GROWTH BRANDS

Forget the slumping stock market. Never mind an economy still mired in the doldrums. Corporate malfeasance? Next case. Members of the beverage alcohol industry can find comfort in the fact that sales of wine and spirits keep growing, which may belie expectations, but the numbers don’t lie. Distilled spirits consumption rose 1.8% in 2002, to 153.0 million 9-liter cases, according to the Adams Handbook Advance 2003, the fifth consecutive year of gains. And the wine industry did even better, registering a 3.3% increase in 2002, to 241.6 million 9-liter cases, continuing the upward trend that began in 1994.


Most spirits categories posted gains in 2002, with the non-whiskey segment (up 2.5%) outperforming total whiskies (up 0.2%). The largest spirits category, vodka, once again led the way with sales of 39.1 million 9-liter cases, a 3.5% gain over 2001. Rum gained 3.8% to 18.6 million 9-liter cases, and tequila reversed the off-year in 2001 with a respectable 8.7% increase. Even gin, which has been having a tough couple of years, saw growth, edging up 0.1% last year. Cordials & liqueurs rose 1.0% to 17.8 million cases in 2002, and brandy & cognac climbed 2.6% to 9.6 million cases. Among whiskies, straights rose 0.4% to 13.1 million cases, Canadians surprisingly gained 0.7% to 15.4 million cases after five straight years of decline, and Scotch recorded a 0.2% increase to 9.1 million cases, the category’s first increase in a decade. And, though still quite a small category, Irish whiskey continued its growth, up 8.6%. The only two categories to decline in 2002 were American blended whiskies, which were down 2.3%, and prepared cocktails, which lost 5.0% to 6.3 million cases.


The wine segment has seen terrific results from the ongoing publicity surrounding the health benefits of moderate consumption, as well as an increasingly wine-educated American public. Last year’s gains were led by table wine, which now accounts for almost 90% of the U.S. wine market. Led by premium varietals, table wine grew by 4.2% to 216.7 million 9-liter cases in 2002. Interestingly, among all wines, imports gained a hefty 9.5% while domestics rose 1.7%. Following two years of declines, champagne & sparkling wine had a modest 1.1% rebound last year, while vermouth consumption, though small, gained 2.3% to 1.9 million cases. Dessert & fortified wine fell for the sixth straight year, off 3.0%, while wine coolers took a big hit, down almost 40% to 1.5 million cases, a victim of the wildly successful malternative fad in 2002.


Underlining recent industry strength are retail dollars from the sale of all beverage alcohol products: wine gained 9.4% in 2002 to $20.8 billion and distilled spirits increased about 6.3% to $42.0 billion. Indeed, when adding in beer sales, total retail dollar sales for all beverage alcohol increased 6.3% to $137.2 billion. These are fairly hefty percentage gains and reflect not only the volume increases across all segments but also continuing consumption trends favoring higher-end products.


BRAND POWER

Though it may be an overused phrase, “brand equity” remains one of the most valuable assets a product can possess. And though it may be overused, it cannot be overestimated, especially in the beverage alcohol industry, where the slightest change in consumer tastes and perceptions can make or break a product. As we’ve previously stated, a combination of resources, creativity, perseverance, the right economic environment and just plain luck often go into creating and developing a successful brand. Still, the entire process remains somewhat of a mystery. There are beverage alcohol products in every category and at every price point that, for any number of reasons, have either lagged behind or outpaced their respective competitors. And although identifying category consumption trends is helpful, actual brand activity is what generates profits. Thus, the rationale behind “Growth Brands,” an annual report which uses the latest industry results to highlight those brands that have demonstrated noteworthy growth over the past few years.


There are four categories of Growth Brands and Fast Track represents the most demanding set of criteria. Among wines and spirits, these are brands whose sales exceeded 100,000 9-liter cases in 2002 while having also demonstrated double-digit growth over each of the past four years. (This means that even if a brand has grown 25% a year from 1998 through 2001, if it only grows 9% in 2002, then it does not qualify as a Fast Track brand, though it would likely be included in another category.) All Fast Track Brands must have at least a five-year history.


Other brands that have shown significant growth over the past few years, but have not yet been on the market for a full five years, have been designated as Rising Stars.


In addition, in order to highlight traditionally top-selling brands that have consistently grown over the past four years, we’ve created an Established Growth Brands category. Because many of these brands are already operating from huge sales bases, their percentage gains are often modest relative to their overall case volume, even though these brands have had substantial sales increases and are often leaders among their respective segments.


Finally, there are brands that have had one or two years of sales declines since 1998, but have nevertheless bounced back over the past few years with healthy growth to have a positive impact in the marketplace. We have termed these products Comeback Brands, and they include some of the best-selling brands of wine and spirits in the industry.

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