Vodka Seeks a Shot of Innovation

FILED OCTOBER 1, 2009

Dear Client:

Years ago when we first started writing WSD the flavored vodka category was exploding, but there were also critics who claimed it was just a fad. Fast forward 4 years and we’re still seeing growth from that category, along with innovative new flavors. For example, who knew sweet tea would take off like it has? We spoke with Gray Ottley, cmo of Distilled Resources, who gave us some background on his company and discussed the present and future of the vodka industry as he sees it.

THE SKINNY. Distilled Resources is a full service alcohol distillery based in Idaho and the smallest of four commercial distilleries in the US that is a complete farm-to-bottle operation at one location. “All the neutral spirits that go into making vodka or gin come from one of four distillers in the US. We are by far the smallest...the other three are more in the agri-business, making your large, common vodka brands,” he explained.

Idaho’s natural resources make up the core of the company. Distilled Resources produces neutral spirits from Idaho russet potatoes, organic grains, and Idaho winter wheat and corn for use in 22 products including straight vodkas, flavored vodkas, liqueurs and other specialty spirits. “We build brands that our clients win awards for,” he said. They don’t own any brands themselves: “we keep that very clean primarily so no one thinks we’re giving one client preference over another.” The company is also selective about who they work with, looking for the right long-term partnerships.

LOOKING FOR FLAVOR INNOVATION. Gray said he’s been impressed with the entrepreneurial spirit coming from his clients. “I thought that during the economic downturn that entrepreneurial group of individuals would have subsided but they haven’t...they’ve increased, along with a new entrepreneurial spirit for brand building with many industry members.”

Many of the brands Distilled Resources helps produce “are meant to be tools for mixologists.”
Gray believes that there is a lot of growth potential in “innovative flavored products with a high quality neutral spirit base.” The straight vodkas they produce from Idaho russet potatoes and grain make up their core business, but Gray said new flavored products “are increasingly finding the consumer’s appetite.”

“Products we’re interested in developing with industry members are innovative and flavorful, and have not been tried before.” One example of the company’s innovation is its “huckleberry” flavor in 44 North Flavored Vodka and Square One Organic Cucumber Flavored Vodka.

“If you can bring innovation that is unique like we’ve been able to do on a couple of brands than they can be successful and really break out.” He pointed to the sweet tea craze originating with Firefly Distillery, noting that “it’s been awhile since the industry has had a great idea like that, and a lot of new products followed.”

BIG GUYS LOOK TO THE LITTLE GUYS. “I think there will continue to be a lot of new and innovative products...there will be some new national brands but I think the larger companies, the Bacardi and Diageos of the world, are probably watching what pops from the smaller entrepreneurial businesses. There is so much out there and so many business trying new things like Distilled Resources.”

WINE INDUSTRY LOSES YELLOW TAIL LEGEND FILIPPO CASELLA

Decanter is reporting that Filippo Casella, the founder of Casella Wines and home of Yellow Tail, died at the age of 88 on October 12 after battling “a long illness.” Filippo was a third-generation Sicilian grapegrower and winemaker. He also spent 6 years in a British POW camp during World War II. He immigrated to Australia in 1957 with his wife, Maria, and started Casella wines in 1959. Their son John took over the family business in 1994 and launched Yellow Tail with the help of marketing manager John Souter in 2001. He now runs the company with brothers Joe and Marcello.

John told AreaNews.com: “There was not a thing we did without telling him first. If he agreed, we were all happy; if he didn't, we didn't go ahead with it. He was a man of vision who believed in hard work and determination.”

NORTH COAST GRAPE GROWERS DEAL WITH AFTERMATH OF STORM

Grape growers on the North Coast are still divided on the amount of damage caused by heavy rainfalls last week. The storm brought an extra 2-4.5 inches of rain through Wednesday, depending on the area, followed by foggy drizzle and humidity the rest of the week, reports the Sonoma Index Tribune. These conditions put grapes at a higher risk for mold. Some growers are picking grapes that are not fully mature to avoid mold, while others are taking the risk and holding out for more ideal grapes. Still, many growers say there was no damage, especially since thin-skinned varietals more susceptible to rot damage such as chardonnay and pinot noir are mostly off the vines.

JACKSON FAMILY WINES FURTHERS CONSOLIDATION WITH MONSTER WAREHOUSE

Jackson Family Wines’ new distribution warehouse in American Canyon will open its doors at the beginning of 2010 after the busy holiday season. It was largely built so K-J could consolidate distribution activities under one roof. You’ll recall that this isn’t K-J’s first move towards consolidation this year: in August they announced plans to absorb their millennial arm White Rocket Wine Co into the parent company.

Currently they have warehouses in Napa, Santa Rosa, and Windsor among others, according to an article in the Napa Valley Register. It’s as big as 9 football fields (650,000 sq ft) and will use railroads and trucks to distribute its wines. A rail spur connects the warehouse to an existing Union Pacific Railroad line. Not only are trains more eco-friendly but they’re also more practical simply because they can move more product. The warehouse area will be kept between 54 and 60 degrees Fahrenheit, thanks in part to the building’s white roof areas, insulation in the walls and ceilings, and a 500-ton chiller system. They have yet to build solar panels due to “economic reasons,” said the article.

In addition to holding Kendall-Jackson wines, the warehouse will also store wines for clients of Biagi Brothers, the Napa-based trucking company that manages Kendall-Jackson’s trucking operations. Biagi will occupy 175,000 sq ft.

RODNEY STRONG TAKES OVER K-J’S FORMER FUNDRAISING INITIATIVE

You may recall this summer when Kendall-Jackson announced it was dropping its $100,000 annual donation to the Santa Rosa-based Wells Fargo Center for the Arts. That news coupled with recent lay-offs led to speculation that the company was in a rough spot, although spokeswoman Caroline Shaw said it merely reflected “a new strategic marketing vision.” Fast forward a few months and Rodney Strong Vineyards announced it will take K-J’s place. The winery says it struck a three-year deal with the Center to pay an annual undisclosed sum and donate wines to fundraisers.

WSD BRIEFS:

WINE BUSINESS REAL ESTATE INVESTOR Dinesh Maniar has filed for chapter 11, reports the North Bay Business Journal, citing a total of $32 million of debt. He filed bankruptcy on behalf of his Realty Group investment companies, Diamond Oaks Vineyards and Southland Thoroughbred Farms racehorse business. Over the past 30 years he’s acquired 5 properties in Napa and Sonoma, including property that once belonged to Robert Mondavi Corp. Diamond Oaks creditors have a court date on October 23 in Santa Rosa, says the article.

CENTURY COUNCIL PRESENTS GRANT FOR BINGE DRINKING RESEARCH. The Century Council has provided a $100,000 research grant to the Emergency Medicine Foundation (EMF) to learn more about the role of emergency services with regard to college binge drinking, prevention and treatment. In the first phase they hope to better understand these young people by uncovering the circumstances surrounding overconsumption, age/gender, how the patient arrives, BAC, and other things. Next they will investigate the role emergency facilities play in the college community when it comes to overconsumption.

BROWN-FORMAN HAS APPOINTED Michael McShane as managing director, North Asia, based in Shanghai, effective February 1, 2010. He most recently served as managing director of Australia and New Zealand. The company has yet to announce Michael’s replacement.

LVMH MOET HENNESSY has appointed Jean-Marc Gallot as the new managing director of its Ruinart Champagne house, effective November 4. He replaces Stéphane Baschiera who was recently appointed managing director of of LVMH's Veuve Clicquot Ponsardin unit.


Until tomorrow, Megan

“Never eat more than you can lift.”
Miss Piggy

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