Value Spirits Take Share Off-Premise

FILED DECEMBER 1, 2009

Dear Client:

The spirits industry had mixed results in the 52 weeks to November 14. Certain super-premium and value brands were on fire with little rhyme or reason, it seems. Overall, value and mid-priced spirits brands outperformed the industry but not by a lot, according to Nielsen off-premise scan data that spans food, drug, c-store, several major liquor markets, nationwide liquor chains, and BJ's Club stores and Wal-Mart. The good news is that there were no major declines in the various price groups. The bad news, though, is there were no major gains either. In speaking with Danny Brager, vp group client director, beverage alcohol team for Nielsen, he points out that value and mid-priced segments are only up a little, and premium and ultra-premiums are down only a little – unlike the wine industry which is seeing more significant declines in the above $20 segment. Note that this trend within spirits is much different from how it was a couple of years ago when ultra-premiums were on fire.

The total spirits category grew in the low-single digits, with dollar sales up 1.7% in the 52-week period and volume up 1.3%. Value priced spirits led in growth: dollars gained 3.9% and volume rose 1.8%. Coming in second, mid-priced spirits posted 2.7% growth in dollar sales and volume rose 1.9%. Next were premiums, which managed to squeeze out some growth in dollar sales (up 0.3%), but declined slightly in volume (-0.2%). Lastly, ultra-premiums declined -1.6% in dollar value and -1.3% in volume.

Among the top 75 spirit brands based on value, the ones significantly outperforming the spirits category (meaning they grew above 5% on annual value growth) within the Nielsen measured off-premise channel are the following (listed alphabetically): 1800 Tequila, Burnett Vodka, Canadian Ltd, Clan Macgregor, Evan Williams, Gentleman Jack, Glenlivet, Jameson, Makers Mark, McCormick Vodka, Patron, Sailor Jerry, Seagrams Vodka, Skyy, Skol, Svedka, Three Olives, Wild Turkey, and UV Vodka.

These brands are a good indicator of the overall spirits market because they represent a diverse group of price segments, with some hailing from the value segment and others from the ultra premium. Clearly some consumers are focused on price while others are still willing to shell out money for more expensive products. They can also expect a lot of deals this holiday season as spirits companies continue to drop prices in favor of gaining volume share.

WHISKEY AND VODKA HOLD COURT. The top performing spirits categories were no big surprise: Irish whiskey and vodka were the clear leaders, followed by bourbon, rum and tequila.

Irish whiskey was once again the one to beat, with sales up 16.4% and volume rising 16.1%. Coming far behind in second place was vodka. Dollar sales of vodka grew 5%, while volume was up 5.3%. Out of bourbon, rum and tequila, bourbon showed the most growth in dollar sales while rum and tequila were stronger in volume. Bourbon saw dollar sales gain 4.3% and volume rise 1.4%. Meanwhile, dollar sales of rum grew 2.8% and volume rose 1.8%. Finally, tequila saw sales gain 1.4% and volume rise 2.5%.

We’ve heard execs argue that whiskey does well with at-home occasions because it’s flavorful and easy to mix. You can drink it on the rocks, with a bit of water, or a simple cola mixer. Some of the new whiskey flavored offerings (Red Stag by Jim Beam and Wild Turkey American Honey) are likely helping the category too by roping in a new consumer set – namely women. Vodka, meanwhile, will always be hot because it’s so mixable and available in a wide array of prices.

COSTCO AND COKE COME TO PRICING TERMS

If there was ever any question over the level of power that big box retailers have over suppliers, just look at the recent fight between Coke and Costco. Recall that Costco had stopped carrying Coca-Cola products because they refused to come down on price. Costco stores even posted signs announcing they would not sell Coke products until it could provide competitive prices or a value to its members. It was a great marketing move by Costco no doubt. The two must have struck a deal, though, because Costco cfo Richard Calanti said yesterday they will resume stocking Coca-Cola products in stores effective Monday (Dec 14). Richard simply said: "We're now going to sell it; that's all I can say at this point." So the question is, who caved first?

SONOMA WINERY AND 7-ELEVEN SETTLE WITH TEEN INJURED IN DRUNKEN DRIVING ACCIDENT

A Sonoma Winery and local 7-Eleven store have agreed to pay the family of a young man who was permanently disabled in a alcohol-related car crash in 2006, says The Press Democrat. The driver of the vehicle, who was underage at the time, was reportedly served beer at a wedding reception hosted by Paradise Ridge Winery. He then purchased additional beer at a 7-Eleven store, and eventually crashed his car the next morning with a BAC of .14. The passenger suffered brain damage among other injuries. The lawsuit stipulates that Paradise Ridge will pay the family $3 million, 7-Eleven will pay $500,000 and the driver will pay about $105,000. This money is meant to cover life-time care for the injured man and over $1.1 million in attorney fees. For more details, click here.

WSD BRIEFS:

ILLINOIS TAX DRIVES CONSUMERS TO MISSOURI. Local reports say Missouri liquor stores have seen a sales spike since Illinois state taxes increased $8.55 per gallon on spirits and $1.39 per gallon of wine. Not everyone is convinced by the numbers, however, and claim it’s only a “trend” if it spans at least one year. Compared to August, MO’s tax revenue grew 41% in September. October’s increase over September was 6.5%.

THE NEW YORK FARM BUREAU is again taking sides with wineries by supporting a bill aimed at legalizing wine sales in grocery stores. The bill, co-authored by Assemblyman Joseph Morelle, didn’t make it out of committee last year and is therefore still active. In order to appease liquor stores, the bill would allow them to install ATMs and sell snacks and gift baskets. However, liquor stores continue to oppose the bill.


Until Monday, Megan

“We forfeit three-fourths of ourselves in order to be like other people.”
Arthur Schopenhauer

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