Chalk it up to the resurgence of cocktail culture in recent years, but the spirits-based, prepared cocktails segment is one of the bright spots in the distilled spirits industry.
With dominant brands stepping up their promotion and advertising, including a few careful forays into broadcast advertising, industry executives hold qualified optimism that the segment could be in for a sustained period of growth. That would be good news not only because the segment offers healthy profit margins, but because it helps to bring new consumers into the spirits category in general.
The prepared cocktails segment rose 12.8% in the control states in 1997, according to 1998 Adams Handbook Advance, and nationally, the category increased almost 8% to more than 6.2 million 9-liter cases. Such brands as T.G.I. Friday’s, Jack Daniel’s Country Cocktails, Alizé and Chi-Chi’s all appear to have maintained strong sales gains in 1997. In the control states, in particular, Ice Box, from White Rock Distilleries exploded up more than 50% and Seagram’s Gin & Juice saw a 20% increase.
Naturally, retailers and suppliers are buoyed by this positive activity, especially since pre-mixed cocktails often serve as a spur to purchases of the actual distilled spirits that are ingredients in the drinks.
Other issues that could help determine the growth pattern in coming years are whether manufacturers can bring more males into the pre-mixed cocktail franchise, and whether they can overcome a sharp seasonal skew that sees the bulk of sales occurring in the three months between Memorial Day and Labor Day. Through new packaging, seasonal SKUs and promotions, and other means, some players are claiming to progress on both those fronts.
Another challenge confronting marketers of pre-mixed cocktails is to differentiate those brands against cheaper-to-produce malt-based knockoffs, a problem that has bedeviled such established lines as Cuervo ‘Ritas. While most execs will privately acknowledge that the issue of shifting to a malt base is revisited from time to time on account of the pricing and distribution advantages it would confer, none said such a plan is on the boards for their brands. Bacardi was the most visible player to tilt from a spirit to a malt base, but most marketers view such a shift as undermining their long-term objective of building the core spirits brands on which many pre-mixed cocktails are based. Luckily, few marketers seem to think such sweeping formula changes will be needed to continue category growth.
“The category had been declining at the cost of specialty beers and wines at the retail chains, but now it’s turned around, and [retailers] are supporting pre-mixed cocktails more than they have in the past several years,” both on-shelf and in the cold box, said Stuart Brown, brand manager for the Jack Daniel’s Country Cocktails line marketed by Brown-Forman Beverages Worldwide.
Prominent players in the segment have adopted strikingly different strategies. Some, in response to the faddish cycles, on- and off-premise, are willing to play the “Snapplization” game, quickly spinning off new flavors while retiring exhausted ones to keep total SKU counts manageable. Hot flavors from one brand are likely to be quickly aped by competitors. “There are a lot of line extensions of Mudslide out there,” said Deborah Candeub, strategic marketing manager at Diageo’s United Distillers & Vintners, whose fast-growing T.G.I. Friday’s line was one of the first with a pre-mixed Mudslide.
Other players have been very sparing in their launch of new flavors, hewing rigorously to a core brand strategy so long as that core brand shows continued prospects of growth. In one extreme case, Kobrand took a dozen years before launching the first line extension to its successful Alizé cognac and passion fruit blend a few months ago.
Among brands that do experiment frequently with new flavors, some are quick to mimic concoctions that have demonstrated interest on-premise, while others strive to go counter to such trends with blends that consumers can’t easily find in alternative venues.
A Recent Standout
In recent years, one of the standout brands has been T.G.I. Friday’s frozen cocktails, marketed by UDV along with a separate line of pre-mixed cocktails. The brand rose 14% to more than 1.26 million 9-liter cases nationally in 1997, and more than 24% in the control states. According to Deborah Candeub, strategic marketing manager at UDV, “Our focus is on the frozen because that’s our unique proposition. We’ve experienced outstanding growth of 20% nationally on the [300,000 case] ready-to-drink line, but the core of our focus is on the frozen line.”
At the time the brand was relaunched four or five years ago, not much was happening in the category, Candeub said. “It was pretty stagnant; a lot of brands had been around for a long time, but T.G.I. Friday’s was revolutionary: in a bottle, but for a blender, and pretty self-contained. It offered ease of use and was a new kind of drink.” As a result, she recalled, it drew healthy support from the trade, including independent retailers, and brought renewed attention to the category.
For T.G.I. Friday’s, given its marketer’s conviction that its striking taste alone is enough to win over consumers, the crucial marketing element has been sampling. Distributors and retailers in many markets have embraced non-alcohol versions of T.G.I. Friday’s drinks that are available for in-store and other sampling efforts. Also important are paid sampling of the alcohol versions, at venues such as the Pine Knob Arena in Michigan. And just last fall, UDV tested a logoed sampling van that paid retailer calls and visited special events in two markets. The effort was successful enough, Candeub said, that UDV now is setting a schedule for two vans to tour the nation, targeting high-traffic venues where awareness might be built among consumers who haven’t previously seen the brand.
Also increasing has been T.G.I. Friday’s use of promotion. A giveaway of various party accoutrements during the 1997 Super Bowl had a solid effect on national accounts, and UDV in general has promoted the brand around sports occasions. For early 1998, the brand is relying on local tie-ins with food, ice and other items, along with a party-goods offer through March.
“Friday’s is a very confusing consumer proposition,” Candeub said. “Consumers will ask, is everything I need in here? We try to let people know that putting it in a blender with ice is all you need to do, but there’s still room to grow.”
In UDV’s separate line of ready-to-drink prepared cocktails, flavor experimentation also is key, with the line’s approximately 15 SKUs balancing an ever-changing array of flavors in five different packages (although some winnowing of package variants is due soon). “We gradually built the line, and there’s a somewhat regional skew to the flavor mix available,” Candeub said.
Still, Candeub said that strategy is different from competitors who, figuring on short product life cycles, constantly generate new flavors to maintain interest. “We do flavors that we hope will have legs,” although UDV is in the early stages of reevaluating what she acknowledged to be an “SKU-rich line.”
Pre-Mixed Margaritas
The four-year-old line of pre-mixed Cuervo Authentic Margaritas is also generating an impact on the UDV lineup, now in a new package and receiving increased trade support, particularly in the warehouse club channel. It’s a brand that brand manager Rand Eyberg feels is benefiting from tequila’s surging popularity, the leadership of the Cuervo name within that category and consumers’ yen for increased convenience. The 19.9 proof Authentics line enjoyed a 31.6% surge in depletions nationally in 1996, and posted another 25% increase nationally in 1997 to 383,000 9-liter cases. In addition, in the control states Jose Cuervo ‘Ritas saw a 10.8% increase last year.
“We’ve had a very strong message that Margaritas can be paired with food, and not just Mexican food,” Eyberg said. “They can be paired with pizza, barbecue or most recently, for this year’s Super Bowl, with sub sandwiches.” In groceries, then, the strategy is “anything we can do to pair up with another convenience food item to support social gatherings.” To the extent that gets the brand out of the spirits department, it can help grow awareness.
Although the high visibility of the core Jose Cuervo brand has a huge impact, UDV has engaged in other promotional and sampling efforts to get the word out. As a sponsor of the Fiesta Bowl in Tempe, AZ, Cuervo hosted a block party that drew 150,000 visitors and a tailgate party that drew 20,000. The effect of that and a retail promotion with Tostitos stimulated a 300% jump in sales in Arizona, proving the effectiveness of such efforts, Eyberg said.
Also important is a packaging change just taking place that will imbue what UDV execs hope is a more masculine feel to the brand, which like many pre-mixed cocktail brands skew about 55% to 60% to women. “We want to bring more men into the category, so imagery cues will bring [the cocktails] closer to the base brands,” Eyberg said. The label will pick up more masculine cues, and white borders will be replaced by gold-foil ones, along with a gold cap, that should bring the brand more in line with Cuervo Gold.
Positioning the brand so that it doesn’t encourage trading down by consumers of the tequila brand is another challenge. In other words, it must play off the Cuervo image, as it does even more with the new package, without undercutting the core brand. “We get as close to the base brand, while carrying the message that Authentics are for convenience,” Eyberg said.
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