Sam's Club Launches Private Label Vodka

FILED JANUARY 1, 2010

Dear Client:

Private label spirits brands have gained a lot of traction in the recession and now Sam’s Club is jumping on board. Over the holidays the retailer launched a premium, private label Member's Mark vodka under the label Rue 33. It will be available in the 241 locations that are permitted to sell alcohol. This is the first spirit to be launched under the Member's Mark brand – recall that Sam’s already sells a number of private label wines and beers – and we think it’s no coincidence that they chose vodka. The vodka category is extremely competitive and it looks as though Sam’s is trying to undercut some of the premium and super-premium heavy hitters with this offering. Rue 33 sells for about $28 per 1.75 liter bottle. Although its selling at a price point comparable to premium Absolut and Skyy, Maurice Markey, vice president, private label brands, Sam's Club, told publication Store Brands Decisions that it’s also aiming to compete against the higher priced set: “Rue 33 ‘is an ultra-premium spirit and an unbelievable value for the quality level product we are offering,’ Markey said, adding that comparable ultra-premium vodka -- such as Kettle One, Grey Goose, Belvedere and Chopin -- retail for upwards of $55. Effectively, Rue 33 is retailing at a price comparable to premium national brands such as Stolichnaya and Absolute, ‘but [members] are getting a much better product for the price.’” He told the publication that Rue 33 was months in development and that he met with Wal-Mart counterparts in the UK and Japan to gain a better understanding of private label spirits. He didn’t specify whether Sam’s was considering another private label spirits launch in the future but note that Costco has a vodka, scotch and tequila under its Kirkland label. Sam’s is likely to enter those categories too if it finds Rue 33 profitable.

Sam’s plans on marketing Rue 33 with typical in-store and direct mail marketing, along with several key marketing events to support the product launch. The Beverage Testing Institute gave the brand a 91 rating and said it “will excel in artisan cocktails.” These types of cocktails are hits at the on-premise so expect Sam’s to display the Bev Institute’s rating and quote in promotions. Louis Royer (yes, it’s a French import) produces the vodka and it’s imported by Shaw Ross.

Now more than ever vodka brands need to differentiate from their competition. By the very nature of the product – since it’s a tasteless, colorless spirit – it seems that consumers have an easier time trading down to less expensive brands. Luxury vodkas need to find new ways to distinguish themselves from their lower-priced brethren and exude luxury. Premium and lower-end vodkas need to hone in on price and present a separate identity from their competition. Easier said than done, we know.

CALIFORNIA COMMITTEE SHUTS DOWN 10 CENT HIKE ON ALL ALCOHOL

California again avoided a 10 cent tax hike (or what Assemblyman Jim Beall called a “mitigation fee”) on a can of beer, glass of wine and shot of spirits yesterday. AB 1019 was killed in the Health Committee where only 5 out of 19 members voted in support of the bill but Beall isn’t going away anytime soon. According to an article in the Mercury News, he said: I’m going to “come back in a few weeks with something different...more modest.”

His plan was to put the resulting $1.4 billion towards criminal justice and public health costs associated with alcohol abuse. The tax would have been paid by wholesalers and likely passed on to consumers. No surprise The Marin Institute was in full support of his bill. Along with other public health advocates, members from The Marin Institute rallied outside of the Capitol yesterday. Marin says alcohol abuse costs California tax payers about $38 billion a year, while the state Department of Alcohol and Drug Programs estimates it at $22.5 billion.

Meanwhile, American Beverage Institute pointed out that federal, state and local governments already collect over $2 in taxes for every $1 that the industry earns in profit, or well over half of the average bottle of spirits. In a statement ABI managing director Sarah Longwell said “The wine, beer, and spirits industries contribute over $90 billion annually to California’s economy. The hospitality industry is already paying its fair share.”

WSD BRIEFS:

CONSTELLATION warned 300 winegrape growers in Australia’s Murray Valley that their contracts would be terminated after the 2012 vintage. It gave another 200 growers a three year warning in December. Foster’s and Pernod are also scaling back in Australia.

PINNACLE VODKA, produced by White Rock Distilleries, reach 1 million cases in 2009 with projections of 1.5million for 2010, said the company. They are planning for a $5 million national advertising schedule in 2010 for online and print.

INDEPENDENT LIQUOR has appointed Bruce Herman as its president of North America. Recall that Bruce was most recently senior vp of US sales for Foster’s Wine Estates and reportedly left the company in October. He has also served as general manager of The Estate’s Group for Young’s Market. Independent Liquor’s core business is made of ready-to-drink brands in Australia and New Zealand and Bruce’s job is to create a footprint in the US and Canada.


Until tomorrow, Megan

“Too much of a good thing is wonderful.”
Mae West

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