decisions,” he said. “It’s what they’re looking for that matters.” Solomon added that the downside of all the new flavor introductions is that the suppliers and distributors expect to get more facings on the shelf. “The retailer has a limited amount of space and it can be a little oppressive when you have a vodka in the three regular sizes — 1.75, 1 liter and 750 ml — and they want to make a placement of four flavors in three sizes. That’s 12 additional facings. So you’ve got to make a decision. Maybe you want to carry the product, but you don’t want to carry all three sizes, or you don’t take all the flavors.”

Foremost Sunset Corners, according to Solomon, has long done a big business in single malt whiskies and high-end cognacs, and it’s one of the things that have always set the store apart. “What we like to look for, both in wines and spirits, are the more obscure items that have a lot of quality,” Solomon explained. “You can turn your customers on to these and kind of make a brand within your own store. We’ve been very successful at that through the years.”

In Solomon’s opinion, retailers often don’t know how to make the most of the opportunities they have in front of them. It might be easier to sell a well-known branded spirit, but he’d rather take customers back to the tasting table and turn them on to a new experience. “Our customers come in and they ask for recommendations,” he said. “They’re often looking to try something new.”

STRONG WINE PRESENCE

That’s also true when it comes to wine, which according to Solomon’s estimate, accounts for 60% of the store’s business. (He pegs the spirits portion of the business at 30%, with beer and food making up the remainder.) With wine accounting for such a large part of the operation’s sales, it’s understandable that one of the partners spends the majority of his time and focus on that area. “What we try and do is stay one step ahead of the game. We want to be trend-setters rather than trend followers,” explained Bittel. “That’s the great part of being in the retail business. We have the capacity to follow good wines, wherever they come from. Southwest France is an area that’s particularly strong. Portugal is doing well. Italy is doing very well. We look for pockets of interest. New Zealand is very hot for us. We’re beginning to actually experiment with Greek wines.”

Foremost specializes in superpremium products — in wine, beer and spirits — and offers approximately 300 different beers in the store, including many specialty brands and imports.

To anyone who only knows Greek wine through an acquaintance with retsina, one might wonder about the nature of such an experiment. But Bittel inspires confidence that he knows what he’s doing. “There’s a timely interest in Greek things at the moment because of the Olympics, but that’s just one piece of the equation. For people who are marketing higher-quality Greek wines — and in fact, there are some wonderful estate-bottled wines being produced — this is an opportune time for them to introduce their products to the marketplace. The question is, can you get beyond retsina to more basic reds and whites. We’ve found a few that we like and there’s no doubt that there are lots of them that are of excellent quality. Right now, it’s something that we’re just experimenting with and which has been very well received by consumers.

“I think one of the major differences between retailing today and 25 years ago is that there’s an enthusiasm and a passion for wine and an enjoyment of experimenting with new and different things. People are excited when they can be exposed to something that they haven’t tried before,” Bittel said.

GIVE THEM A TASTE

Bittel’s responsibilities also include overseeing the store’s many wine tastings. “There isn’t a week that goes by that we aren’t doing a couple of tastings,” he said. “We always take the time to make sure that the staff rotates in and out, that they have the same opportunity that we do to try the wine.

“The tastings have different focuses,” he continued. “We do what I call thematic tastings. It might be wines of a given vintage. For instance, in the last 30 days we did a tasting of 25 different wines from the 2001 Bordeaux vintage. We try to have an educational component to everything we do. We also recently had seven wine producers from New Zealand in the store, who poured about 15 of their wines. We conducted a tasting on a Saturday in May, where we had nine different wine producers from Italy pouring their wines. And we try to mix it up a little bit. We’ll sometimes do dinners in restaurants.”

CREATING STORE EXCITEMENT

“That’s another way the business has evolved,” Bittel said. “In retail today, to a certain extent, you’re in the entertainment business. You have to create reasons for people to come to your place of business because the fact is, if you segment out wine from liquor, everybody sells wine today. The grocery stores have an excellent selection of wine. There has to be some reason, other than service, that makes customers say, ‘I’m not going to buy that wine in the grocery store, I’m going to make an extra stop at a retail store.’

“There was big article in our local newspaper the other day, an analysis of retail, that said Americans talk about how important service is, but at the end of the day, what they care about is price. That’s why you have the success of these big box stores like Costco and BJ’s, where they provide no service but sharp prices. I think you need sharp prices, but also excellent service.”

Wine sales, which have been growing steadily, account for approximately 60% of the store’s business.

At the same time, Bittel added, “I think you also need what I call the entertainment component to draw people to your business and create a reason for them to shop your store. You give them that educational experience, that opportunity to try the wine, that opportunity to meet people.”

Indeed, Bittel maintains that you have to sell customers their wine before they shop for food. “If they pick up the fish first, and they don’t have the wine at home already, they’re going to buy it in the grocery store. You’ve got to help them make the wine decision before they go and pick up the fish.”

All of the in-store tasting events are presented free of charge. According to Bittel, turnout can vary tremendously with the biggest crowds (100 to 140 people) coming on Friday nights “in season.” A weeknight event is likely to draw a much smaller crowd. “The one we had last night was from 5:30 to 7:00 and we got about 17 people,” he said. “But I learned a long time ago that the measure of success is not necessarily how many people you had in attendance, but how many customers you made and how much product you sold. Last night was an extraordinarily successful event. We sold six cases of wine. And these were expensive wines, averaging $50 to $60 a bottle. We’ve had events with 40 people at them and haven’t sold that much wine.”

LOVING THE BUSINESS

But whether it’s selling a $50 bottle of wine, a rare cognac or a six-pack of imported beer, like many retailers who have the business in their blood, these two men can’t see themselves doing anything else. “I love the human interaction,” said Bittel enthusiastically. “When people come into the store, it’s because wine and spirits adds something positive to their lives. If they’re buying for a special occasion, typically it tends to be something positive. If they’re getting something to have with friends, it’s a positive element that they add to their lives, and it’s a very social thing. I’ve been blessed over the course of time that a significant number of my own personal friends are people that I’ve met through the store who have the same kind of interests that I have. My wife and I have been blessed with a wonderful life and a lot of that is attributable to the industry that I’m in.”

Similarly his partner can’t think of anything he doesn’t like about the business. “I loved growing up in it,” Solomon said, with equal passion. “It’s all-consuming. I love everything about it.

“The bottom line is that to be successful you really have to have a niche in the business,” added Solomon. It’s obvious that he and his partner have found the perfect niche for their business as they begin the second 50 years of the Foremost Sunset Corners operation.

Robert Keane is a contributing editor to Beverage Dynamics and writes for a variety of other business magazines.

Ever since people first started trading and making deals with one another, there has been theft, robbery and fraud.

And stores — filled with products people want and the cash they used to pay for them — have always been a big, fat target.

According to the 2002 National Retail Security Survey from the University of Florida, the average shrinkage rate reported by retailers this year in the survey was 1.7% of their total annual sales. Nationwide, according to the survey’s report, this would amount to losses of approximately $31.3 billion for retailers.

Meanwhile, according to the FBI Uniform Crime Report for 2001, the crimes it tracks (murder, robbery, burglary and larceny/theft among them) showed a 2.1% increase over the previous year, the first such increase since 1991. And according to the National Institute of Occupational Safety & Health, beverage alcohol store workers continue to suffer the second highest rate of homicide on the job, after taxi drivers.

Retailers, however, are fighting back — and are using a spectrum of the latest high-tech equipment to do so.

The BioPay 200 with DL color, which verifies identity through fingerprints, helps prevent check-cashing fraud.

Take Brightseat Liquors in Landover, MD, for example. For years, Brightseat would have liked to offer a paycheck cashing service because, if it weren’t for fraud, such check cashing can be a lucrative sideline. But, explained Benjamin Ilkovitch, co-owner, “We kept our check cashing business to a minimum because we consistently got burned on bad checks.” He explained that it wasn’t uncommon to lose $500 in a single transaction. “And you need to cash a lot of [good] checks to make up for that $500,” he said. “Many times we had to turn away potential check-cashing customers because we just didn’t know the customer or if the check was good. But that’s all changed now.”

The change is like something out of a science-fiction movie. Brightseat now uses a system from a company called BioPay that allows them to identify someone from his or her fingerprint.

Here’s how it works: when a customer first comes to Brightseat with a check to cash, Brightseat employees use their system to record the prints of the person’s index fingers, a digital picture of the customer and an image of the person’s ID, such as a driver’s license. Brightseat’s system also has a device that verifies that the MICR encoding on the bottom of the check — and therefore the check itself — is authentic and not a counterfeit produced on a laser printer.

The latest in electronic surveillance includes the Panasonic WV-NM100 (top) and the Panasonic WJ-HD500BV (bottom).

After being enrolled, customers don’t have to present ID with their checks. They just place their fingers in the system’s reader to verify their identity.

Meanwhile, if they have tried to cash a bad check in the past, the BioPay system alerts Brightseat. In fact, since BioPay maintains a database of all the people enrolled in its system — according to the company, it has enrolled over 500,000 people in 31 states so far — Brightseat is alerted if that person has an outstanding bad-check history at any BioPay merchant throughout the country.

Ilkovitch originally paid $5,000 to $6,000 for the BioPay system, including the computer used to run it, three years ago. While it does not eliminate all the problems with checks — it cannot, for instance, tell him if the business that issued the check has money in its account — Ilkovitch says he has noticed a dramatic decline in fraud in his store. “It’s been worth every penny,” said the retailer, who has increased his check-cashing business ten-fold since using BioPay.

Closed-Circuit Advances

There have been many such advances in the technology used to combat retail crime. “There have been advances in closed-circuit television (CCTV), electronic article surveillance (EAS) and exception-reporting software in the past 10 to 15 years,” said Robert Blackwood, a founder of Loss Prevention Solutions, a consulting firm based in Winter Park, FL. “And the real advance is in how retailers are applying those tools.”

According to the National Retail Security Survey, 73.3% of the retailers surveyed used live, hidden CCTV and 50.8% used digital video recording systems. Almost half, 49.2%, used POS data-mining software and 17.8% used POS-exception-based CCTV recording, when a camera aimed at the register is triggered to record when certain types of transactions, such as a return, are rung.

Many retailers use EAS systems, which include a product with a tag that causes an alarm to go off at the exit if the tag has not been deactivated by a store clerk. A small percentage (almost 2%) of all the retailers surveyed use the very latest EAS technology, radio-frequency identification tags, or RFID.

Two months ago, Schaefer’s in Skokie, IL, invested in a 16-camera digital system. “We spent $10,000 to $11,000,” reported George Schaefer, co-owner. “A couple of years ago, it would have been at least twice that much, if not more.”

Intelli-Check’s ID-Check terminal, which analyzes and displays information encoded on driver’s licenses, military identification and other forms of state and government identification.

Basically, when it comes to surveillance or closed-camera systems, the term “digital” means computerized. The term for the old video-tape systems is “analog.” The computerized images produced by digital video recorders are stored on a computer’s hard-drive. How much can be stored at one time is a matter of how much computer memory is available.

One big advantage for digital recording is that no one has to remember to change the tape. Digital recording systems can be programmed to automatically continue recording, even if the storage space is full, and to erase the oldest stored images first. “And if you suspect something, you can always save or print out that image,” said Schaefer.

But cameras on these systems can be programmed to start recording only when something happens. By using a cursor at the computer on the image, retailers can block out areas that they do not want to trigger the camera. For example, Schaefer blocked out the view of the street from the camera at his store’s front entrance so that every passing car did not trigger the camera to start recording.

The other advance in surveillance systems is the ability to be networked. “The trend toward networked video surveillance systems opens up a whole new realm of camera viewing and control possibilities,” said Frank Abram, vice president for Panasonic Security Systems. “Networking provides many different ways for retailers to monitor their facility or facilities from remote locations and allows them to interface their video equipment with related devices such as POS systems, more easily.”

Retailers, for instance, can view their store’s live surveillance from a remote location, even from their PC at home. Schaefer thinks such remote viewing possibilities can help with customer service issues as well as security. “Right now, I’m watching a woman wandering around in an aisle and I’m wondering why someone isn’t helping her,” he said, from his office.

Another cutting-edge feature of Schaefer’s new system is a small wireless camera. “We can hide that in places we think we have a problem,” said Schaefer.

Rick Curtis, owner of the Curtis Liquor operation based in South Weymouth, MA, also has digital systems, each with 10 cameras, in his three stores. “It allows you, after the fact, to focus in on what’s been recorded, slow, stop, reverse the action, zoom in 500 to 600%,” he said. “The technology is amazing.”

Curtis paid $3,000 to $3,500 per recorder. “Believe me, it is money well-spent,” he said. “If you catch just one employee, it can pay for itself.”

Green’s, a chain with six stores in Georgia and South Carolina, uses a surveillance system from Sensormatic (a company recently taken over by ADT), which is connected to its POS system with software called POS/EM, short for POS Exception Monitoring. There is a camera trained on each register and what is being done on the register is superimposed on the image from the camera. “It’s fascinating to watch what a dishonest employee will do,” said Lock Reddic, managing partner. “They’ll scan something with the UPC code facing the ceiling. They’ll keep labels at the register and use those instead of scan what they are supposed to be selling.”

With exception-based reporting, a retailer can create a report of any unusual transactions. “If the retailer spots a transaction that in any way seems out there, there will be a camera icon next to it, which will show him a copy of the receipt and a video clip,” said Thomas Dinkel, chief operating officer for Mirasys Communications, a digital video recording company.

Perhaps the most interesting aspect of these retail-crime fighting technologies is that they are beginning to converge. Not only can surveillance cameras be connected to POS systems, but EAS tags, specifically the ones using radio-frequency technology, can be linked to other systems as well. For example, Mirasys and Checkpoint Systems recently demonstrated a “smart shelf” at the annual Food Marketing Institute (FMI) show. Products were tagged with RFID tags with a sensor located underneath the shelf. When a product was picked up, it sent a signal to the sensor which triggered a surveillance camera to begin recording. And the camera could automatically be set to send the image elsewhere, even to a personal digital assistant (PDA). So, if someone grabbed a high-priced bottle off the shelf, the store’s manager’s PDA could sound an alert and show what was happening, in real time.

Although Jack Bondon, president of the 14-store Berbiglia Wine & Spirits operation in Kansas City, MO, doesn’t connect his POS system to a camera system, he stays on top of exceptional transactions. “I watch those every day. I get a report of all the cancelled transactions and returns and, if there’s a return, for instance, the manager checks the inventory of the returned item that day. If there’s supposed to be 17 bottles but there are only 16, the manager starts asking what’s the matter here — and the employees all know that,” he said.

Exception-based reporting can be a real eye-opener. “For years, people would talk to us about internal theft,” said Bondon. “Insurance people, camera salesmen, people selling door chimes, all kinds of security people. And we‚d say, ‘Oh, no, not us.'”

Now, Bondon sees things differently. “Internal theft has always been around but retailers weren’t aware,” he said. “Now, with the computer systems, we are more aware.”

Bondon, however, is not a big believer in the effectiveness of camera systems. “In 30 years, we have never caught someone because of a camera,” he said. “After all, the employees run the cameras.”

Quench your customers’
summer thirst with
fast-growing white spirits.

By Michael Sherer

Summer’s the season for backyard barbecues, picnics in the park or just kicking back on the porch with a tall, cold drink, watching the world go by. About the only thing as hot as the summer sun are the white spirits consumers are using to build those frosty cocktails.

White spirits — vodka, gin, rum and tequila — are experiencing tremendous consumer interest, and for the most part constitute a growing category. There were some big bumps in the road last year for the industry as a whole as well as individual brands. The ride looks smoother this year, though, allowing a number of brands to step back on the gas and grow faster again.

Last year’s mixed bag was the result of factors as varied as they were numerous, ranging from recession and industry consolidation to terrorist attacks in New York and Washington, D.C. But consumer trends and enthusiasm dampened much of the negative effect of outside forces.

Stolichnaya, from Allied Domecq Spirits USA, has debuted its new “See what unfolds” ad campaign.

The surge in growth of white spirits in recent years, especially above-premium and imported brands, has been largely due to the economic boom times of the ’90s.

“We enjoyed 10 years of the longest economic expansion in U.S. history with a corresponding expansion of personal income,” said Douglas McCreadie, vice president of marketing, Nolet Spirits USA. “Consumers have discovered new ways to express themselves in the things and brands they buy.”

For the past decade, consumers have been trading up, and even the recession didn’t changed their behavior. A recent Wall Street Journal article noted that even middle income consumers are buying more luxury brands. Consumers consider high-priced goods such as ultrapremium spirits and even bigger ticket items like cars, to be affordable luxuries, even in a down economy. That is putting a squeeze on middle-of-the-road brands, though.

Younger consumers, from legal drinking age to their 30s, are perhaps even more brand- and image-conscious than older generations. The growth of this group also has helped fuel growth of higher-end brands.

The biggest wrench in the works last year was the events of September 11. The terrorist attacks put an immediate damper on the travel and hospitality industries. People stopped going to restaurants and bars where so many spirits brands are discovered and consumed.

Absolut Mandrin, introduced to great success last year by The Absolut Spirits Co./Future Brands, has continued its positive sales momentum.

Surprisingly, even that didn’t slow spirits sales much. A side benefit of people’s fear of going out has been a corresponding increase in the amount of time they spend at home.

“One of the positive repercussions of September 11 was a pick-up in off-premise business because people started entertaining at home more,” said Steve Meyers, senior brand manager for Tanqueray at Schieffelin & Somerset.

The shift to more “cocooning” also fueled another trend that has been growing in recent years. Consumers exposed to the explosion of flavored cocktails appearing in restaurants and bars are now trying to recreate them at home.

“It’s curious how people walk in to someone’s home and ask for their usual drink — a glass of white wine or Scotch on the rocks — but put it down when they see a martini shaker come out and someone offering Cosmopolitans,” McCreadie said. “People aren’t willing to give up luxuries, but they may be willing to change where they consume them.”

Also surprising is how quickly consumers have shown a willingness to return to “normal.” According to the National Restaurant Association, restaurant sales started to rebound in December, and exceeded year-earlier figures in January and February, too. The strongest gains, however, have been in casual dining, presenting a challenge to ultra-premium brands.

Finlandia, from Brown-Forman, introduced both lime- and cranberry-flavored vodkas last year.

“White tablecloth restaurants saw the biggest hit from September 11,” said Dennis Greenwood, national brand manager for Finlandia Vodka Americas, Inc., “but family-style restaurants saw growth. Finlandia saw growth because it’s not priced as high as ultras.”

Vodka Volume Up

Vodka, which accounts for about 25% of industry volume, is still a hot category. Total volume last year was up 4.0% to more than 37 million 9-liter cases.

Much of the growth has been the result of consumer interest in high-end products and flavored vodkas. The resurgence of classic cocktails like the Martini has spurred interest in high-end brands. Younger consumers, though, are taking those classics to new places by demanding different flavors and experiences.

“Younger consumers have grown up on a lot of different flavors even in products like cereal,” said Susan Overton, director of marketing for Heaven Hill Distilleries, Inc. “They want those choices.”

Vodka is an ideal spirit to use in mixed cocktails because of its neutral taste. Flavored vodkas have given consumers that much more to play with in terms of drink combinations. Because flavored vodkas are not as sweet as liqueurs, they create a “more sophisticated cocktail than a drink with a paper umbrella in it,” according to Overton.

Flavored vodkas also appear to be adding incremental volume to the segment rather than stealing volume from core brands. Top brand Smirnoff led the pack last year in growth with an impressive 9.6% volume increase. The brand was helped by incremental sales of new flavors it introduced last year, as well as the buzz generated by its “malternative” brand, Smirnoff Ice.

Skyy Citrus joined the vodka flavor parade last year, adding to the growth of the superpremium Skyy Vodka.

Number-two brand Absolut saw sales dip slightly last year, falling about 1.1%, as it adjusted to new ownership and a new sales force. It continues its award-winning ad campaign, however, with new executions that help keep the brand relevant with consumers.

A brand that fared well under new ownership last year was Stolichnaya. Overlooked in recent years, the brand is getting fresh attention from Allied-Domecq, which took over the brand in January 2001. Sales last year ended up 10.4%. A new ad campaign tagged “See what unfolds” features the Stoli label folded into origami “animals” in natural settings. It’s the first new campaign for the brand in five years, and initial print ads are being supplemented by radio and new p-o-s materials this spring.

A summer program focusing on Stoli’s flavored vodkas features a patio umbrella display, drink cards and more to remind consumers that Stoli was the first vodka to introduce flavored varieties.

The ultra-premium VOX Vodka, from Jim Beam Brands/Future Brands, recently introduced two new sizes to its lineup.

Another hot brand is Skyy. Up about 18.8% last year, the brand continues on a roll with its “cinematic moments” campaign. Seven new executions are expected this year. Skyy Citrus also was a big factor in building both consumer calls and volume for the brand.

Like many brands, Skyy is focusing a lot of effort in on-premise accounts to build awareness. It’s distributing a “great Martini moments” kit to accounts this spring that contains disposable cameras so bar patrons can take pictures of their martini moments. Off-premise sales will be supported with point-of-sale materials that tie into the ad campaign.

Finlandia is pushing its infusion program heavily in on-premise accounts in hopes of driving more consumers to off-premise. There, the brand is featuring lots of new p-o-s materials, including bins and racks, with a metal theme. This month, the brand is launching a new package and ad campaign for Finlandia Lime.

Sidney Frank Importing just added Grey Goose Le Citron to its ultra-premium Grey Goose and Grey Goose L’Orange vodka line.

“It’s a challenging time for vodka,” Greenwood said. “You always have to be on the cutting edge. The category is very different than it was five years ago with all the flavors and ultras and packaging.”

The smaller ultra-premium brands are counting on continued word-of-mouth to help build sales. Using grassroots education programs like brand ambassadors and bartender and waitstaff training, they’re trying to build a ripple effect with small budgets.

Ketel One is leveraging its heritage as hand-crafted product that has been handed down from father to son. In time for Father’s Day, the brand is creating a micro-CD featuring a video story of how the brand was created. The CD will be given away on a bottle-necker.

Barton Brands’ Thor’s Hammer, another fairly new superpremium import, just debuted a national radio campaign.

Grey Goose, imported from France, continues to tout its taste in print ads, having won a blind taste test conducted by the Beverage Testing Institute in Chicago. The brand has grown dramatically in the last few years, jumping from sales of 100,000 9-liter cases nationally in 1999 to 600,000 last year, an increase that was “goosed” by the successful debut of the flavored Grey Goose L’Orange. Indeed, the brand just introduced Grey Goose Le Citron, a lemon-flavored line extension.

Rather than push flavors, brands like Belvedere, Chopin and Wyborowa leverage their heritage. All three are marketed as authentic Polish vodkas, with Belvedere and Chopin positioned as ultra-premiums and Wyborowa a little more attainable. The former, marketed by Millennium, use event marketing at elegant functions like last year’s wedding ceremony for actress Angie Harmon and New York Giants defensive back Jason Sehorn.

Wyborowa, recently purchased by Pernod-Ricard, is concentrating on getting word out to the trade this year, and has plans for a consumer ad campaign next year.

The Millennium Import Co. has staked out solid ultra-premium positioning with its Polish vodkas, Chopin and Belvedere.

Vox, in just a short time, has grown to the number-three ultra-premium behind Belvedere and Grey Goose. It recently introduced two new sizes and will increase its sampling push this year. “Vox Martini Week” will celebrate the classic cocktail, not its flavored cousins, in top restaurants around the country. New p-o-s is designed to highlight the virtues of pure and clear Martinis made with Vox.

Sazerac’s Rain Vodka also is eschewing flavors in favor of straight vodka for people who appreciate the subtle nuances among really fine vodkas. The brand is concentrating on education programs, explaining the brand’s point of difference to bartenders, waitstaff and retailers, and giving consumers the opportunity to sample the product where legal.

“You can’t really tell the brand story in ads,” said Rain brand manager Rebecca Green. “You have to have time to explain and give consumers the opportunity to taste. When you talk about volume, though, you have to have off-premise sales. We hope the ripple effect will drive those sales.”

Leading Brands of Vodka
(Thousands of 9-Liter Cases)

(p) 2001 Preliminary. Source: Adams Handbook Advance 2002

Another relatively new superpremium, Thor’s Hammer, imported and marketed by Barton Brands, has taken a more ambitious tack. Last year, Barton supported the brand with a fairly heavy schedule in The Wall Street Journal. And it features a full line of off-premise merchandising materials as well as a line of quality on-premise materials. In addition, “in 28 markets we run Viking Night promotions, where we feature various giveaways (T-shirts, etc.) and make it fun for bartenders and consumers,” said Ed Gualtieri, Barton’s director of marketing. Searching for more brand awareness, Thor’s Hammer debuted a national radio campaign on the Howard Stern show last month.

Gualtieri believes the brand, introduced a year and a half ago and available nationally, has a distinctive story to tell. Made from 100% wheat, Thor’s Hammer is produced with water from an underground lake that has a unique chemical composition, including a high ph. “The result is a vodka with a very smooth mouthfeel and lots of clarity,” he said. “Depletion percentage gains have been in the solid duble-digits; however, the brand is still in its infancy.” Because of its clarity and smoothness, Gualtieri said the brand is most popular in Martinis, “but it is also good in Cosmopolitans and Gimlets.”

Evaluating Vodka

Vodkas, especially the ultra-premiums, are in a war of words over which is better. Finlandia, for example, is in the process of using independent labs to prove that it is the “purest” vodka available. Why all the fuss over a spirit that by definition is supposed to be odorless, colorless and have no taste at all?

Even though vodka is a neutral grain spirit, it does have a certain taste and mouthfeel. The objective of a good vodka is to be as smooth as possible on the palate. A number of factors will affect both smoothness and taste.

PRIMARY INGREDIENT. The ingredient with which vodka is made will have an influence on taste. Traditional Polish vodkas such as Belvedere and Wyborowa, for example, are made with rye. Absolut boasts about its Swedish wheat. Stoli is made with winter wheat. Finlandia uses six-row barley. Rain uses only organically grown grains. Some vodkas are made with potatoes. Each will impart its own subtle flavor.

DISTILLATION. How vodka is distilled, as well as how many times, can have an effect on vodka’s smoothness. Some claim continuous distillation is better than distillation in a pot or column still, and there’s disagreement about which of those two types of stills is best. Some, like Vox, are distilled as many as five times, the idea being that each distillation removes more impurities from the alcohol. Several, such as Rain, discard the “heads” and “tails” of each distillation, again to remove impurities.

FILTRATION. Once vodka has been distilled, it’s usually filtered to remove even more impurities, often through charcoal. Wyborowa is triple-filtered. Stolichnaya is filtered first through quartz sand, then through birch charcoal.

WATER. The other main ingredient of any spirit is water. The mineral content certainly can have an effect on taste. Thor’s Hammer, for instance, draws its water from an underground lake in Sweden, 200 feet beneath the surface, which provides a unique chemical composition. Glacial water is big with a number of brands. Limestone is another. Again, each brand will suggest its water results in a superior, distinctive taste.

Ultimately, taste is on the tongue of the beholder. When you sample vodka, however, look for flavor notes when it first touches your tongue such as sweetness, citrus or floral tones, or a hint of grain such as rye. Next, look for mouthfeel of the alcohol and smoothness as it hits the back of your mouth and throat. Is it soft or harsh? Finally, look for a minimum of aftertaste in the finish.

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. *