Dessert Flavored Vodkas Taking the Category by Storm

FILED APRIL 26, 2011

Dear Client:

Two big trends that have emerged in spirits this year are quite contradictory. On one hand, you have consumers snatching up low-calorie, pre-mixed cocktails (Skinnygirl) and low-calorie spirits offerings (Voli Light). On the other hand, more and more companies are launching cupcake, whipped cream, brownie, cake and other dessert flavored vodkas. Just this week White Rock announced the new launch of Pinnacle Cake, following other flavors like Whipped and Cotton Candy. It is set to hit shelves in May. Then today Phillips Distilling Co said they are introducing UV Cake. "Recently selling our one millionth case of UV Vodka, we wanted to mark the success of the UV brand with a festive and distinctive product," said Dean Phillips, ceo of Phillips Distilling. Selling for a suggested retail price of $13, UV Cake will hit shelves in June. Also, The Wine Group is capitalizing on its wildly successfully Cupcake Vineyards by launching a new Cupcake Vodka, which includes the flagship brand and Chiffon, Devil's Food and Frosting flavors. "We are always looking for opportunities to meet the needs of our core consumer: the adult millennial," said Underdog Wine & Spirits (a division of TWG) senior marketing director Todd Ziegenfus. Each of the Cupcake vodkas carries a suggested retail price of $17.99 per 750ml bottle.


Cupcake Vineyards continues to be the fastest growing wine brand in food and drug stores, according to Symphony IRI scan data in the 4-weeks to March 20. Compare that to the total table wine category, with sales up 6% and volumes up 4.7%. The brand was launched in 2008 and already it ranks among the top 20 wine brands by dollar sales. Averaging at $4.5 million per year, dollar sales grew 167.5% in the 4-weeks, while volumes gained 181.8%. So yes, Cupcake has met with much success, but it has also discounted in many markets. Cupcake dropped prices by -50 cents a bottle during the 4-weeks. But pricing for the month is improved from the 24-week period, which covers the holidays, when prices were dropped by -96 cents a bottle.

The second fastest growing brand in the top 20 wine brands in food and drug stores was Cavit Collection, with sales up 58.9% and volume gaining 88.9%. As you can see below, that growth has gotten even larger over time as the company rolls back pricing.

4-weeks: Sales up 58.9%, volumes up 88.9%. Prices down -$1.13 a bottle
12-weeks: Sales up 40.1%, volumes up 60.4%. Prices down -90 cents a bottle.
24-weeks: Sales up 24%, volumes up 36.7%. Prices down -66 cents a bottle.
52-weeks: Sales up 15.8%, volumes up 26.2%. Prices down -59 cents a bottle.

Once again, Barefoot had strong numbers, with sales up 31.3% and volumes gaining 32.4%. Prices were down by -5 cents a bottle. Growth has remained steady on a rolling basis even as the brand increased prices by a few pennies in the 12- and 4-week periods.

Menage a Trois also posted solid growth, with sales gaining 30.6% and volumes up 33%, amid a price decline of -17 cents a bottle in the 4-weeks. Sales and volume growth have stayed relatively the same, although prices have fluctuated a bit:

4-weeks: -17 cents a bottle
12-weeks: -11 cents
24-weeks: -10 cents
52-weeks: -22 cents

La Crema dollar sales grew 24% in the 4-weeks, while volumes rose 29.8%. It likely benefited from a price decrease of -78 cents a bottle.

Bogle Vineyards and Chateau Ste Michelle posted solid growth in the high single digits. Dollar sales for Bogle grew 8.5%, while volumes gained 6.3%. The company also took a price increase of 20 cents a bottle - the largest price increase of all the top 20 wine brands. Yes, the brand lost some of its momentum with the price increase, as it grew 20.1% and 22.6% in sales and volume in the 52-week period, but it was also dropping prices by -20 cents a bottle at that time. Chateau Ste Michelle, meanwhile, saw dollar sales gain 7.7% and volumes rise 9.9%, while prices were dropped by -19 cents a bottle. The company took a significant discount from the 52-week period, when prices were down by -9 cents a bottle.

Now for those brands that had a tough month:

Fetzer: Sales declined -10.4%, volumes fell -4.8%. Prices were dropped by -40 cents a bottle.

Livingston Cellars: Sales and volumes both dropped -6%. Prices were flat.

Carlo Rossi: Sales declined -4.1%, volumes dropped -5%. Prices were increased by 2 cents a bottle.

Peter Vella Box: Sales decreased -1%, volumes gained 1.5%, amid a 5 cent increase.

Beringer: Sales declined -0.5% and volumes increase 1%, amid an average price decrease of -8 cents.

What do these brands have in common? They were all either priced below $3.49 a bottle/box, or were priced $5-$7 a bottle.

Moral of the story? Well, there are a few. One, we're starting to see new brands with the right marketing and right price take share in a small amount of time (Cupcake). Two, pricing is still shaky for the top wine brands and will likely continue to be throughout 2011. Three, lower priced wines, those $7 and below, are facing heavy competition from wines that are typically more expensive but are discounting. In fact, which price categories saw the heaviest discounting in the 4-week period? Wines $15-$19 (-40 cents a bottle), wines $11-$15 (-15 cents a bottle) and $5-$7 (-9 cents a bottle).


Following the announced separation of its home and golf units, Fortune Brands will be known as Beam Inc., the company said today following its annual shareholders meeting. Chief Bruce Carbonari told shareholders that the company is making "excellent progress" towards a potential sale or spin-off of the golf business, a tax-free spin-off of the home and security business, and the establishment of the company as a pure-play spirits business. "We're continuing to target completing this process in the second half of 2011," he said.

Regarding the company's future name, Beam Inc, it is meant to reflect "the company's intended pure focus on distilled spirits, the pioneering and entrepreneurial family heritage of the iconic Jim Beam brand that dates to 1795, and the strong equity in the trade inherent in the Beam name." Matt Shattock will continue to lead Beam as ceo.


DIAGEO OUT OF THE RUNNING FOR STOCK. The owners of Stock Spirits, Oaktree Capital Management, have reportedly hired UniCredit and Nomura Holdings to help manage an initial public offering of Stock, sources tell Bloomberg. This latest development comes after Diageo and Bain Capital reportedly dropped out of the bidding process because they felt Stock's valuation (an estimated $826 million to $1.1 billion) was too high.

PURITY VODKA NAMES FORMER MH EXEC AS CEO. Purity Vodka has named Andy Glaser, recently svp of business operations at Hennessy Cognac, as the company's new ceo. Currently Purity is available in New York, California, Nevada and Georgia. Andy will be responsible for developing the brand and increasing its distribution, initially in the US, and is expected to take control over the brand's global operations within 12 months.

V2 WINE GROUP has appointed Scott Ericson as the company's vp of sales. We will oversee the sales functions for the company portfolio, which includes Dry Creek Vineyard, Steelhead Wines, and Toad Hollow Vineyards. "V2 Wine Group is in a rapid growth phase and our outlook for continued expansion is nothing but optimistic," said president Dan Leese. Scott most recently served as vp, southwest division manager with WJ Deutsch & Sons, and worked with Dan and Katy Leese at 585 Wine Partners.

DEKUYPER CORDIALS is adding JDK & Sons O3 Premium Orange Liqueur to its portfolio. The brand has no artificial colors, flavors or high fructose corn syrup, and "offers a balanced flavor and the 'true taste' of the Brazilian Pera Orange," said Rachel Roberts, senior director of marketing for CRU, Beam Global Spirits & Wine.

NABI NAMES NEW CHAIRMAN. The National Association of Beverage Importers announced that Michael O'Brien, General Counsel Palm Bay International will serve as chairman for the next two years. He replaces Jim Ryan, evp Corporate Affairs for Crown Imports.

Until tomorrow, Megan

"Horse sense is the thing a horse has which keeps it from betting on people."
W. C. Fields

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