NORTHERN LIGHTS

NORTHERN

CANADIAN WHISKY IS OUTPERFORMING SEVERAL WHISKY CATEGORIES, BUT IT IS STILL LOOKING FOR A MEANINGFUL BREAKOUT TO THE UPSIDE.


“Relationship marketing” is more than just a fashionable buzzphrase. It may hold the key to reviving the vast but slipping Canadian whisky segment.


The secret, suppliers believe, is successfully combining the old and the new: traditional marketing and promotional strategies with web sites, new packaging and product information galore. The goal, as one supplier put it, is to provide consumers with a new reason to get excited about the industry’s third-largest category.


According to Adams Liquor Handbook 2000, total 1999 sales of Canadian whisky were down 0.9% — not shabby considering most whisky categories were down by a larger percentage. Canadian now represents 10.9% of the entire spirits market in the U.S., at just under 15.7 million 9-liter cases. Only vodka (almost 35 million cases) and cordials & liqueurs (16.5 million cases) sold more.


In the control states, though, sales of Canadian whisky increased overall, up 0.2% to more than 4.24 million mixed cases. This follows historical trends, for Canadian whisky has long been a favorite spirit in many of the control states.


On a national basis, best-selling foreign bottled Canadians include Crown Royal (up 10.2%, 2.48 million cases), Canadian Club (off 0.7%, 1.475 million cases), Seagram’s V.O. (off 2.7%, 1.44 million cases); best-selling domestic bottled Canadians include Canadian Mist (down 7.1%, 2.442 million cases), Black Velvet (up 1.6%, 1.8 million cases) Windsor Supreme (down 2.5%, 1.3 million cases) and Canadian LTD (up 3.7%, just under 700,000 cases).


But if the industry is to staunch the slow erosion of this category, it must broaden its appeal, change with the times, and give more consumers a whole new reason for drinking Canadian whisky.


A “TALE OF TWO CITIES”

The segment is “truly a tale of two cities, so to speak,” according to Dan Kelley, vice president and brand general manager for Brown-Forman’s Canadian Mist. “A number of brands are fighting on a price basis and not investing, from my point of view, in marketing and advertising to attract new consumers to the category, to tell them how to use it. Then there are a couple, like us, who are actually trying to get new consumers for Canadian whisky.”


Kelley likened the situation to that of imported vodkas. There is, he said, “a lot of excitement” in the imported vodka category, “and when one brand does something it helps the others. If there’s a new French or Finnish or Swedish vodka, the Belgian and German vodkas benefit from all the excitement in the category. We’re really helping the entire category with what we’ve had going with our advertising campaign, our increased advertising expense, and with the introduction of our new Canadian Mist package.”


“From the trends that we see, Canadian whisky continues to be flat to slightly down,” said Eileen Higgins, Seagram’s U.S. marketing manager for Crown Royal. “Now, for us at Crown Royal we expect to see the exact opposite trend going on. Crown Royal continues to be on an a growth curve relative to the overall Canadian whisky category.”


Part of that, she claimed, is the way consumers look at Crown Royal. “It transcends both the Canadian whisky category and traditional North American category. More consumers are drinking Crown Royal in a variety of ways that makes it appear to compete with premium spirits overall. All this mixability and mixing that goes on allows it to break free of the overall Canadian trend.”


The Canadian whisky segment today is “not good,” conceded Mike Harris, brand manager for Allied Domecq Spirits and Wine North America’s Canadian Club and Canadian Club Reserve. “The market has been in a pretty slow decline for over a decade now, and all the brands have been following a pretty much steady decline, say minus 3%, in terms of volume for that period of time.”


An exception, he conceded, has been Crown Royal, which he said has been growing at an 8% or higher clip. He is quick to point out, however, that although the brand is a Canadian whisky made in Canada, most consumers who are drinking it “don’t actually know it is a Canadian whisky or care.”


TAKING THE LEAD

Allied Domecq’s plan is to “take the lead” on updating Canadian whisky’s values, to “make people reconsider what they think about whisky.” A new Canadian Club marketing campaign — “a new proposition” as he puts it — based on consumer research will go into test in three cities in February. “If it works, and I’m sure it will, we’re hoping to go national with it.”


How can he be so sure? “We’ve tested it quantitatively in market research, and I feel the results from there are positive. We’re checking the assumptions from the quantitative analysis just to make sure they’re true and will hold up in a real life situation.”


Such a sea change is drastically needed, he maintains, “because nobody out there has said anything new to consumers. That’s the reason that Canadian Club and the category have been in a decline.” The new campaign will mean “challenging people’s perceptions about Canadian Club and about whisky. It’s great stuff.”


Interestingly, Harris said the internet will “probably not” play a significant role in the new program. “We do have web sites, like canadianclubwhisky.com., which is actually looked after by our Heritage Department up in Canada, at the distillery. But other countries, like Japan, have a different target market, so it’s probably not the ideal medium for our target.”


Despite the change, the brand’s base will not be discarded. Said Harris, “We’re certainly not going to walk away from the quality and the heritage.”


In addition to the tests, the first quarter will also see other volume-driving programs in motion, though at press time they remained “still in the works.”


INVESTING IN CANADIAN WHISKY

It was a year and a half ago that Barton Brands purchased several Canadian whisky brands, such as Black Velvet, McNaughton Canadian Whisky, McMaster’s, Schenley OFC — as well as a couple of production facilities — from Diageo. Those brands complemented other Canadians in Barton’s portfolio, including Canadian LTD, Northern Light, Barton Canadian, Canadian Supreme and Canadian Host. Black Velvet significantly leads the pack in sales, at close to 1.8-million 9-liter cases per year.


The April 1999 deal, said director of marketing Jack Kavanagh, was viewed as “an opportunity for us. The Canadian market is obviously one of the main categories in the industry. We had a fairly significant brand in Canadian LTD, which was our flagship prior to the acquisition, and we saw a tremendous amount of growth with that product. When we acquired it, we priced it properly and focused on distribution, size and merchandising, and the brand responded beautifully.”


When the deal became available, then, “we jumped at it. We saw the Canadian category as extremely important, and one that we were particularly well versed at getting some success from.”


The large number of brands is fine with Barton, said Kavanagh, because most are so regional in nature. “This industry is loaded with brands that think of themselves as national,” he stressed, “but when you really stop and look at them they tend to be more mega-regional, if you will. There are some brands, like Absolut or Crown Royal in the Canadian category, that are true national brands, and by that I mean they’ve got distribution throughout the country, not only in one size but really across their full line of sizes.


“They’re also heavily supported with national advertising. That, to me, would be the definition of a national brand.” Barton’s brands, as most of its competitors’, “tend to be regional in nature.”


‘SIGNIFICANT CHANGES’

The first half of Brown-Forman’s FY 2001, which runs from May to April, has been “excellent,” said Canadian Mist’s Kelley, with sales of Canadian Mist up about 2%, although for FY 2000 they were down. As he explained, “We took some significant price increases, and we were off, over 5% for the year.”


The $1 per bottle price increase had logic behind it. First, he explained, it was the first increase in “a number of” years. Beyond that, “the economy is strong. We have what we believe is a superior product, and you have to take regular or at least occasional price increases just to keep up with whatever limited inflation there is.”


Brown-Forman introduced a new plastic, 1.75-liter, easy-pour Canadian Mist package at the end of the last fiscal year, March/April, but it really started hitting stride in May, June and July.”


The plastic bottle has “a very stylized look to it that consumers really take to,” and when they pick it up it just feels good, Kelley said. It has also, he claims, “galvanized the attention” of distributors, brokers and the field force. “They’re real enthusiastic it.”


FIRST-QUARTER STRATEGIES

The coming year will start less with a bang than with a commitment to continue strong, often innovative marketing efforts that have already produced results.


The first quarter will see a continuation of Black Velvet’s rodeo sponsorships in the Northwest and Western regions. There will also be off-premise materials available.


Barton also plans to continue its resurrection of the Black Velvet Lady, an advertising character introduced in the 1960s. The elegantly dressed model, clad in a black velvet gown, has been portrayed by such (at the time) up and coming models as Cybil Shepherd, Christy Brinkley and Cheryl Tiegs. “That campaign kind of went to the wayside over the last couple of years,” said Kavanagh. “We resurrected it as soon as we made the acquisition.”


According to Brian Warren of Jim Beam Brands, the first quarter of 2001 will see Windsor Canadian Whisky busy conducting the fifth-annual Windsor Ultimate Ice-Fishing House Contest, a statewide program to find the most elaborate ice-fishing house in Minnesota. Consumers will be invited to enter by submitting an essay explaining what makes their house the “ultimate” in the state, along with photos and video of the house.


The contest positions Windsor Canadian as “the refreshment of choice for outdoor enthusiasts,” increases consumer excitement and provides local-market retail extensions for the brand.


The beginning of the year will also see Windsor Canadian finalizing sponsorship relationships in key retail markets including Minnesota, South Dakota, Nebraska and Pennsylvania. These programs give the brand a strong presence in Windsor’s high-volume markets throughout the year, and reward loyal consumers with opportunities to participate in Windsor-sponsored activities. The sponsorships include minor league sports, music festivals and fairs.


Brown-Forman’s first-quarter initiative will include an Outdoor Escape promotion, focusing on fly fishing. Executives also plan to bring back an old favorite: a hanging model of the Canadian-manufactured deHavillan Beaver Float Plane. A fixture in liquor stores more than a decade ago, the company still receives calls asking how to get one. It is being brought back “as kind of an icon of the brand,” said Kelley, “to call attention to the Canadian heritage and to grab the consumer’s attention when he comes into the store.”


The company will also be giving away fishing trips to Canada and more local locations, as well as equipment, watches, vests, creels, reels and waterproof cameras. The brand’s web site, www.canadianmist, is “refreshed from time to time” and feature our promotions “so consumers will know what to look for when they go into a store.”


Brown-Forman has increased the brand’s annual ad spending to $7 million, reportedly placing it 14th or 15th among all spirits brands.


Greg Leonard, Seagram’s director of public relations and event marketing for North American Whiskey, said executives are “very excited about VO Gold as a trade-up option for a very loyal V.O. franchise right now.” The company’s “It’s What Men Do” campaign, which started in 1999, has been “tremendously successful” via direct mail, and will be extended to the internet during the first quarter of 2001. “We’re putting on some final touches on that, and we hope to begin really communicating to our V.O. consumer base about what men do on line.” The on-line component is designed to promote an ongoing dialogue with consumers.


The recent launch of crownroyal.com is also helping the company extend the Society of the Crown benefits, which will include customized labels, special offers and Crown Royal merchandise, opportunities to learn about the brand and share stories, personal event reminders, invitations and advance notification of Crown events.


STORE-LEVEL EFFORTS

Relationship building doesn’t only apply to consumers. Warren said suppliers need to form “strong bonds” with distributors and retailers to ensure that the brand image and message is communicated frequently and correctly, whether through promotion, point-of-sale materials, shelf placement or local event sponsorships. “Retailers need to challenge their distributors and suppliers to provide them with the information and tools that will help them grow their sales.”


Retailers, Kelley insisted, “should be taking a look at their shelves and making sure they have the top selling brands at an eye-level position where the consumer will see them when they come in the store. They need to make sure they display brands like ours that are big sellers, and that they have sufficient inventory to prevent out of stocks. They need to be relying on their own knowledge of their consumers to make sure they’re stocking and promoting what sells best in their area.”


Retailers, said Harris, “control the amount of shelf space they give each brand. All the brands are fighting for shelf space, but the more displays they can give us the more volume they get from us, to be honest.”


Higgins believed retailers have been “extremely helpful” in promoting programs such as Crowning the Moment, which takes the personalized label program to “an entirely new level.” Consumers can buy specially marked packages, get a Crown Royal photo label, and actually put a photograph of a special moment on the bottle.


Several new creative executions were rolled out during the fourth quarter of 2000 that will, in Higgins’ view, continue to communicate her brand’s appetite appeal, mixability “and, as always, have the trademark Crown Royal wit. So those will be coming up in the first quarter to further enhance brand awareness and growth for us.”


Windsor Canadian’s Warren called forming relationships with customers “critical to our success. We form relationships with customers through our distributors and where possible, directly. We also feel strongly about connecting to local communities and ultimately consumers through our various promotions and sponsorship activities.”


Brown-Forman’s Kelley agreed, saying, “You need to always be in front of the consumer’s mind,” adding that it is up to suppliers to provide consumers with information to spur them to use the product.


Promoting those kinds of relationships with consumers remains the key to successfully reinvigorating the Canadian category. The internet can help do that, but so can traditional marketing strategies that are planned smartly and executed carefully. All it takes, executives agree, is the top-level savvy and commitment to do it.


LEADING BRANDS OF CANADIAN WHISKY IN THE CONTROL STATES


 
 
 

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 (Mixed Cases)


 

 Brands
 Type
  Supplier
 1999(*)
  2000(*)
 % Change

Canadian Mist
USB
Brown-Forman Beverages
715,172
667,977
-6.6%

Black Velvet
USB
UDV North America
709,439
724,507
2.1%

Crown Royal
FB
Seagram Americas
471,091
525,051
11.5%

Canadian Club
FB
Allied Domecq Spirits, USA
364,303
344,187
-5.5%

Windsor Supreme
USB
Jim Beam Brands
276,339
265,667
-3.9%

Seagram’s V.O.
FB
Seagram Americas
275,572
278,161
0.9%

Canadian LTD
USB
Barton Brands
183,087
181,302
-1.0%

Canadian Rich & Rare
USB
Allied Domecq Spirits, USA
155,541
167,407
7.6%

MacNaughton
FB
Barton Brands
148,324
161,297
8.7%

Lord Calvert
USB
Jim Beam Brands
130,515
128,583
-1.5%

Total Leading Brands in the Control States
3,429,383
3,444,139
0.4%

Others
804,864
797,258
-0.9%

Total Canadian in the Control States
4,234,247
4,241,397
0.2%

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