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The in Crowd
By JENNIFER ZEGLER
Spirits and wine revamp to entice new consumers
Popularity rules. In order to be popular, spirits and wine producers have realigned their strategies to attract both new consumers and connoisseurs. With both categories plentiful with new product introductions popularity boosters aren’t lacking this year. Despite showing slightly smaller growth over the past year, both categories continued to grow due to strategic marketing and demographic appeals.
In the spirits category, mounting interest in a
“cocktail culture” has led to continued increases for flavored
spirit varieties. With trendy flavors and unique mixes, younger consumers
often are the target for spirits manufacturers. As for wines, baby boomers
are uncorking more bottles due to the beverage’s recent healthy
headlines. At the same time, the premium end of both spirits and wine draws
brand-conscious 21- to 30-year-olds as well as the 50-years-old-and-above
age range.
U.S. spirits sales by volume (millions of liters) |
|||
Category | 2006 | Forecast 2011 | Forecasted % change |
gin and vodka | 534.8 | 599.5 | 12.1% |
whisk(e)y | 402.6 | 394.3 | -2.1% |
rum | 210.9 | 243.2 | 15.3% |
liqueurs | 171.1 | 199.2 | 16.5% |
brandy and cognac | 94 | 98 | 4.2% |
tequila (and mezcal) | 87.3 | 120.2 | 37.7% |
other spirits | 10.7 | 9.1 | -15% |
total category | 1,511.3 | 1,663.3 | 10.1% |
Source: Euromonitor International 2007 |
Top spirits by brand | ||||
Brand | Dollar sales (in Millions) | % change vs. prior year | Market share | % change vs. prior year |
smirnoff vodka | $181.6 | 8.4% | 21.5 | 0.3% |
bacardi rum | $157.9 | 0.7% | 40.0 | -0.9% |
captain morgan rum | $121.4 | 7.9% | 30.8 | 1.4% |
jack daniels tennessee whiskey | $109.1 | 4.9% | 18.8 | 0.9% |
Absolut vodka | $93.2 | 7.3% | 11.0 | 0.0% |
jose cuervo tequila | $91.8 | 7.5% | 41.0 | -0.9% |
crown royal canadian whisky | $71.0 | 2.9% | 12.2 | 0.3% |
jim beaM bourbon | $60.5 | 3.4% | 10.4 | 0.3% |
skyy vodka | $60.0 | 9.4% | 7.1 | 0.2% |
baileys creaM liqueur | $50.8 | 13.5% | 13.1 | 1.3% |
total category | $2,902.1 | 3.4% | 100.0 | — |
Source: Information Resources Inc., Total food and drug outlets (excluding Wal-Mart) for the 52 weeks ending March 25, 2007. |
Cocktail culture
This year, younger consumers who are newer to the
spirits market have had an influence on sales. Their unique tastes for
cocktails, often made with flavored spirits, and emphasis on brands as part
of their personal identity are part of a 3.4 percent retail sales growth
experienced by the spirits category, according to Information Resources
Inc. (IRI), Chicago, for the year ending March 25, 2007.
“Brands are more in tune with the cocktail
culture, which is the idea that you can take a label, make it popular and
useable while still allowing people to customize it,” says Brian
Morgan, senior research analyst at Euromonitor International, Chicago.
“People are looking to spirits as a status indicator, which is more
in tune with what beer brands have done.”
Though young consumers are having an impact, consumers
of all ages are tempted by new trends and releases. The total spirits
category grew to $2.9 billion in sales, according to IRI data. Across the
category, certain spirits are attracting attention.
“In spirits, there are some things that are
opportunistic,” says Bump Williams, executive vice president and
general manager of IRI’s beer, wine and spirits practice. “One
thing we’re continuing to see trend well are sweet spirits, such as rums. Vodka continues to be the largest spirits category,
while others such as Jägermeister are
coming out. Also, brands such as Jack Daniels and Jim Beam are growing
based on their history.”
In addition to Jägermeister, other brand names
also are growing this year with similar double-digit increases to the
aforementioned liqueur, including Grey Goose vodka and Baileys Irish Cream.
Euromonitor International’s “Spirits in the USA 2007”
report singles out Jägermeister and Grey Goose for their respective
activity this year. The report attributes Jägermeister’s recent
25 percent growth to tapping into younger consumers with signature
cocktails, especially those mixed with energy drinks.
“Jägermeister is a brand that has been
around for a while, but has seen double-digit growth, which I think is a
testament to both Sidney Frank’s marketing and to on-trade
promotions,” Morgan says. “Its marketing is not about heritage,
tradition, or even flavor to a certain extent, but it continues to be a
success story.”
High-end, premium spirits maintained growth this year,
while the value-end of the spirits range declined. Williams describes the
premium side of the business as “on fire.” Euromonitor’s
Morgan says appreciation for high-quality, limited-quantity spirits
extended to nearly every spirits category. From bourbon to tequila,
consumers are learning about the intricacies of premium-positioned spirits,
and allowing the ceiling on spirits prices to rise. Increases in disposable
income in addition to image concerns also are factors for success.
“Consumers enjoy ordering a Grey Goose martini
or a Tanqueray and tonic, which these brands build into their
positioning,” Williams says. “A typical bourbon drinker is not
going to ask for off-the-shelf bourbon, they want to order a Crown
Royal.”
Premium positioning is helping grow tequila as well.
Formerly regarded as a mixer, new premium tequila brands were launched by
Skyy Spirits, Pernod Ricard, Diageo and Beam Global this year. Tequila is a
category that grew last year due to flavor introductions by Jose Cuervo,
and also is expected to grow in the future, according to
Euromonitor’s Morgan.
An additional premium spirit that has gained momentum
is Grey Goose vodka. The premium brand, which bills itself as “the
world’s best-tasting vodka,” had $46 million in sales for a
21 percent increase this year, according to IRI data. The vodka has built
recognition for its brand, which is cited in everything from cocktail menus
to hip-hop songs.
Grey Goose also was part of the larger flavored
spirits trend this year, launching its La Poire pear-flavored variety.
Along with pear, companies have introduced a new round of trendy flavored
spirits to the market, including blueberry and multiple tropical flavors.
Flavored spirits are not anything new, rather continuing a trend that has
become standard in the marketplace.
U.S. Wine sales by volume (millions of liters) |
|||
Category | 2006 | forecast 2011 | forecasted % change |
still red wine | 961.4 | 1,085.5 | 12.9% |
still white wine | 952.2 | 1,054.7 | 10.8% |
still rose wine | 385.9 | 401.9 | 4.1% |
total category | 2,299.5 | 2,542.1 | 10.6% |
Source: Euromonitor International 2007 |
“We’ve seen cycles in flavored
spirits,” Morgan explains. “It has progressed to the point
where every year and every season you have a new cycle with new trendy
flavors. Last year we saw a lot of pomegranate and ruby red flavored
spirits.”
This year, nearly every spirit category received new
flavored additions. Taking inspiration from the produce section, Svedka
released clementine-flavored vodka, Stolichnaya debuted blueberry-flavored
vodka, and Bacardi recently released Peach Red variety of rum. Another
trend in flavors has spirits headed to the tropics, including Malibu
rum’s Banana flavor and DeKuyper’s lineup of Tropical Mango,
Papaya and Pineapple Coconut liqueurs. Gin also welcomed a new offering as
Tanqueray introduced a variety flavored with Rangpur limes.
Pernod Ricard’s Baileys and Kahlua brands
innovated from their traditional liqueur roots. Baileys courted dessert
cocktails with new Mint Chocolate and Caramel varieties, which may have
helped it crack IRI’s best-selling spirits Top 10 this year.
Coffee-flavored Kahlua continued that inspiration with French Vanilla and
Hazelnut flavors released in March. The company also released SOHO
lychee-flavored liqueur in October for a new exotic influence.
Despite the growth, both Morgan and Williams wonder
how long the trend will last.
“If you look at the past year, nearly all the
growth in vodka, tequila and rum was due to flavors,” IRI’s
Williams says. “This year it’s still not as strong as a year or
two ago, but it is still one of the keys in spirits growth. I’m
really not sure how many flavors there are to exploit when they’ve
already done the berries, citrus, vanilla and the rest. I’m just not
sure how many flavors they’ll be able to get into.”
Euromonitor’s Morgan says consumers often are
intrigued by the newest offering, but lack loyalty to any particular
flavor. For a brand such as Absolut that continues to innovate, including
its latest pear-flavored vodka, it may contradict a long-term strategy,
Morgan suggests. Yet, it’s a trend he sees continuing.
“I think the cycle of flavors will
continue,” he says. “I don’t know if it will be the
infused-with-energy vodka or the superfruits, such as acai and mangosteen,
that will continue to grow.”
In marketing, IRI’s Williams says he’s
impressed that spirits companies are continuing to emphasize positive
advertising and responsible drinking. “Not only are they promoting
martini parties but also the importance of responsibility,” he says.
“They’re tackling a difficult subject and I applaud them for
it.”
As for the future, companies are searching for the
next mojito or trendy cocktail combination. Morgan is keeping his eye on a
trend that hit this year — cachaca. The Brazilian-native distilled
beverage hit the United States this year and he expects it to grow. In
2006, Leblon cachaca was introduced in the U.S. market, promoting its
Brazilian roots and its role in of the caipirinha cocktail.
Top still wine brands | ||||
BRAND | dollar sales (in Millions) | % change vs. prior year | market share | % change vs. prior year |
yellow tail (australia) | $188.8 | 8.1% | 4.0 | -0.1% |
sutter home (california) | $162.8 | 9.7% | 3.4 | 0.0% |
franzia (california) | $161.5 | 0.4% | 3.4 | -0.3% |
woodbridge by robert mondavi (california) | $146.2 | 5.9% | 3.1 | -0.1% |
kendall-jackson vintners reserve (california) | $141.9 | 9.7% | 3.0 | 0.0% |
beringer | $109.8 | 5.2% | 2.3 | -0.1% |
carlo rossi (california) | $109.7 | 2.7% | 2.3 | -0.2% |
livingston cellars (california) | $101.3 | -2.0% | 2.1 | -0.3% |
clos du bois (california) | $80.1 | 16.9% | 1.7 | 0.1% |
robert mondavi private selection (california) | $76.8 | 12.1% | 1.6 | 0.0% |
TOTAL CATEGORY | $5,012.2 | 9.3% | 100.0 | — |
Source: Information Resources Inc., Total food and drug outlets (excluding Wal-Mart) for the 52 weeks ending March 25, 2007. |
Drink wine and live longer
Williams cites the headline
from February’s Fortune magazine as evidence that unlike spirits or beer, wine has
been able to coincide with the health and wellness trend. The “Drink
wine and live longer” article documents research conducted by Sirtris
Pharmaceuticals, Cambridge, Mass., that found an ingredient in red wine,
resveratrol, stopped mice from gaining weight and seemed to slow their
aging process. The study, as well as others on wine’s benefits, has
helped boost the category’s sales this year.
“We saw a big bump
about six months ago in sales following the release of two big reports that
shared the benefits of red wine,” Euromonitor’s Morgan says.
Sales for wine incrementally increased since 2006 for a
$5 billion category. The health news added fuel to wine’s fire, which
experienced a 9.3 percent increase this year.
“In wine, there are lots of price points and
it’s universally growing by appealing to young and old
consumers,” Morgan says. “The antioxidant value is not as
appealing to younger consumers; it skews slightly older. Wine had an image
of snobbery, but it is changing with a new wine culture. There also has
been a crossover into the mainstream and into everyday meals where wine
used to be reserved for special occasions.”
In addition, wine has grown due to increased presence
in retail outlets, training personnel on wine and food pairings in retail
as well as restaurants , and an expanding private label presence in the
category. IRI’s Williams describes private label as both the biggest
opportunity and threat for brand-name wine. As consumers enter the
category, the value end of wines, such as private label options, is
tempting trial, which may pull consumers away from premium options.
Value-minded consumers also are helping revive
bag-in-box wines. High-quality wines are now being branded in 3- and
5-liter “casks” that emphasize freshness and moderation. IRI
named Fish Eye and Black Box wines as two of its Top 30 Wine Brand
Performers, while Trove and French Rabbit made its Top 10 New Wine Brand
list. Fish Eye, Black Box and Trove all offer multiple varieties of
bag-in-box wines in premium packaging. On the other hand, French Rabbit
uses 1-liter Tetra Paks for portability. The new breed of boxed wine is
attracting younger consumers, Williams says.
In addition, baby boomers are flocking to wine for its
beneficial antioxidant properties. The 50-years-old-and-above demographic
are “the largest demographic currently purchasing wine or migrating
to the category for health, wellness and obesity reasons,” Williams
says. The group also tends to be more educated about wine than their
younger counterparts and is more brand loyal, he adds.
Overall for both spirits and wine, Williams predicts
another successful year. “You won’t see a decrease in new products for wine and spirits,” he says. “I think
companies will re-focus their efforts on the 50-years-old-and-above
consumers and 21-years-old-and-above wine, spirits and beer drinker.
It’s really specific marketing.”