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.

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.

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.”