Spirits Post Strong Sales in March

FILED APRIL 18, 2012

Dear Client:

March was a good month for the US spirits industry, with sales up +5.5% compared to +4.7% growth in February, based on Nielsen scans per Goldman Sachs, CitiGroup and Morgan Stanley. Stronger sales were boosted by improved volumes (+3.7%) and price/mix (+1.7%) thanks in part to St. Patrick's Day. Case in point: Irish Whiskey sales climbed +31.7% in March compared to +19.8% in February.

Premium and super-premium price categories remained strong, with sales up +6.3% and +13.4%, respectively. Prepared Cocktails was again the growth leader, up 27.1% driven by Skinnygirl. That was followed by Bourbon (+14.1%), vodka (+6.5%), rum (+2.6%), gin (+1.4%), tequila (+0.9%) and Scotch (+0.3%). The top brand performers included Jameson (+34.8%), Maker's Mark (+20.8%), and Svedka (+11.4%).

Brown-Forman had a particularly strong month, with sales up +9.4% and volumes gaining +8.1%. Price/mix climbed +1.2%. Which brands were particularly strong? Jack Daniel's Honey remains the biggest growth driver and made up 6.9% of B-F sales in the month. Jack Daniel's black label saw sales climb +4.4% in March from +3.7% the prior month. El Jimador sales improved to +10.8% vs. flat to down in prior periods, but it was also up against easy comparisons. This helped offset weakness in Southern Comfort (-2.1%) and Canadian Mist (-2.7%).

Beam Inc.'s volumes were softer than normal as it lapped "heavy" promotions a year ago and increased pricing +7.6% across its brand portfolio. While sales grew +2% and price/mix was up +7.6%, volumes fell -5.2%. Brands like Sauza and Courvoisier lost some volume momentum, down -5% and -13%, respectively, while Jim Beam flagship was flat after experiencing volume growth in the 3-4% range over the last few periods. However, Goldman Sachs analysts note that the off-premise is particularly weak for Beam since it's lapping tough comparisons, "and we do not believe these trends are likely representative of overall Beam growth which, for example, has shown stronger trends in NABCA data."

Total Constellation spirits sales grew +3.9%, while price/mix declined -0.6% and volumes climbed +4.5%. Svedka sales were still strong (+11.4%), but their other spirits brands struggled in March. Paul Masson sales fell -9%, while Black Velvet declined -1.8%.

Bacardi grew sales by +1.2% in March, with volumes up +2.4%. Prices were down -0.9% across its brands, led by Dewar's and Cazadores. Their fastest growing brand was Bombay Gin, with sales and volumes up +17.2% and +16.8%, respectively. Grey Goose saw sales and volumes decline -2.8% and -1.7%, respectively, as pricing was down -1.1%.

Diageo sales (+2.1%) continued to outpace volumes (-1.4%) as pricing was up +3.5%. Smirnoff is back to growth, with sales up almost +4% and volumes climbing +3.7%. Pricing was up +0.2%.

Pernod's dollar sales were strong, up +5.2%, as volumes grew +1.6%. Pricing across the board was up +3.6%. Pernod's fastest growing brand was Jameson as we mentioned above, which helped make up for softness in Kahlua (-8.1%) and Seagram (-2.9%) in terms of sales.

BEAM RELEASING NEW FORMULATIONS FOR WOLFSCHMIDT AND KAMCHATKA

WSD has learned that Beam Global is switching Wolfschmidt and Kamchatka vodkas to "Vodka Liqueurs." Using 10% sugar and 49% wine, this allows the products to sell at a lower price and may bring a new level of competition to the already competitive vodka category. The new products are reportedly launching May 1.

"Beam's value-for-money vodkas are benefiting from updated packaging, as well as a new liquid formulation that delivers the same value and taste profile consumers of these products already love. Vodka is still the base, blended with a high-proof liqueur. Beam is the market leader in liqueurs, and this vodka with premium liqueur formulation simply extends our leadership and expertise to enhance our value vodka brands, Kamchatka and Wolfschmidt. Testing indicates consumers of these brands will respond favorably to the refreshed packaging. Given the high quality of the liquid in these brands, we do not expect the selling price of these products to materially change," Clarkson Hine, svp of corporate communications, told WSD.

WSD BRIEFS:

FLORAL AND WHISKEY FLAVORS DOMINATE COCKTAILS. Cream, Herbal, Whiskey Specialty and Fruit flavors are posting the highest volumes in the Cordial & Liqueur category on-premise, according to research firm Technomic's upcoming SpiritsTAB report. However, the greatest increases in share of category were achieved by Flower (71% gain) and Whiskey Specialty (26%) in 2011. Herbal and Coffee flavors, meanwhile, are losing share.

THE UTAH HOSPITALITY ASSOCIATION has lodged a new version of its lawsuit against the state, this time eliminating the compliant that LDS Church officials have excessive influence over lawmakers, reports The Salt Lake Tribune. Instead, the lawsuit focuses on claims that the state has violated the Sherman Antitrust Act by passing legislation that outlaws happy hour specials and limits the number of available liquor licenses. At the same time, state-owned package stores are allowed to offer discounts. Recall in late March that a judge tossed out their initial lawsuit, but gave the Association 20 days to amend their complaint to show how the new law is affecting restaurants and bar owners.

TESCO PLANS TO OPEN FEWER Fresh & Easy stores in the US this financial year, taking its total to 230 by February, reports the London Evening Standard. That's because Tesco is now predicting it won't "break even" with Fresh & Easy until some point in 2013-2014. The original target was February 2013.

7-ELEVEN MOVING INTO NYC. With 114 7-Elevens moving into Manhattan over the next five years, Bodega owners are worried they will lose considerable business, reports the NY Daily News. In response, some are offering fresh food that 7-Eleven doesn't carry, and cutting back on groceries where the chain is strong.

MAISON LILLET LAUNCHES LILLET ROSE. Bordeaux aperitif producer Maison Lillet is rolling out their first new product in 50 years, Lillet Rose, as an extension to its hallmark brand. It is made from a blend of the red and white Grand Cru Bordeaux wine varietals used to produce Lillet Blanc and Lillet Rouge.


Until tomorrow, Megan

"Sooner or later we all quote our mothers."
Bern Williams

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