The NABCA Industry Steering Committee is comprised of industry leaders from several distilled spirits companies who meet during the year with the NABCA Board of Directors to examine various issues and take action, when appropriate, to help facilitate business throughout the control states. As we have for a number of years, StateWays approached the very busy Committee members and asked them to participate in a “virtual” forum centered on the theme of the NABCA’s 66th Annual Conference, “Progress Through Partnerships.” They could also address any other issues they felt were relevant to the industry and the control states. This year, Industry Steering Committee members who offered comments include Robert W. Biles, senior vice president, director of sales for the control states and Canada, Brown-Forman Beverages Worldwide; Ivan Menezes, chief operating officer, Diageo North America; Bill Anderson, vice president, sales, Bacardi USA; Brad Mundy, vice president, sales, control states, Future Brands LLC; Peter Hickey, president, control states, Allied Domecq Spirits North America; Jeffrey S. Homel, vice president of sales, Heaven Hill Distilleries; Rick Przebieda, vice president, control states, Barton Brands; and Paul Coulombe, chief executive officer, White Rock Distilleries. We thank them for their participation.
ROBERT W. BILES
Senior Vice President
Director, Sales, Control States and Canada,
Brown-Forman Beverages Worldwide
Sunday. Traditionally it’s a day to relax, spend time with family and perhaps play golf. But in today’s busy world, Sunday is also a day to shop, but often not for our products. In twenty-three states, blue laws dating from the repeal of prohibition prevent the purchase of spirits. Brown-Forman’s brands cannot serve our consumers if they cannot be easily purchased on one of the busiest shopping days of the week. We are now working to repeal these laws.
There are three reasons why this is important. First, an extra day of shopping increases our brand-building opportunities and helps our bottom line. Brown-Forman has a renewed focus on brand-building, especially as related to meeting consumers’ needs. Sunday sales can help bring our products closer to the customer’s daily life. Shoppers often spend more on Sunday than on any other day of the week. When we are not allowed to sell our products on Sundays, we are denied access to these many consumers.
Second, although our beer competitors enjoy Sunday sales in 36 states, the spirits industry does not share this same commercial freedom. We all know alcohol is alcohol, and that beer, wine or spirits all contain alcohol. Why should one type of beverage be treated differently? Sunday sales of spirits would serve to level the playing field and remove another unfair marketing advantage beer has enjoyed for decades.
Third, Sunday sales bring needed revenue to the states, which are desperately in need of funds. In most states, high excise taxes and the lack of Sunday sales artificially reduce state revenue because many consumers either don’t buy spirits products or make their purchases in neighboring states that do allow Sunday sales. In either case, the state loses revenue. Opening stores on Sundays allows states to capture this lost revenue.
But don’t just take the industry’s word about the benefit of Sunday sales. Look at the results. Last year Oregon changed its laws to allow Sunday sales and today it reports millions of dollars in additional revenue. A study commissioned by DISCUS found that opening New York’s package stores on Sunday would bring the state $20 to $30 million in additional desperately needed revenue.
The 23 states prohibiting Sunday sales present us with an opportunity to grow our brands. I am pleased to report progress in our efforts to open these states.
As noted above, Oregon adopted legislation allowing state licensed stores to open on Sundays.
Pennsylvania changed its laws to allow Sunday sales in 10% of the state-owned stores.
Throughout 2003 we will work to pass laws allowing Sunday sales in Connecticut, New York and Virginia. We will also look for opportunities in other states experiencing revenue shortfalls, such as Washington. So if you live or sell in a state that does not currently allow spirits sales on Sunday, stay tuned; the doors to your favorite local liquor store may soon be opening. In fact, maybe you should help open those doors!
Chief Operating Officer,
Diageo North America
We will be discussing a number of important issues in the industry as we gather together at NABCA’s annual meeting. On the top of the list is our collective responsibility to ensure that we do what is right by encouraging the responsible consumption of our products.
We want to be allies to lead the industry in excellence, setting best practices for social responsibility. We are proud to say that we have one of the strictest marketing codes in the industry, but we realize this is not enough. That’s why we will be taking the time to train our employees and promotional agencies to live the values of our code in every advertisement that we produce and in all the promotional activities we execute.
We also focus on excellence in the way we deliver innovation in our brands. We want to work closely with our strategic allies in each market to understand the new products and services that add value for consumers, and then find the most effective and efficient way to deliver that value.
We are working with our strategic allies in many states to introduce new, high-valued services, including rearranging hours of sale to fit current consumer practices and needs, and introducing Sunday sales.
Finally, we want to be innovative in the way we go to market by improving the efficiency and effectiveness of the three-tier system. We know we have outstanding brands that you and your consumers value. We also know that to be you’re an effective business ally, we’ve got to provide even more value in the way we bring those brands to market in each state. Our investment in this area is vital to maintaining and growing business relationships. We know delivering high levels of service in the most efficient and effective way possible is especially important to you and your states in these challenging economic times.
Our intent is to deliver value and service through the strategic distributors and brokers we have selected around the country. We will continue to work with you to build our relationships to address these issues in your states. Only by working together can we bring best practices to the industry and the communities we serve.
Vice President, Sales,
Last year, I wrote of the promise of premium products and the additional revenues that the promotion of these products can bring to our control state partners. This year, I would like to continue with that theme of premium products and champion premium well programs.
Promoting premium products to retail consumers is an established method of increasing revenues responsibly for the control states while projecting an image of quality. The natural extension of this program is for our control state partners to promote premium wells to on-premise accounts. Control states with retail operations act as supplier representatives to the on-premise when selling our brands, and they have the opportunity to promote a premium well to on-premise accounts.
Premium wells allow an on-premise account to increase revenues and the image of their accounts by moving products they already carry to the well. How can our control state partners do this? If you have the opportunity to speak to on-premise buyers, please keep this information in mind.
Image and quality are critical factors in purchase decisions.
Generate greatest opportunity to drive revenues
Deliver better cost of goods sold margin
Produce higher gross profit per drink
Meet expectations of on-premise customers
Reinforce your commitment to quality and value
Instill customer confidence and increase frequency
No need to add additional inventory.
Current premium offerings account for 60% to 80% of on-premise account’s inventory
Reduced inventory maximizes product volume and increased turnover
Reduced inventory injects cash flow
Enhances back bar shelf management
Simplifies inventory control
By extension, each premium product purchased by on-premise accounts provides higher margins and additional revenue to control states without increasing inventory.
Fulfill your customer’s expectations while increasing critical revenues and margins by promoting a premium well program with the on-premise accounts.
Vice President, Sales, Control States,
Future Brands LLC
We at Future Brands LLC believe in “partnering” with our customers, and we consider the control states to be both partners and customers. Our philosophy has always been to listen to and work with our customers, and whenever possible, to suggest more effective ways of marketing and selling our range of products. And we have learned more than a thing or two from our customers’ ideas and suggestions.
Future Brands (and Jim Beam Brands Co. before it) remains one of the few beverage alcohol companies that devotes an entire staff to creating market-specific sales promotion programs, tailored to the needs of individual states.
Operating within the framework of the control state system, we are well aware of the various states’ struggles to increase profits, particularly in the current economic climate, while adhering to the control philosophy. We have worked at the request of individual commissions to develop numerous exciting sales promotion concepts, elevating the profile of our superpremium brands. These state-specific promotions have captured the attention of consumers in the control states.
Bourbon barrel sales, resulting in state-specific packaging for our Small Batch Bourbon Collection (Knob Creek, in particular), were conducted in both New Hampshire and Ohio with outstanding results. Merchandising elements suggested by the states — such as Bourbon Ambassador Fred Noe appearing on a New Hampshire television cooking show, and an Ohio Bicentennial Know Creek package — elevated sales of these ultra-premium brands, generating more profit for both parties.
In Pennsylvania, the PLCB chose to test the concept of floor merchandising non-discounted items. Pennsylvania-specific Absolut Vodka display material was produced for the 60-day trial. Seven major concert sponsorships were conducted statewide tying in with he store promotions, culminating with “Absolut Jams Festival” in Philadelphia. This effective merchandising combination moved sales on Absolut to a dramatic upswing.
Given the scope of our Future Brands LLC portfolio, companion merchandising promotions have become a “natural.” With the PLCB’s input, we co-promoted Absolut along with DeKuyper Sour Apple Pucker in Pennsylvania stores to create “Absolut Appletini” displays with promotion-specific p-o-s. The two brands were up 5% and 84% respectively. Note: the 84% is not a misprint.
On occasion, our collaboration with the state helps institute a change in policy. In Idaho, we worked with other suppliers and the Idaho Liquor Dispensary to establish floor display frequency guidelines, in addition to floor display price/product relationship merchandising standards.
Future Brands also has a dedicated control states category management team that applies a variety of tools to bring objective results to our partners. The use of NABCA/SAM2 data, AC Nielsen scan data, Spectra demographic information, and consumer research help us to understand and convey each state’s business environment to the retail level. At the request of the State of Washington, our category management team created several planograms in order to reset the state’s 156 stores. Our team worked together with category management teams from five leading suppliers to ensure the validity of the sets.
Like other suppliers, we are also working on an on-line pricing system test with the NABCA. We are confident this new system will make the price filing process much more efficient.
As time goes on, we at Future Brands feel the “partnering” concept with the control states will foster new, unprecedented avenues of opportunity. We look forward to continued success with our control state partners.