WE THREE KINGS: PAUL, RICHARD AND AUGUST
The theme of this year’s NABCA meeting in Palm Springs, CA was appropriately titled “Social Responsibility” and remained the foremost topic at hand throughout the week. Our first meeting to attend was the now infamous “Global Alcohol Strategies” panel where August Busch IV announced the company’s plans to pull Spykes from the shelves. It was quite a revelation indeed after A-B has endured weeks of criticism from regulation groups and other alcohol beverage insiders. We don’t want to get too involved in the issue, but let’s just say there are two very different points of view surrounding the controversy and both sides are not entirely unreasonable.
With that said, Paul Walsh and Richard Sands made up the rest of the panel, uniting the kings of beer, spirits and wine. Lynn Walding, NABCA president, moderated the panel and managed to throw some rather tough questions at the three chiefs.
ALCOHOL’S VERSION OF “RED CAMPAIGN.” But before the question/answer section, each leader made a presentation starting with Diageo ceo Paul Walsh. Paul focused mainly on social responsibility and challenged the industry to form an aligned global initiative much like Bono’s “Red Campaign.” Beer, wine and spirits together holding hands? It would surely be a sight to see.
Paul reiterated the idea that responsibility programs serve as growth drivers “if we implement them successfully.” What does a successful program meant to Paul? Well, let’s begin with the consumer. Paul claims that a growing trend among people is “the rise of ...the ‘ethical consumer.’” According to Diageo, consumers want to “feel good about the product they are consuming,” which translates to a “demand for leadership in responsible drinking” among alcohol beverage companies.
“And this is core to what responsibility means for us as an industry, and certainly for Diageo.”
Paul warned the audience that unless steps were taken to go above and beyond self-regulation, “those hostile to the industry will continue to characterize us” in a negative way.
“There is no room in such an environment for half-hearted measures, and no room either for those who want to selfishly coattail on the efforts of others.”
The answer, said Paul, lies in alignment. He encouraged the industry to come together to create a unified message on responsibility. But is this truly possible? Will beer, wine and spirits companies be able to effectively align in promoting a single message?
“It could be a global advertising campaign which we all of us fund – using our marketing expertise to drive awareness. It could be an initiative like Bono’s iconic ‘Red’ campaign. Or it might be a series of events around the planet to mark a Responsible Drinking Day. Frankly, the format of the initiative is immaterial. What is critical is that it is Global in character, substantial in execution, admirable, and impactful with all of our audiences...And that we do it together,” he said.
“CLASSIFICATION SHOULD REMAIN INTACT.” Next, August Busch IV (president and chief of Anheuser-Busch Companies) talked about the global vision for his company. We won’t go too deeply into his speech (you can get further coverage at www.beernet.com), but he did bring up some interesting points. A-B already has a spirits brand, Jekyll and Hyde, and has expressed a lot of interest in branching out to beverages other than beer, such as its Hansen energy drink. Nevertheless, August maintains that when it comes to classifying different types of alcohol, everything should remain intact.
“The different classification and rules for different types of products that have always existed should remain intact – flavored malt is still beer and flavored vodka is still vodka.”
SO, ABOUT A-B AND SPIRITS. During the question and answer portion, August remained rather tight-lipped over the possibility of taking on any future spirits brands.
“We have a little baby toe in the liquor business...We’re in a learning mode right now to understand routes to markets whether its control state or traditional systems. We also want to make sure that if we use traditional wholesalers it won’t distract them from beer.”
“Paul and Richard are in all three categories and know the cost advantage that I think I know, but don’t know for sure.”
In response to August, Paul Walsh said, “I would advise August not to come into the spirits category if he thinks he can make $0.03 a serving (laughter)...competition is good and we’re all here to serve the consumer as effectively and efficiently as we can.”
SAY ADO TO SPYKES. August slipped in an announcement that A-B will discontinue Spykes during the end of the question and answer portion. If you weren’t listening closely, you would have missed it. Here’s what he said:
“In no means was it [Spykes] intended for anyone under 21. We looked at the business and economics for the product and we’re going to take the product out of the marketplace.”
He also pointed out that “there are a lot of products out there that could be misinterpreted and we need to look at that.”
Afterwards, Paul used the opportunity to stress Smirnoff Source’s low abv and Richard came to A-B’s defense. One wonders if they knew August would make the announcement beforehand.
“We knew A-B wasn’t thinking about underage consumers. They were innovating in an interesting way and maybe it was perceived as such...the action August took really should be commended,” said Richard.
NO MESSING WITH THE THREE-TIER. Similar to August’s speech, Richard Sands (chairman and chief) gave an overview of Constellation in the global market. As the world’s largest premium wine company, Richard told listeners that the company’s “simple, decentralized structure allows our businesses to stay close to our markets and customers.” He also touched on recent developments such as the Vincor acquisition, Constellation International, Svedka vodka and Crown Imports, and declared that Constellation will continue investing in faster growing categories and geographies.
Wholesaler Support: While his speech was informative and articulate, Richard really shone during the question and answer part. One notable quote was made in reference to the three-tier. All three speakers agreed that the three-tier system is good and that they support it whole-heartedly, but Richard further expounded on the notion.
“If we start taking and messing with the three-tier system and control states and individual state control over alcohol, we’re going to create chaos. We’ve all learned how to adapt to the system and utilize the system to address consumers’ needs...social responsibility and the system we have are very important to take advantage of.”
Retailer Consolidation: When it comes to consolidation, the chairman of the world’s largest wine company declared that retailers will have the most consolidation in the future. He also said that “you’ll see more rapid consolidation in wine but I don’t think it’s eat or be eaten...there can be big players in each category and there can be small players. It goes back to the consumer. Consumers want choice.”
Critter Wines: Critter wines aren’t going anywhere, and if you ask Richard, that’s a good thing. Richard called critter wines “very positive. It demystifies wine because wine is the most esoteric and difficult to understand...the seasoned wine drinker isn’t offended by the fact that wine is being made available in this more approachable way, so you’re not losing that halo effect in ultra-premium wine.”
DO CONSUMERS OR COMPANIES DRIVE TRENDS? It’s like the chicken and the egg theory – which comes first? Do alcohol beverage companies jumpstart trends, or do new products serve as a way to meet consumer demand?
All three agreed it was the consumer who brings about new product trends, but both Paul and Richard had something interesting to say on the subject.
“I think its consumer driven. Sometimes the consumer can’t articulate their need as clearly because the product isn’t out there,” says Paul.
“The consumer wants a diversity of choice and the consumer, especially in the US, is very aspirational and wants a unique relationship with the alcohol beverage they want,” said Richard. “Mass brand is loosing its appeal and I imagine it’s why August wants to get into the imported specialty business.”
“American consumers are willing to pay a higher price for both quality in the bottle and perceived quality. There are very few markets in the world that offer that type of potential,” Richard continued.
What about brand loyalty when it comes to wine and spirits? Richard pointed out that while loyalty still stands, it’s a little different than, say, Coke or Pepsi.
“Consumers are drinking across category and brands serve as a function of their mood, but they’re still picking a particular set of brands...They have two or three spirits brands they trust...In ultra premium wines they don’t have loyalty to a brand but they’re choosing from a selected price set they can trust,” said Richard.
With that said, Paul Walsh and Richard Sands made up the rest of the panel, uniting the kings of beer, spirits and wine. Lynn Walding, NABCA president, moderated the panel and managed to throw some rather tough questions at the three chiefs.
ALCOHOL’S VERSION OF “RED CAMPAIGN.” But before the question/answer section, each leader made a presentation starting with Diageo ceo Paul Walsh. Paul focused mainly on social responsibility and challenged the industry to form an aligned global initiative much like Bono’s “Red Campaign.” Beer, wine and spirits together holding hands? It would surely be a sight to see.
Paul reiterated the idea that responsibility programs serve as growth drivers “if we implement them successfully.” What does a successful program meant to Paul? Well, let’s begin with the consumer. Paul claims that a growing trend among people is “the rise of ...the ‘ethical consumer.’” According to Diageo, consumers want to “feel good about the product they are consuming,” which translates to a “demand for leadership in responsible drinking” among alcohol beverage companies.
“And this is core to what responsibility means for us as an industry, and certainly for Diageo.”
Paul warned the audience that unless steps were taken to go above and beyond self-regulation, “those hostile to the industry will continue to characterize us” in a negative way.
“There is no room in such an environment for half-hearted measures, and no room either for those who want to selfishly coattail on the efforts of others.”
The answer, said Paul, lies in alignment. He encouraged the industry to come together to create a unified message on responsibility. But is this truly possible? Will beer, wine and spirits companies be able to effectively align in promoting a single message?
“It could be a global advertising campaign which we all of us fund – using our marketing expertise to drive awareness. It could be an initiative like Bono’s iconic ‘Red’ campaign. Or it might be a series of events around the planet to mark a Responsible Drinking Day. Frankly, the format of the initiative is immaterial. What is critical is that it is Global in character, substantial in execution, admirable, and impactful with all of our audiences...And that we do it together,” he said.
“CLASSIFICATION SHOULD REMAIN INTACT.” Next, August Busch IV (president and chief of Anheuser-Busch Companies) talked about the global vision for his company. We won’t go too deeply into his speech (you can get further coverage at www.beernet.com), but he did bring up some interesting points. A-B already has a spirits brand, Jekyll and Hyde, and has expressed a lot of interest in branching out to beverages other than beer, such as its Hansen energy drink. Nevertheless, August maintains that when it comes to classifying different types of alcohol, everything should remain intact.
“The different classification and rules for different types of products that have always existed should remain intact – flavored malt is still beer and flavored vodka is still vodka.”
SO, ABOUT A-B AND SPIRITS. During the question and answer portion, August remained rather tight-lipped over the possibility of taking on any future spirits brands.
“We have a little baby toe in the liquor business...We’re in a learning mode right now to understand routes to markets whether its control state or traditional systems. We also want to make sure that if we use traditional wholesalers it won’t distract them from beer.”
“Paul and Richard are in all three categories and know the cost advantage that I think I know, but don’t know for sure.”
In response to August, Paul Walsh said, “I would advise August not to come into the spirits category if he thinks he can make $0.03 a serving (laughter)...competition is good and we’re all here to serve the consumer as effectively and efficiently as we can.”
SAY ADO TO SPYKES. August slipped in an announcement that A-B will discontinue Spykes during the end of the question and answer portion. If you weren’t listening closely, you would have missed it. Here’s what he said:
“In no means was it [Spykes] intended for anyone under 21. We looked at the business and economics for the product and we’re going to take the product out of the marketplace.”
He also pointed out that “there are a lot of products out there that could be misinterpreted and we need to look at that.”
Afterwards, Paul used the opportunity to stress Smirnoff Source’s low abv and Richard came to A-B’s defense. One wonders if they knew August would make the announcement beforehand.
“We knew A-B wasn’t thinking about underage consumers. They were innovating in an interesting way and maybe it was perceived as such...the action August took really should be commended,” said Richard.
NO MESSING WITH THE THREE-TIER. Similar to August’s speech, Richard Sands (chairman and chief) gave an overview of Constellation in the global market. As the world’s largest premium wine company, Richard told listeners that the company’s “simple, decentralized structure allows our businesses to stay close to our markets and customers.” He also touched on recent developments such as the Vincor acquisition, Constellation International, Svedka vodka and Crown Imports, and declared that Constellation will continue investing in faster growing categories and geographies.
Wholesaler Support: While his speech was informative and articulate, Richard really shone during the question and answer part. One notable quote was made in reference to the three-tier. All three speakers agreed that the three-tier system is good and that they support it whole-heartedly, but Richard further expounded on the notion.
“If we start taking and messing with the three-tier system and control states and individual state control over alcohol, we’re going to create chaos. We’ve all learned how to adapt to the system and utilize the system to address consumers’ needs...social responsibility and the system we have are very important to take advantage of.”
Retailer Consolidation: When it comes to consolidation, the chairman of the world’s largest wine company declared that retailers will have the most consolidation in the future. He also said that “you’ll see more rapid consolidation in wine but I don’t think it’s eat or be eaten...there can be big players in each category and there can be small players. It goes back to the consumer. Consumers want choice.”
Critter Wines: Critter wines aren’t going anywhere, and if you ask Richard, that’s a good thing. Richard called critter wines “very positive. It demystifies wine because wine is the most esoteric and difficult to understand...the seasoned wine drinker isn’t offended by the fact that wine is being made available in this more approachable way, so you’re not losing that halo effect in ultra-premium wine.”
DO CONSUMERS OR COMPANIES DRIVE TRENDS? It’s like the chicken and the egg theory – which comes first? Do alcohol beverage companies jumpstart trends, or do new products serve as a way to meet consumer demand?
All three agreed it was the consumer who brings about new product trends, but both Paul and Richard had something interesting to say on the subject.
“I think its consumer driven. Sometimes the consumer can’t articulate their need as clearly because the product isn’t out there,” says Paul.
“The consumer wants a diversity of choice and the consumer, especially in the US, is very aspirational and wants a unique relationship with the alcohol beverage they want,” said Richard. “Mass brand is loosing its appeal and I imagine it’s why August wants to get into the imported specialty business.”
“American consumers are willing to pay a higher price for both quality in the bottle and perceived quality. There are very few markets in the world that offer that type of potential,” Richard continued.
What about brand loyalty when it comes to wine and spirits? Richard pointed out that while loyalty still stands, it’s a little different than, say, Coke or Pepsi.
“Consumers are drinking across category and brands serve as a function of their mood, but they’re still picking a particular set of brands...They have two or three spirits brands they trust...In ultra premium wines they don’t have loyalty to a brand but they’re choosing from a selected price set they can trust,” said Richard.
posted at 12:46 PM
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