John McDonnell Lands at Tito's Vodka

FILED SEPTEMBER 18, 2013

Dear Client:

You may recall Patron Spirits president international and coo John McDonnell left the spirits company rather abruptly in May (see WSD 05-30-2013). At the time of his departure a Patron spokesperson told WSD, "He's been thinking for sometime that it's time for a change."

WSD has learned that John landed at Tito's Handmade Vodka as the company's managing director international, effective this month. He will be responsible for managing duty-free, direct military and non-Canadian international sales. "We are excited to have John on the team and are very much looking forward to bringing his expertise to bear as we look to expand beyond our shores," Nicole Portwood, brand manager for Tito's tells WSD.

John worked at Patron from 2005 to 2013 and is credited with helping close the acquisition of Ultimat vodka and leading the company's international and duty free expansion - that's where his value to Tito's comes in, we imagine. His most recent role at Patron was president international, which moved him to the company's headquarters in Switzerland. You may also recall he served as DISCUS Chairman at the time of his departure from Patron.

WSD will have provide more details as the story develops.

YOUNGER COGNACS THRIVE IN US MARKET

WSD has previously reported that Cognac is having a great year in the US (see WSD 08-09-2013). But we just got our hands on a new note from UBS with some more in depth analysis of recent Cognac trends. In August Cognac sales were up 7% in the US (its largest market), although volumes did decline 1%, per Nielsen data.

UBS goes even further to break down trends by quality. Recall Cognac falls into three variants: VS (aged more than two years), VSOP (aged between four and five years), and XO (more than six years). They found that younger Cognac variants are the primary volume shareholders in the US. In 2012 VS Cognacs, the "cheaper" and youngest variant, made up 74% of US Cognac volumes. VSOP made up 24% of US share and XO made up about 2%. Meanwhile, the global average for VS was around 50% share, VSOP was 42% and XO was around 9%.

CATEGORY LEADERS: As expected, LVMH's Hennessy is still the market leader with 68% market share in 2012, followed by Beam's Courvoisier at 19% and Remy Cointreau's Remy Martin at 12%. Meanwhile, Martell's presence in the US is very small because Pernod Ricard withdrew from VS several years ago, writes UBS analyst Olivier Nicolai.

Remy Martin has the highest average price point of the category leaders due to its favorable mix and the fact that it doesn't have a VS. Remy is sold at $40 on average, versus $30 for Hennessy and Martell, and $26 for Courvoisier in the off-trade. While volumes for Remy Martin, Martell, and Hennessy were up in August, Courvoisier's volumes were down.

COGNAC INVENTORIES GETTING YOUNGER: Cognac's inventory increased by only 1% from 2001 to 2012, moreover the average age of Cognac inventories has decreased. XO Cognac only accounted for 25% of inventory in 2012, compared to 46% in 2001. "It gives the category strong pricing power, but the volume constraint limits the global growth of the category to mid single digit pa in the medium term," writes Olivier.

As a result of supply constraint, Pernod Ricard and Remy have been "regularly" buying aged eaux-de-vie from independent producers. This best explains why Remy Cointreau acquired Larsen's "eaux-de-vie" stocks (see WSD 11-01-2012) and Pernod's deal with Le Maine au Bois (see WSD 02-05-2013).

Although Cognac sales trends in August were healthy, the 7% growth did represent a slowdown from the average 9% growth in its 6-months rolling average. And the 1% decline in volume during August was in stark contrast to the 6-months rolling average of 5% growth. Could this be the sign of a slowdown, or merely a lull for the category? Email any thoughts to emily@winespiritsdaily.com.

TECHNOMIC: HISPANIC CONSUMERS OVER INDEX ON RED WINE BLENDS

We've previously reported that the US Hispanic population is a good opportunity for the wine and spirits category, both because it is growing rapidly and it has traditionally gravitated toward the beer category. "Currently, the LDA Hispanic population skews young and male, and strongly favor beer, tequila and red wine," says Technomics senior director Donna Hood Crecca. But many of their preferences and purchase habits are different from the general population.

As such, Technomic has released a report on some of their findings from researching this growing demographic's relationship to alcoholic beverage products. Here are the highlights:

-- Latinos most frequently buy adult beverages at liquor and wine stores (48%). However, they are more likely than the overall population to purchase at other types of retail outlets like c-stores (19% vs. 14%).

-- Hispanics are more likely than the broader population to have purchased adult beverages online (17% vs. 11%) in the past year.

-- Casual-dining restaurants are frequented by Hispanics, but among them, English-dominant and bilingual consumers are more likely to order adult beverages during their visit than Spanish-dominant consumers, and are also more likely to try new adult beverages in on-premise locations.

-- Hispanics over index on red wine varieties in restaurants and bars compared with the general population, particularly red blends (4% vs. 28%).

WSD BRIEFS:

MONTALVO SPIRITS, BEST KNOWN FOR ITS Montalvo tequila, has entered into a sales and marketing agreement with Prestige International Exports. Prestige will represent the Montalvo Spirits portfolio brands in certain international markets, as well as provide sales and marketing support for Montalvo Tequila and Broken Heart Gin throughout the state of California, and will assist the company in attempting to secure distribution in additional markets in the US.

GLAZER'S HAS HIRED ALAN STEEN to be vp for government affairs, effective October 14. In his new role, he will be responsible for representing Glazer's in legislative and regulatory matters with governmental organizations and associated agencies, as well as direct the company's lobbying efforts. Alan was the administrator for the Texas Alcoholic Beverage Commission for ten years and has held leadership roles with the Texas Youth Commission. He will report to Alan Greenspan, Esq., executive vp and general counsel for Glazer's.

Until tomorrow, Emily

"The way a team plays as a whole determines its success. You may have the greatest bunch of individual stars in the world, but if they don't play together, the club won't be worth a dime. "
-- Babe Ruth

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