Survey Reveals Craft Distillers Feeling the Pressure this Year

FILED OCTOBER 14, 2016

Earlier this week we reported on the results from our craft survey, focusing particularly on growth and business operations [see WSD 10-11-2016]. Today, we'll delve deeper into some outside factors, like regulation and distribution, and how our craft distillers feel about them.

Here's a quick reminder of who participated: 30 craft distillers were surveyed ranging in size from 1,000 nine-liter cases to more than 20,000 cases. About half of them fell in the 1,000 to 6,000-case range, and another 20% in the 10,000-20,000-case range.

HOW REGULATIONS AFFECT CRAFT. About 60% of respondents said their business had been affected by recent regulation. Though, distillers were evenly split on whether or not the effects were positive or negative.

Regulations that have helped craft distillers improve sales and make expansion easier include: off-premise tastings, by-the-drink sales, direct-to-consumer sales and the ability to open a bar. While others feel their business is hampered by regulations, such as limits on sales and the number of tasting rooms.

Although not mentioned in the survey questions, 13% of total respondents commented on the need for a FET reduction, making it one of the most popular topics.

In a similar vein, 63% of distillers feel that they are effectively represented by craft trade groups. But one respondent says: "I don't think our category will have a voice until we build a critical mass of at least 8%-10% share of the domestic industry."

CHALLENGES IN SUPPLY CHAIN. Similar to last year's results, the only other topic that got more comments than FET reduction was challenges in supply chain, i.e., getting products on shelves and a lack of attention from distributors. 16% of total respondents mentioned distribution challenges in their answer, though that number jumped to 30% when we remove those who skipped the question.

Moreover, distributor consolidation has only increased these concerns, according to some respondents. "It is hard to get representation at many distributors as they are preoccupied with representing and protecting the business of brands even if it is at the expense of the smaller brands they carry," said one distiller.

"Shelf space is getting more and more difficult to come by," said one respondent. "There is little differentiation. Distributors are consolidating, retailers are not expanding shelves - yet there are many, many new distilleries opening every day," adds another.

NEGATIVITY MORE PERVASIVE IN 2016: We asked craft distillers to share "general industry comments" in both the 2015 and 2016 surveys. We found there were a significantly higher number of negative comments made in the section of the 2016 survey than in 2015. In 2015 only 28% of comments were distinctly negative (50% were positive, 22% were neutral), but this year 76% of comments were negative in tone (17% were positive and 7% were neutral). But it should be noted, we can't verify who the respondents were, so take that information with a grain of salt.

JIM BEAM WORKERS GO ON STRIKE AT MIDNIGHT

Effective tonight at midnight, more than 200 Jim Beam union employees, both at the flagship Clermont and Boston facilities, will go on strike after failed negotiations with Beam Suntory. The workers union issued a statement yesterday afternoon noting that the strike will begin in spite of three extensions and the assistance of a federal mediator, reports the Kentucky Standard.

Some of the key complaints from employees include: (1) job security in regards to the high number and excessive use of agency workers; (2) failure to honor and recognize seniority; (3) vague and open-ended contract language; (4) poor labor scheduling resulting in burdensome and strenuous work hours that have led to an undesirable work/home balance; and (5) an atmosphere "void of recognition with a lack of respect and value" of union employees.

In response to the vote, Beam Suntory issued a statement claiming: "We are seeking to understand the reasons why the union membership voted down this competitive two-year contract proposal unanimously recommended by their own representatives. The proposal includes substantial wage increases, coupled with other enhancements including elimination of the two-tiered wage system for almost all employees."

Employees at the Jim Beam plant in Frankfort and the Maker's Mark distillery are not included in this particular union strike, per Courier- Journal.

LUCAS BOLS TAKES CONTROL OF PASSAO LIQUEUR'S FUTURE

Remy Cointreau and Lucas Bols have formed a joint venture for the passionfruit liqueur Passao. Under the terms of the agreement, Remy Cointreau will hand off the distribution, manufacturing, trademarks and inventory for the brand, while Lucas Bols provides some working capital, and the "know-how and expertise" in the liqueur and cocktail business.

Furthermore, Lucas Bols will assume operation and financial control of the joint venture, and Remy Cointreau will divest the brand from its portfolio, enabling it to "refocus on its portfolio of exception spirits, which is at the core of the Group's strategy," says chief Valerie Chapoulaud-Floquet

Lucas Bols chief Huub van Doorne says Passoa has "ample opportunities" for growth in a number of markets, including the US, and it will join the company's key brands.

WSD BRIEF:

WSD SUMMIT SPONSORSHIP OPPORTUNITIES. WSD will be accepting a limited number of sponsorships for our 2017 Summit at the Hotel Del Coronado in January. For more info on pricing and opportunities, please email rena@winespiritsdaily.com.

Until Monday,
Your Editors

Emily Pennington - emily@winespiritsdaily.com
Sarah Barrett - sarah@winespiritsdaily.com

"The superfluous, a very necessary thing." -- Voltaire

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