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10.2009

Massachusetts Beverage Business

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Article By: Liza Weisstuch

“We live in a one-hour-photo, instant oatmeal, microwave popcorn society,” Lisa Simpson once remarked.  Of course, she couldn’t turn to her Duff Beer-glugging father to find out how cocktails fit into that schema, but the answer is clear to anyone in the industry.  Pre-mixed cocktails, both ready-to-drink (RTD), the smaller containers, and ready-to-serve (RTS), the larger bottles of simple alcohol mixers, though the phrases are used interchangeably by many) are a growing segment in the retail realm, with liquor companies unveiling products at what seems like a higher velocity now than just a few years ago.  According to the Distilled Spirits Council of the United States, the national trade association, premium premade cocktails are up 26.8 % in volume and 29.4% in revenue from 2OO7 to 2OO8.  You could chalk that up to any number of factors – convenience, the fact that crafting balanced cocktails at home is easier said than done, and/or the power of marketing.  Either way, that growth, which continues, all ultimately leads to one development that’s been repeated like a mantra over and over since the economy nosedived last fall: people are going out less than they did as recently as a year ago.  In fact, according to a July report by the market research firm NPD Group, restaurant industry guest traffic fell 2.6 percent for the quarter ending May 31, the largest decline since 1981.

Drink producers, in turn, are getting more creative – not only with their offerings but also with their marketing. For instance, RTD and RTS products have long been perceived (and positioned) as summer items, but that seasonal association is changing.  Now, then, seems as appropriate a time as any to survey the fast expanding landscape of pre-mixed cocktails. 

“The premixes have done well this summer, with more people getting together outdoors, having cookouts, or just having people over.  My gut doesn’t sense that’s because of the economy.  I think people typically don’t like to mix their own drinks.  It’s much easier to buy them premade.  But the ready-to-drinks have been picking up slowly throughout the course of the year,” said Jeff Fine, manager of Atlas Liquors, which has outposts in Medford, Quincy and Roslindale.  “It’s becoming a bigger and bigger segment in terms of more options and bigger volume, but most of our volume still comes from margaritas.  Other stuff is definitely there, but it moves more slowly.  New drinks are constantly coming out – different Mojitos, a pomegranate martini – but the whole category is driven by Cuervo’s ready-to-drink, particularly the Golden Margarita.” Fine said he sees a lot of spur-of-the-moment purchases of RTDs.  People come to the store unsure of what they want to buy and when they see these products, they become a quick, almost reflexive, choice.  His reasoning for that is somewhat intuitive.  “I think it’s brand loyalty – especially with Cuervo.  Jose Cuervo is the number one selling tequila and it carries a lot of clout.  The Golden Margarita has Grand Marnier, and people have a certain comfort level with that.” At his stores, the pre-mixed martinis, like Smirnoff’s line, are keeping pace while the Mudslides, pina coladas and other heavier drinks aren’t.

That observation is well validated by smaller distilling companies, several of which are making an impact with their introduction of easy-drinking RTS products.  Phillips Distilling, based in Minnesota, launched three styles of UV Lemonade Cocktails – Cherry, Blue Raspberry and Pink Lemonade – this past spring, sold in 1.75-liter bottles.  Dean Phillips is the fifth generation President and CEO of the family-owned spirits maker, which secured its footing in the spirits industry in the 193Os when it created a peppermint liqueur that became the first American-produced schnapps, a consistent commercial alternative to the broad-reaching trend of dissolving peppermint candies in poorly aged Indiana whiskey.  In the 195Os, long before the recent craze, Phillips developed the first flavored vodkas, which were colored, in a range of flavors: red cherry, lime, orange, mint, and grape.  (Interestingly, Philips also introduced Belvedere Vodka, which it sold to Moët Hennessy  Louis Vuitton in 2OO1.) “If others zig we like to zag.  We’re looking backwards to find new ideas to move ahead with,” said Phillips.  “Colored, flavored vodkas from the 195Os seemed the way to go, so we reintroduced America’s first flavored vodkas.  We introduced the vodkas to the US in 2OO1 and sold 7OOO cases in five states in the first year.  Eight years later, we’re just shy of 1 million cases,” he said, noting UV Vodka is sold in six other countries, too.

“Most people consume UV flavors with lemonade or lemon-lime soda.  In the last 18 months, the ready-to-drink category has taken on a life of its own with a number of new introductions – Mojitos, Cosmos, margaritas, and the like.  It’s an interesting opportunity to create a sub-category of vodka – it’s fun, refreshing, all natural, and a great value.  That was the impetus for the UV Lemonade Cocktails.  We introduced it the first week in May and in the first six weeks we sold over 5O,OOO cases nationally.  In the first month, we sold about 1OOO cases in Massachusetts.  Instead of buying different ingredients to make a cocktail, you just have to buy one.  We’ve never introduced a brand in all of our history that sold 5O,OOO cases in six weeks.”  He said the demographic skews a bit older than the core UV Vodka consumer, which leads him to surmise it’s an appealing pick to suburbanites for, say, backyard BBQs. 

Heaven Hill’s Burnett’s franchise also entered the RTD segment this summer with Burnett’s Cocktails, which include three line extension of Burnett’s Vodka – Cosmopolitan, Margarita and Mojito.  According to their Corporate Communications Manager Josh Hafer, the new products are predicated on the success of the Burnett’s franchise.  The standard 8O proof is doing well, he said, as are their 19 flavors.  “This is a perfect opportunity to merge not just the Burnett’s franchise, but also the trend of cocktail creation for in-home entertaining with the Burnett’s Cocktails.  A lot of learning has gone on during the years.  We identified an opportunity based on economics and market demand.  Burnett’s Cocktails come along at a perfect time for us.  We’re seeing traction so far, at least on the trade media side.  We wouldn’t have gotten into it if there wasn’t a demand for it from key customers and wholesalers nationwide, if they weren’t integrally involved and didn’t already have the buy-in on the product from manpower and buzz perspectives.”  The brand goes back to the mid-’8Os when it was in Diageo’s portfolio, then it was picked up by United Distillers.  Heaven Hill purchased the brand in 1999.  It was just a gin until that point and Heaven Hill set out to broaden the name.  He says the franchise is doing exceptionally well in the Bay State.

Given the identified potential in the category, the market’s time-honored key players are ramping up their game.  Bacardi’s Party Drinks line, for instance, has been around for about five years and Bacardi Classic Cocktails have been on the market since the Original Mojito launched in April 2OO8.  The Raspberry Mojito was unveiled at the end of this past May.  “When we first launched, we were leveraging Bacardi Superior with lime and mint in the RTD format,” said Alia Dia, Assistant Brand Manager for Bacardi flavored rums and Classic Cocktails.  “We had huge success with that Original, selling about three times the volume we expected.  We want to leverage the success we’ve seen in the on-premise, and there’s a huge trend for flavored Mojitos.  With the whole economic situation and people staying in more, the ready-to-drink category is exploding with new launches in the premium price segment.” The goal for the Classic Cocktail line, she noted, is to be the number one option for at-home entertaining.  To that end, promotions and ads are focused on digital, print and public relations.  There’s a strong push on in-store samplings as well as tastings in non-traditional venues.  Bacardi, for instance, partnered with Shecky’s, a women’s lifestyle website and social marketing company that holds grand-scale shopping events around the country.  Each features boutique designers hawking their wares amid a party-like atmosphere.  The products are distributed as samples. 

“We’ve done so much work driving the Mojito cocktail and brand association with it that it’s almost set the platform for ready-to-drinks,” said Dia.  “There are people who may have been nervous to order something like that on-premise and spend the money, so this gives them the chance to try it at home.”  She added that Boston is an important market for Bacardi, and it’s doing well. 

Meantime, Bacardi is revving up for digital activity in November.  “We focused efforts on RTD and Classic Cocktails when weë launched and through the summer,” she added.  “We don’t usually see a lot of activity through the holidays.  We’ll be doing banner placements and activity on the Food Network as a test run this year.  The goal is to be the preferred option for home entertaining, so ads will be a reminder and keep us at the top of consumers’ minds when they’re doing holiday shopping.  There’s room for growth, especially as consumers are latching on to a subset of premium ready-to-drinks.
It’s about what’s hot and new.”

Linchpin brands Cuervo and Smirnoff, both owned by Diageo, are also putting resources into their RTD and RTS products.  (Diageo also owns the TGI Friday’s bottled cocktail line.)  There are two lines of RTS margaritas.  The first is the premium priced Cuervo Authentic Margaritas, which, according to Amy Bidwell, Brand Manager for Cuervo’s RTS portfolio, is the number one RTS in the category in the US.  Then five years ago, Cuervo created the super-premium RTS cocktail segment when launched its Golden Margarita, which is sold in 75Oml and 1.75 liter sizes.  Authentic comes in several sizes, including 2OOml and 4-packs.  “I think margaritas have a seasonality, but holidays are also a big time for us.  It’s just an incredibly popular cocktail, so we see good volume year ’round,” said Bidwell.  “It’s got great brand recognition and it’s been in the market for a while.  In terms of doing anything new, as consumers entertain more at home, we’re looking to beef up communication around RTS for the whole portfolio.  It’s an opportunity to provide consumers with easy cocktail and entertaining solutions.  There’s been tremendous year-over-year growth in the category for a while.  Before the recession fully hit, the category had potential.” Smirnoff’s Cocktail Collection includes Pomegranate Martini,the Grand Cosmopolitan, Vodka Mojito, and Tuscan Lemonade. 

“We benefit from extreme popularity in warm months but what’s better to serve at Christmas time than a red martini?” said Jody Samuels Ike, Senior Brand Manager for Smirnoff and Ready to Serve Cocktails referring to an increasing effort to make products like the Cosmo and Pomegranate Martini more conspicuous in the holiday season.  “When you talk about Smirnoff Cocktails, it puts the brand on the top of people’s mind in on- and off-premise.  The super-premium segment gives stronger spirits credentials to the category than it had before.
We also have  the TGI Friday’s cocktails, which are premium level.  Consumers know the cocktail because they had a great drink experience from Friday’s.  There’s a halo across the brands for us.  What we know is different consumers want different ways to get to the end game.  Some consumers really love the idea of being able to try something new that’s already done for them.  Ready-to-serve plays a fantastic role.”

She notes that there’s always an eye toward organic growth and innovation.  “Diageo isn’t a company that forgets about the products that have been in the market.  We drive those for growth and look for new solutions.” Growth can happen in multiple directions.  To hear Samuels Ike tell it, the RTD category has mass appeal because it interests different demographics for different reasons and, perhaps, at different moments.  “There are different levels of engagement and involvement in preparation of cocktails.  It might be best compared to someone who wants to make a pizza.  There’s the person who makes the dough and sauce completely from scratch.  Then there’s the person who buys the kit, and there’s the person who calls for delivery.  Maybe the same consumer is exploring different categories.  It depends on the time and occasion.  At Diageo, the consumer consistently gets a quality solution.  That’s what puts us head and shoulders above competition.”

But to be sure, there’s more and more competition each month.  Brown-Forman’s Southern Comfort launched Southern Comfort Hurricane Cocktail and Southern Comfort Sweet Tea Cocktail, premium RTS drinks, in time for the Fourth of July.  US Brand Management Director Jay Finnegan said that with the new RTS offerings the company is asking: Can Southern Comfort be the first brown spirit to make an impact in this category?

The new products are the outcome of analyzing three key objectives.  “We’ve seen a shift from bar and nightclubs to more home entertaining, so we’re tapping into that.  There’s a convenience portion, but when off-premise, it’s a great way to support the Southern Comfort brand by getting a more direct point of purchase,” he said.  “We asked: Can we be in the cold box next to shot brands, with Jagermeister and Tuaca?  Southern Comfort Lime has become really popular, but it’s more of a shot.  Can we be at the register with small sizes?  Where else in the store can we be?  The premade cocktail section?  Ready-to-serve supports and enhances the Southern Comfort brand name at retail and leverages the mixability and versatility of the brand.  There are still a lot of consumers who don’t know how to use Southern Comfort, so the ready-to-serves are a great way to showcase the product.  Ultimately, it comes back to the 7O proof and Southern Comfort 1OO proof, which has more of a whiskey profile, so people can experiment with those spirits knowing there’s some versatility there.”

He said RTDs dovetail with the ever-growing intrigue around cocktails on-premise.  Hurricane and Sweet Tea are distinct from the varieties that are proliferating the market, making them strong candidates for people in pursuit of new or unique flavors.  “I think competitive brands on the market have done a good job identifying that.  I’ve seen bubblegum vodka, a different take on getting a different flavor in a cocktail.  There’s been a huge introduction of other exotic fruits and blends, as well as getting back to traditional flavors that people maybe hadn’t thought of in cocktails.  Sweet Tea is one we went to quickly.  Certainly it’s different from grape, cherry, peach.  What companies are doing is not only a challenge to consumers and their tastes, I think it’s challenging bartenders to up their game a little bit. 

I’d relate it to the power tool section at Home Depot: here’s your saw – work until your arm is too tired to saw.  You up your power tools to make it easier to do your home improvement.  It’s offering something new, now go see what you can go create.  I think it’s rewarding to a bartender and pays off for consumers.”

The ground was set for Hurricane and Sweet Tea beginning in May, when aggressive merchandising appeared in the form of neck-hangers on Southern Comfort bottles announcing “Your cocktails are coming”. Since then, there has been a sizable off-premise focus, with floor decals and shelf talkers that make use of deep-seated brand credibility.  (For instance: “From a great brand, Southern Comfort.”)  Finnegan recognizes the premade category’s seasonality, but sees the SoCo RTDs as a bit of an exception, since the Hurricane has something of its own off-season holiday.  “In February, typically not the height of cocktail season, it’s Mardi Gras.  We do promotions with the family of brands, but leading with the Hurricane, a New Orleans drink. 

However, we’re looking at our introduction as cementing our foothold in off-premiseand supporting the family of brands throughout the year.”  Massachusetts is one of 13 key states they focus on and one of first states to receive product.  Early on, he said, the sales goal was reached. 

Brown-Forman’s other brand with a stake in the RTD category is Jack Daniel’s, which introduced Jack Daniel’s Country Cocktails line as a spirits-based drink in 1988. 

At that point, California Coolers were propelling the RTD phenomenon.  Since then, the product and packaging have undergone several overhauls.  Today, the beverages are malt-based.  In June 2OO7, they transitioned from a 4-pack configuration to 6-packs of bottles, which is more fitting with the malt beverage category, and instituted a sleeker, fresher design.  Mark Grindstaff, US Brand Marketing Director for Jack Daniel’s family of brands, said the late 198Os launch of their RTDs was an opportunity to make the brand available at nontraditional venues and occasions, like sports stadiums, and also to recruit consumers who may lie beyond the core demographic, like women.  “Today primarily the Jack Daniel’s consumers can have their brand in a setting or occasion where having the actual Tennessee Whiskey had been hard to do, from NASCAR races to concert venues.”

Currently, the flavors are Black Jack Cola, Downhome Punch, Lynchburg Lemonade and Sweet Tea.  They offer two sizes: 6-packs of 1O-ounce bottles as well as 16-ounce cans, which are sold as 4-packs and singles.  In the 4-pack configuration, he says they’re seeing growth, especially in convenient stores.  “In the past, we haven’t really done much in that sector, but now with new cans and 4-pack configuration, there’s an excitement behind that and we’re seeing lift.”

Interestingly, that original objective of moving aggressively outside the core demographic manifested a bit differently than planned – and that’s not a bad thing.  Grindstaff points out that the audience for the Country Cocktails is nearly an exact 5O/5O male-to-female split.  “Of all the RTD brands we track, we have the highest percentage of male consumers.  Most of competitors are more in the 6O/4O range, especially when we look at wine coolers.  Where we differ from Seagram’s Coolers or Bartles and Jaymes is they’re really heavily skewed female and older.  In our cases, roughly 7O% of consumers are 25- to 49-years-old.  When we look at brands like old wine coolers, they are more around 5O% to 6O% in that age demographic.”

He continued, noting that growth in the brand and category is resurging.  “It was so hot back in the year Mike’s Hard Lemonade launched [1996],” he said.  “At that point there was an enormous influx of new brands.  Every spirit brand jumped on the bandwagon.  Then excitement dipped.  Since we reintroduced brand in 6-packs, we’ve been seeing continued growth from 2O% to 1O% here as of late.  Growth trends anywhere from 2O% to plus-12% in the last year,” he said, adding that it was recently time to refresh the overall product offering, thus the introduction of Sweet Tea.  And keeping with their strategy to maintain five flavors in the market, they eliminated the slowest seller, Wild Berry.  “Sweet Tea and Jack Daniel’s are a good fit.  Now we’re seeing other brands doing well with teas.  We’re looking at launching another new style in March of 2O1O, Jack and Ginger, and when we do, we’ll eliminate Watermelon Spike.”

Dean Phillips said that with megawatt companies like Brown-Foreman and Diageo jumping into the RTD game, the long underdeveloped category is a prime opportunity for retailers.  “It’s a wonderful opportunity for incremental sales at healthy margins.  Unlike rum or gin or other spirits, there’s no loss leader in the RTD category.  There are good margins, and an opportunity to make money.”

Back on the local retail front, Robert Carney at Al’s Liquors in South Boston said more and more salespeople are offering RTDs, but often finds that sales are a matter of micro-trends.  Correspondingly, he said a lot of patrons will ask for something specifically because they saw an ad on a billboard.  Brand recognition is a big selling point, he also notes, echoing what other retailers said about Cuervo’s success, which is evident in his store. 

Mike Cimini, President of Yankee Spirits, said the buzz has definitely hit.  He sees the buying patterns revolve around party purchases.  “We were up in May and June, a big testament considering this June versus last June.  To be up a little bit is good.  The first couple weeks of July, those things continue to be up.  Mojitos are in the top 2O, Smirnoff is among the top ten – with Cosmo as the number one, followed by Pomegranate Martini,” he said.  “Figure, if you have a buyer saying that a couple of couples or 1OO people are coming to his house, and he wants to make Mojitos, you’re not going to sit in the kitchen all day and make Mojitos.  People buy these products because it’s a way they can present it, add a couple mint leaves, put it in a pitcher, chill it, and get it out more quickly.”

He also said there’s definitely brand loyalty, but notes a good deal of trial and era.  “The Cosmo is number one, so they’ll get that and also try pomegranate.  Or they want to get away from something vodka-driven and go to something rum-driven.”

Ready or not, it looks like the ready-to-drinks and ready-to-serves are here to stay.

Just as a Cognac is only as old as its youngest eau de vie and a chain is only as strong as its weakest link, a cocktail’s quality can only be as premium as the ingredients used in it.  With consumers eating out less and entertaining at home more, those who don’t purée their own juices or make their own sour mix from scratch can find a variety of premium mixers – from juices to syrups to shrub – created specifically for cocktail making.  As a testament to their quality, fine dining restaurants are using them too. 

Les Vergers Boiron Frozen Fruit purées, produced by a company based in France, has been in operation for about 4O years, but the company’s premium products, long available only to the food service industry in opaque white tub-like one-kilogram containers, became available in 17-ounce plastic bottles in February.  Using fruits directly from their source farms, they’re puréed, strained and flash frozen, so when it comes to exotic fruits or those that are out of season, Boiron offers arguably the closest thing you can get to fresh fruit throughout the calendar year.  Their wide variety of flavors includes fruits, like calamanzie, a cousin of yuzu that has a tangerine-like aroma and a lime’s tartness.  The brand seems well positioned to appeal to the growing contingent of everyday foodies.  The top seven flavors are available in the bottles and they include mango, passion fruit, raspberry, strawberry, pomegranate, white peach and blackberry.  “The product is the same as what was sold in the kilo containers, but the package is innovative for home use.  The bottle is capped with a spout.  People relate to that and understand it’s for drinks.” said Laurene Bourges, Boiron’s Brand Manager for North America.  She noted that because people are familiar with the brand through their encounters with it at hot spots, they have already come to know it through the internet. 

“If I’m going to use a purée product, it allows consistency and you always get the purest of fruit,” said Todd Maul, Bar Manager at Ken Oringer’s refined Clio at the Eliot Hotel in Boston’s Back Bay.  He said that the Boiron products are not only super premium and provide a consistency that can be challenging to attain when making your own purées, they’re also ideal for the more molecularly inclined mixologists.  He uses it in a drink that involves liquid nitrogen.  Maul learned about Boiron because it’s a staple for the pastry chefs at Clio.  “We try to make it interesting and make the bar match what’s happening in the kitchen.”

The Fall River-based Stirrings Company, which has developed an extensive portfolio of premium cocktail mixers since its founding twelve years ago, was acquired by Diageo in June.  (The drinks giant had invested in a 2O% stake in 2OO7.)  The mixers, from Apple Martini to Bloody Mary, are available in a range of Massachusetts restaurants and bars, from Irish pubs to white tablecloth-caliber restaurants. 

At Vox Populi, a Back Bay restaurant with a trendy martini bar, there are several Stirrings products on the shelf.  As a bar that makes its simple syrups and sour mixes in house, a premade mixer by implication has to rank high on the quality barometer.  As far as general manager Andrew Corbin sees it, Stirrings hits the mark.  Vox (which Corbin says can do four million dollars in sales annually, which includes about $2 million in bar sales) carries four different Stirrings mixers: blood orange, watermelon, peach nectar, and pomegranate.  He said the watermelon is the most popular, but the bar also goes through a good amount of the peach nectar because the Bellini is among the most frequently ordered drinks.  “Stirrings is quite mixable.  They’re not overpowering or too sweet, but more natural.  I use it because I don’t want to lose the flavor of the liqueurs and spirits I’m mixing with it,” Corbin said, noting that the mixers are terrific commodities for such a high-volume establishment considering some of the juices in the line are difficult and labor intensive to produce. 

Stirrings is also featured prominently on the cocktail list at Burtons Grill, which has five locations (three in Massachusetts, one in Virginia and one in Connecticut).  Chris Little is the bar manager at the Back Bay outpost, but he designs the cocktail lists that are implemented chain-wide.  He said Stirrings stays in Burton’s inventory because he appreciates the broad range of flavors – especially the seasonal offerings, like watermelon and blueberry – as well as the texture.  “We use their mix for our Pina Colada martini.  It’s a good all-natural mix with a nice consistency, and it pours nicely out of a cocktail shaker.  Before we were using coconut cream or milk, and it was chalky.  It tasted better when we went to this, and it’s a better presentation.”  He also extolled the consistency it affords as far as replicating cocktails across locations.  When designing cocktails for five locations,  “Stirrings allows us a consistency of flavor;  Blueberry martini in Connecticut is going to be the same as the one in Virginia because the product comes in tasting the way I want it to taste,” Little said. 

But the primary market for Stirrings is off-premise.  Gary Park, owner of Gary’s Liquors, carries the full line of mixers, simple syrups and rimmers.  “The great thing about people not going to bars and restaurants as much is that now they’re used to ordering exotic cocktails and they do want to make them at home.  They come in asking for more exotic flavors, and that’s Stirrings’ specialty,” he said.  “There’s quality in every one of their products.  They have outstanding variety and do a good job keeping up with the latest trends.”  Park did express concern about the economy and the new tax that went into effect in August.  Even though the tax does not apply to non-alcoholic products like Stirrings, he is noticing people trading down more, and that includes a fallback to brands like Mr. and Mrs. T.  However, he added, most Stirrings buyers, which span a diverse range of ages, are repeat buyers.  He said the Bloody Mary and Cosmo mixes are the workhorses and the Margarita does well, too. 

Adam Lantheaume is proprietor of The Boston Shaker, a cocktail tool and supply shop that opened in January within Grand, a home furnishing and gift store in Somerville’s Union Square.  He said one of the benefits of running a business that’s highly specialized is that it allows him to focus on niche products other stores maybe don’t even carry due to design and space.  He stocked a full line of Stirrings for several months, but now only keeps the Bloody Mary mix on hand.  “The reason I carried Stirrings was because I think it’s a high quality brand.  And being that I want to cater to people who really care about cocktails and like to make drinks from fresh ingredients, I want to focus on brands I can stand behind.  Stirrings is one of those,” he said. 

In addition to Stirrings, Lantheaume sells a number of premium mixers that aren’t widely available, like Q Tonic, cordial syrups such as Orgeat and Falernum from Fee Brothers, and a broad range of artisanal bitters.  He’s also one of two outlets in the state to sell shrub from Tait Farm Foods in Pennsylvania.  Shrubs are fruit syrups that blend sugar, vinegar and fruit and make for an ideal highball. And as more boutique brands become available in this state, it seems more people will be drinking better at home.

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