Spirits Dipping into Popular Cider Category

FILED OCTOBER 8, 2013

Dear Client:

The spirits category has latched on to the Cider craze. In addition to Beam's Red Stag Hardcore Cider launching this fall (see WSD 08-16-2013 ), Brown-Forman is launching a Jack Daniel's extension called Winter Jack Tennessee Cider. Winter Jack is a whiskey blended with apple cider liqueur and holiday spices and is best served warm, according to a press release from the company. It hits shelves this month in AK, CO, CT, DE, GA, ID, IL, IN, KY, ME, MD, MI, MN, MA, NV, NH, NJ, NY, ND, OH, OR, PA, RI, SD, TN, TX, UT, VT, WA and WI, and will be available through February. The 30-proof product will be available for $18 a 750ml. Note, Beam's Hardcore Cider is also $18 a bottle, but is 80 proof.

B-F'S INNOVATION STRATEGY: B-F has been very cautious with its extensions to the iconic brand thus far. This is only the second extension to the Jack Daniel's family after Tennessee Honey, which was up 30-40% in the US as of B-F's first quarter ended July 31. Recall B-F let Wild Turkey Honey, Red Stag Black Cherry and Evan Williams Honey test the waters of flavored whiskey before diving in with Tennessee Honey in 2011. "We really want to take our time and make sure we build really good branded businesses with these flavors," said B-F chief Paul Varga in December 2012.

Why cider? Because along with RTDs and craft beer, the popularity of cider has been driving the sluggish beer category and been deemed as a way for it to gain back some of its lost share from wine and spirits. Cider alone was up 108% year-to-date to August 11 in IRI all-channel scans. Cider grew from 9 million gallons in 2009 to 21 million gallons in 2012.
With these two huge brands leading the charge we won't be surprised to see more follow suit.

PART I: A CONVERSATION WITH ROY CECCHETTI

Since its debut in 2007 the Cecchetti Wine Company has proven itself a formidable competitor with its portfolio of affordably priced California wines. The company, whose brands include Line 39, Backhouse, Redtree, Exitus and newly released Austerity, has grown double digits every year and expects to sell close to 400,000 cases this year. WSD recently sat down with industry veteran Roy Cecchetti to talk about what they're getting right as you, dear reader, are a fly on the wall.

Wine & Spirits Daily: You've been very successful in building brands both at Cecchetti and before with Pepperwood Grove. What's your strategy?

Roy Cecchetti: Pepperwood Grove, that brand took a long time to get off the ground. It was persistence. Number two, the quality-to-value ratio, putting really good quality wine in a bottle for a fair price. We've created a portfolio of brands that are: number one, an excellent value for the price points and number two, we invest a lot of money in packaging. It's kind of a combination of all those things and after being in business as long as I have, you certainly build up relationships with wholesalers that you've done business with and you have a proven track record over the years, which helps a lot to open doors for you to get a product out there.

WSD: Is the Backhouse brand still leading growth for Cecchetti?

Roy Cecchetti: Through the last year you're right, Backhouse was by far the fastest program we had. I think that is due to a number of things. It's our lowest priced brand and the quality ratio is there. Also I think it's, again with our wholesale network, we are giving them a brand that they otherwise couldn't get at that price point that they could actually sell and get out there. We're finding that once Backhouse hits the floor it just flies out the door. In that price point you'll see it anywhere between $5.99 to $7.99, depending on where in the country. Also, we are gaining more and more distribution with the Backhouse brand across the country in terms of channels of distribution, so just regional chains and chains, and that's really starting to grow.

The update is that through August of this year Line 39 is our fastest growing brand as far as 2013. Line 39 is growing through August about 20% and Backhouse is at about 15%. For both, very, very healthy growth figures, but Line 39 has just become a monster force because the base of volume of Line 39 with that type of growth is going to really catapult this thing to another level.

WSD: How are you positioning Line 39 in the market?

Roy: Line 39 is priced, again depending on where you are in a country, anywhere between $8.99 to $11.99 in a price point that is very, very hot today and sauvignon blanc is kind of leading the pack for Line 39. Sauvignon blanc is a very rapidly growing varietal. If you look at the Nielsen data, it's one of the fastest growing varietals and there is no clear leader. It's a very fragmented category. So we have gobbled up lot of distribution and we'll probably do about 50,000 cases of that one SKU this year, which is a pretty good clip for one SKU.

WSD: Austerity is your newest brand. How you are positioning that one?

Roy: We're trying to build a portfolio with various value wines in various price points, and Austerity is $16.99, $17.99, depending on where you are in the country. It is a high quality red and white blend, there's two SKUs. Of course the red blend category has been very hot these days, but we decided to create a red blend in a higher price point. A lot of the red blends that are out there at $10, $12 and below, and we decided to go a little higher to create a really quality wine. White blends also, there is not a lot of play in white blends right now. As a matter of fact, our white blend is almost going one to one with our red blend, which is very surprising to us and tells us that there might not be a lot of white blends out there. Our white blend is a little bit on the sweeter side. It's a blend of chardonnay and riesling, which is kind of a different type of wine. So we're targeting a different price point, a different consumer, but trying to capitalize on the red blend craze, if you will.

WSD: Do all of the brands get equal investment and marketing support or do you have focus brands?

Roy: No, we promote the brands -- what happens is that, for instance on Line 39, sauvignon blanc has got a lot of critical acclaim over the years, has received numerous best buys, has been in the press a lot etc. When you have something like that, it's kind of your horse, you can really go out and ring that bell with your wholesalers, with your retailers.... and as you grow that and as you put more and more of sauvignon blanc out the marketplace, the consumer starts to just see Line 39. When they start seeing Line 39 cabernet or Line 39 of chardonnay they just pick it up because they see Line 39 as a brand. And that's when you know you've built a brand, when your varietal leader has start to pull all the rest of them, and we're seeing that with Line 39.

WSD: For your distribution network, are you with the big guys or the small guys?

Roy: Where we can, we try to be with the smaller independent wholesalers, but some markets you really have no choice but to do business with one of these national wholesalers or the larger wholesalers. But our success, by far, has been with the medium to small size wholesalers across the country.

WSD BRIEFS:

SIDNEY FRANK IMPORTING COMPANY IS LAUNCHING two extensions for Barenjager honey liqueur. Barenjager Honey & Tea and Honey & Pear. This is the second round of extensions for Barenjager after the introduction of Barenjager Honey & Bourbon in 2012. The new flavors are available nationwide with a suggested retail price of $29 a 750 ml.

US MARKET NEWCOMER TANDUAY RUM has launched an on-premise infusion program in Connecticut and Southern Florida. "Tanduay's infusion jars cut the work for a bartender or server in half," says Steve Raye, managing partner of Brand Action Team, Tanduay's marketing/PR agency. "They're easy to make, easier to pour and serve as an eye-catching extra to any display or backbar that's sure to capture the attention of guests." Recall Philippines-based Tanduay is the second largest rum brand in the world by volume and could possibly surpass Bacardi at number one (see WSD 07-29-2013).

TEXAS-BASED FIRESTONE & ROBERTSON DISTILLING CO. is expanding its T-X Blended Whiskey to Louisiana in partnership with Glazer's. It retails for approximately $35. "Sharing our whiskey with our neighbors in Louisiana is a natural step. It took us over two years to develop T-X, and we really enjoyed the artistic demands of creating something we think turned out to be pretty special," says Leonard Firestone, co-owner of Firestone & Robertson Distilling Co.

PERNOD RICARD USA AND IRISH DISTILLERS have unveiled a new look and lineup for Powers whiskey. Powers Gold Label has a new label inspired by the brands history and they've upped its abv. to 43.2%. The new whiskey and packaging will be available in the US this month. Additionally, they've released the second single pot still whiskey to the Powers family: Powers Signature Release, which hit the market last month.

Until tomorrow, Emily

"All man's troubles come from not knowing how to sit still in one room."
-- Blaise Pascal

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