NORTHERN EXPOSURE

Canadian whisky has always been a strong performer in several control state regions. In fact, while Canadian whisky includes only one brand (Crown Royal) among of the top 10 distilled spirits nationwide, most control state can point to at least two, and sometimes four or five, Canadian whiskies among their 10 best-selling spirits brands. Indeed, Canadian whisky is big business in the control states. Michigan, Washington and Ohio are among the top 10 state markets nationwide in terms of Canadian whisky consumption, followed by Pennsylvania, ranked 12th, and North Carolina, ranked 13th nationally. And five control states are numbered among the top 10 in Canadian whisky per capita consumption: Wyoming ranks fourth nationally, New Hampshire fifth, Montana sixth, Washington ninth and Idaho 10th.


Crown Royal is accenting “It’s All in the Bag” merchandising campaign.


While sales of Canadian whisky have been trending down for at least a decade, that decline was surprisingly ended in 2002, when the category showed a 0.5% gain nationally to 15.4 million 9-liter cases. In the control states, sales were likewise up, by a slimmer 0.2% margin.


Canadian whiskies bottled in Canada — “imports” like Canadian Club, Canadian and Crown Royal — gained 2.9%, while products shipped in bulk and bottled in the U.S. fell 1.0%. However, ad expenditures rose for the entire category by a healthy 28.7%, to $32.9 million, which may help explain where some of the positive momentum is coming from. Now, marketers are looking to advertising, promotions and relationship building to keep that momentum going. And, it appears that the arrow continues to point up throughout most of 2003.


Crown Royal, of course, has been leading the way with sales of more than 3 million 9-liter cases nationally in 2002 (up 7.6% over 2001), more than double that of its nearest competitors, Allied Domecq Spirits USA’s Canadian Club, at nearly 1.4 million (up 1.5%). Seagram’s VO, from Diageo, was a hair’s breadth behind, but saw a slight year-to-year sales decline.


OPTIMISTIC OUTLOOK


While the category itself remained “pretty much stable” last year (in 2003), according to Jim Lorenz, U.S. brand manager for Crown Royal and Crown Royal Special Reserve, growth came mainly in the premium area. That’s where Crown Royal plays, and the brand was on course to have a “fantastic year” in 2003, Lorenz said. Depending on market, the brand retails for $19.99 to $24.99 for a 750 ml Special Reserve sells for $30 to $35.


Black Velvet is continuing brand-building activity in 2004, including some consumer rebates.


Halid Izzet, brand manager for Allied Domecq’s Canadian Club, said he sees “a bit of a turnaround in the Canadian whisky market. From the latest Nielsen figures, what we can see is that the total whiskey category is stabilizing after five or 10 years of pretty constant decline… and Canadian whisky is starting to rebound; it’s moving into positive figures.”


For Canadian Club, he cited remarkable Nielsen statistics: a 52-week average of +2.3%, with the brand up 7.5% for the past 26 weeks, 12% over the last 13 weeks and 21.4% in the last month.


“The Canadian whisky category is fueled by the ease of the drink and the resurgence of the classic cocktail,” said Joe Karcz, group product director for Jim Beam Brands Co., which markets Windsor and Kessler brands. “Canadian whiskies have long been known for their smooth, light flavor, making them ideal for cocktails.”


“The category had declined quite a bit over the last few years, (but) those declines seem to have moderated,” said Dan Kelley, brand director of Brown-Forman’s Canadian Mist. “I think there’s some new interest in the category.”


BUILDING A BRAND’S IMAGE


“In terms of growth, I think there is still a significant amount of share stealing going on,” said Jack Kavanagh, vice president, marketing services at Barton Inc., which markets Black Velvet, Black Velvet Reserve and Canadian LTD. “That’s where a lot of the growth is coming from… with the exception of Crown Royal.”


Black Velvet Reserve has completed its first year of national distribution.


Black Velvet and Canadian LTD grew nominally over the last year (2003), he added, while the company’s other brands were flat. The year just passed was Black Velvet Reserve’s first in national distribution, and Kavanagh said executives were “very pleased with it.”


The strategy for Black Velvet throughout the past year was to continue building the image of the brand with the support behind it. That included a golf program in the spring that Kavanagh termed “very successful.” Another initiative included an ongoing rodeo program that began last January and ran throughout the calendar year. It will continue throughout 2004.


Part of the plan as 2004 begins is additional price support in the form of discounts and consumer rebates. Said Kavanagh, “I think it will help build volume.” The stratagem will continue through the year. Management will also continue Black Velvet’s outdoor advertising program, which in the last several months has been expanded to Florida. “We’re doing it in a number of key Black Velvet states.”


POWER OF THE PURPLE BAG


“Really what’s helping drive the brand is that we continue to execute on an advertising campaign we’ve had for about 30 years,” said Lorenz. “We continue to reinforce that. We’ve been building a strong connection with our consumers through a relationship marketing program we have called, “The Society of the Crown.” We have the ability to connect with (them) through both e-mail and direct mail, which gives us a great way to speak to them one on one.”


The brand’s annual sales are on course to rise about 8% in 2003, said Lorenz. “The strength of Crown Royal really lies in its premium positioning,” he noted. “We’re benefiting from the growth of premium spirits overall.”


A first-time program that started last fall and ran through last year’s holiday season — personalized Crown Royal bags — will continue until June 1, 2004. The personalized purple bag offer is available in marked boxes of Crown Royal, through the Crown Royal website at www.CrownRoyal.com or through the Crown Royal Gift Shop. Each personalized bag is $4.99.


A promotional program stemming from the purple bag is called, appropriately, It’s All in the Bag. Running both on- and off-premise, it “plays again around the adoration that consumers have for Crown Royal and the bag,” said Lorenz. Consumers have the opportunity to write in and say how they use the purple bag in unique and interesting situations. A contest connected to the program will give winners a chance to choose from a warm-weather getaway, a ski trip or a shopping spree.


The brand’s mix of national and local advertising will continue. For the holiday season just passed, Crown Royal offered a value-added pack that contained a pair of glasses and accompanying premium wooden coasters.


‘HEALTHY, POSITIVE FACTORS’


Canadian Club’s Izzet is encouraged by the fact that “with each month, we’re seeing more momentum in the brand.” Allied Domecq executives have realigned into what they term a “Move to Market” strategy. The result, said company spokesperson Jack Shea, is that “instead of having a national sales force selling Canadian Club, it’s sold by three different business units — one for control states, one for northern states and one for the south.”


Part of the new strategy enabled the company to add 100 retail account managers, who now more closely monitor competitive pricing and help the brand both react more quickly and anticipate changes.


Beginning in February, Canadian Club will repeat its “Find the Case” promotion. During the past year, cases of product were hidden in a wide variety of markets and clues to their whereabouts given through radio spots. Consumers who were able to put the clues together and locate the cases were brought together to compete for an ultimate prize of $10,000.


TV and PET


Canadian Mist has garnered attention with the introduction of a 750 PET package. The brand successfully debuted its 1.75 liter PET “Easy Pour” bottle three years ago; the new package is being affectionately referred to within the company as “Son of Easy Pour.”


Canadian Mist recently debuted this 750 ml PET bottle.


The proprietary design includes a special thumb grip. “We think this is really going to capture the consumer’s attention,” Kelley noted. “We’re getting really good feedback from retailers on how consumers like it — they take a look at it, pick it up and have found that t’s perfect for tailgating, hunting and fishing. It’s taken what has been a utilitarian size, 750 plastic, and really made it into an image size, as well. We’re really excited about that.” The new package started shipping in the first part of September.


Brown-Forman is spending half a million dollars just for television — the first time it has taken to the airways with Canadian Mist. Canadian Mist’s program includes a test in Indiana, Louisiana and Georgia. “We’ve done some great new television advertising that we’re excited about,” said Kelley. “In fact, we’re even running on Monday Night Football at the local network stations, as well as on cable.”


In addition, during 2004’s first quarter, Canadian Mist is kicking off a hockey promotion at the point-of- sale with logoed hockey jerseys and hockey goal displays. It will also use small, hanging inflatable logoed zambonis as well as logoed zamboni key chains.


RAISING VISIBILITY


According to Jim Beam’s Karcz, the category as a whole “needs to raise its visibility and take advantage of those opportunities.” During the first quarter of ’04, Jim Beam will place increased support behind its Windsor and Kessler brands, including advertising, improved packaging and expanded support behind key sponsorships.


For example, Windsor has sponsored the Minnesota Wild hockey team for several years. Until now, the sponsorship has consisted primarily of signage. This year, Windsor has secured a prime sponsorship of the Club Level in the Xcel stadium, in which it will erect a Windsor-branded bar. The bar will “celebrate Windsor as one of the top-selling spirits in Minnesota.”


Ultimately, maintaining a positive sales momentum for Canadian whisky depends upon these and other supplier efforts, as well as retailers recognizing that Canadian is not a moribund category. It still comprises 10% of all spirits sales in the U.S., and, as the latest sales figures show, deserves to be merchandised as a growing category.



AT THE HIGH END

Yes, Canadian Whisky does have a superpremium niche that has been creating some interest among consumers. Line extensions from several of the major base brands have grown incrementally over the past few years. These include Black Velvet Reserve; Canadian Club Reserve and Classic 12 Year by Canadian Club; and Crown Royal Reserve. Jim Beam Brands also has a superpemium Canadian, Tangle Ridge, which is aged 10 years. Last year, Shaw-Ross Importers launched Forty Creek Barrel Select Canadian Whisky, which has a suggested retail price of $18 to $19. The latest addition comes from Hood River Distilleries: Pendleton Canadian Whisky, in select markets, is also aged 10 years and sells for about $26 for a 750 ml bottle.



LEADING BRANDS OF CANADIAN WHISKY
IN THE CONTROL STATES

(Mixed Cases)

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FOREIGN BOTTLED CANADIAN WHISKY

Brand
Type
Supplier

2001

2002*

% Change

Crown Royal 
FB 
Diageo 
567,418 
606,624 
6.9% 

Canadian Club
FB
Allied Domecq Spirits USA
309,558
308,971
-0.2%

Seagram’s V.O.
FB
Diageo
254,213
253,930
-0.1%

MacNaughton
FB
Barton Brands

161,129


160,266
-0.5% 

Royal Canadian
FB
Pernod Ricard USA

80,083


74,339
-7.2% 

Total Leading Brands

1,372,401
1,404,130
2.3%

Others

55,752
65,228
17.0%

Total FB Canadian Whisky in the Control States

1,428,153


1,469,358

 2.9%

U.S. BOTTLED CANADIAN WHISKY

Black Velvet
USB
Barton Brands

702,088


708,394
 0.9%

Canadian Mist
USB
Brown-Forman Beverages
639,295
596,838
-6.6%

Windsor Supreme
USB
Jim Beam Brands/Future Brands
243,864
235,805
-3.3%

Rich & Rare
USB
Allied Domecq Spirits USA
192,848
209,118
8.4%

Canadian LTD
USB
Barton Brands

172,376


168,580
 -2.2%

Total Leading Brands
1,950,471
1,918,735
-1.6%

Others
746,482
746,661
0.0%

Total USB Canadian Whisky in the Control States

2,696,953


2,665,396
 -1.2%

Total Canadian Leading Brands
3,322,872
3,322,865
0.0%

Others
802,234
811,889
1.2%

Total Canadian Whisky in the Control States

4,125,106


4,134,754
 0.2%

FB=Foreign Bottled; USB=U.S.Bottled (*) Last 12 months data ending September 2003


Source: Adams Beverage Group Database from NABCA data

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