“It’s all good.” That could be the mantra for the spirits and wine industries in the U.S., as they continue to march onward and upward, according to the latest statistics just now being released in the Adams Handbook Advance 2007. In 2006, distilled spirits consumption rose in the U.S. for the ninth straight year, gaining more than 6.6 million 9-liter cases from 2005 to just under 176.6 million cases, an increase of 3.7%. That gain outpaced the 2.8% increase spirits consumption showed in 2005. For its part, wine consumption in the U.S. improved by 3.4% in 2006, to 283.1 million 9-liter cases, a more than 7 million case gain over 2005. For the record, this was the fourteenth straight year that wine consumption grew in the U.S. cases, a more than 7 million case gain over 2005.
There are several positive trends at play here, including the increasing cultural acceptance of moderate wine and spirits consumption as a potential health benefit; the continuation of a thriving cocktail culture; more product access, with the liberalizing of archaic blue laws nationwide, especially the growth of Sunday sales; a more spirits- and wine-savvy public, responding to increasing efforts on product education from retailers, restaurateurs, distributors, suppliers and the media; a recognition that beverage alcohol can be a flavorful enhancement to meals; and a general modernization of retail outlets, as they focus on making beverage alcohol shopping a more enjoyable and less intimidating experience, especially for women. And the golden thread weaving its way through all of these positive trends is the American consumer’s ongoing migration toward luxury products. Indeed, according to a recently released report by the Economic and Strategic Analysis Department of DISCUS, spirits products priced at superpremium and above level increased their volume by a healthy 17.5% in 2006, almost five times the growth rate of spirits overall. And, as one would expect, this increase in high-end sales resulted in overall dollar growth that substantially exceeded volume growth percentages. According to the Handbook Advance, retail sales (combined on- and off-premise) of distilled spirits jumped 9.5% in 2006, to $58.6 billion, while retail sales of wine increased 7.2%, to $26 billion.
Spirit Category Overviews
Once again, most spirits categories registered increases in 2006, with flavored spirits, especially in the fast-growing white spirits categories, again expanding their volumes and offerings. The largest spirits category, vodka, continued to gain market share with sales of more than 49.3 million 9-liter cases, a 6.7% gain over 2005. Rum gained 3.5% to 22.8 million 9-liter cases, and tequila continued its growth with a 10.2% gain to just under 10 million cases.
The second-largest distilled spirits category, cordials & liqueurs, rose another 3.7% to 21.5 million cases in 2006, while brandy & cognac climbed 1.9% to 10.4 million cases. Gin registered a slight increase in sales last year to 11 million cases, while prepared cocktails decreased by 1.7% to 6.5 million cases.
Among whiskies, straights grew by 3.8% to about 14.7 million cases; Irish grew by 16.4%; and Scotch eked out a 0.4% gain. Canadian whisky showed a slight 0.3% decline, while American blends were also off, by 1.1% to 5.2 million cases.
Wine Continues Surge
Last year’s overall gains in wine sales were again led by table wine, which accounts for more than 90% of the U.S. wine market. Led by premium varietals, table wine grew 3.7% to 258 million 9-liter cases in 2006. Similar to 2005, imported wines showed a larger percentage gain (+5.6%) than domestically produced table wine (+2.7%). Still, domestic table wine comprises about two-thirds of the entire U.S. wine market.
Champagne & sparkling wine continued its positive momentum last year (+4.0%), to 13.4 million cases, while vermouth and dessert & fortified wine consumption both declined slightly.
Why Growth Brands?
As we’ve been noting for several years now, “brand equity” is perhaps the most valuable asset a product possesses, particularly in the beverage alcohol industry, where a sudden 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. 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 can often run counter to them (i.e., Crown Royal outperforms the Canadian whisky category). Thus, the rationale behind “Growth Brands,” our annual report that uses the latest industry results to highlight those wine and spirits brands that have demonstrated noteworthy growth over recent years. [The September/October 2007 issue of Beverage Dynamics will publish Beer Growth Brand results.]
Spirits Fast Track Brands
To attain Fast Track status, a brand must have maintained double-digit sales growth over each of the past four years (with sales of more than 100,000 9-liter cases). As brands grow larger, this clearly becomes more difficult with each passing year. Thus, the spirits brands that are identified here are the cream of the Growth Brand crop, and often among the fastest-selling spirits in the U.S.
Only 13 spirits brands were included this year (down from 15 last year), and among them are eight vodkas, two tequilas, and a single liqueur, rum and whiskey, and all except one were included in the Fast Track last year. Once again, vodka dominates the Fast Track, and one cannot emphasize enough how the tremendous growth and innovation among vodka brands has shaped the spirits market. To a degree, the rise of the cocktail culture in the past decade, which has contributed to the amazing gains in spirits overall, can be traced to the prestige and appeal of the tier of high-end vodkas. In addition, the explosion of flavors in the category has coincided with and maybe helped spur the expansion of flavors overall. In the end, vodka now accounts for about 28% of all spirits sold in the U.S. Even more significantly, according to a recently released report by the Economic & Strategic Analysis Department of DISCUS, the superpremium segment of the vodka category grew by 38.6% in 2006 compared to 2005. And the Fast Track features several of these brands.
Grey Goose Vodka, the high-end import from France, had another stellar year in 2006, gaining an estimated 28.2% in sales to 2.66 million 9-liter cases. Bacardi purchased the brand two years ago and has continued driving its phenomenal success. The brand recently debuted a new line extension, Grey Goose La Poire, a pear-flavored version, which now joins the portfolio of L’Orange, Le Citron, La Vanille and the original Grey Goose. Skyy, another above-premium vodka featuring five additional flavors and an even higher-end expression (Skyy 90), increased sales to 2.27 million 9-liter cases, while Ketel One, from Nolet Spirits, eclipsed 1.75 million 9-liter cases in 2006. Svedka, just purchased from Spirits Marque One by Constellation for $384 million, gained almost 400,000 cases last year, breaking the million case barrier for the first time, a 59.8% gain over 2005. Three Olives, another superpremium imported vodka with an impressive lineup of flavors, jumped almost a third to 630,000 cases. UV, from Phillips Distilling, and Vincent Van Gogh (Luctor International) vodkas also feature extensive flavored vodka portfolios.
The only first-time member of the Fast Track is Tito’s Handmade Vodka (from Fifth Generation), an ultra-premium product made in Austin, TX. Pot-distilled in small batches, Tito’s grew sales 60.4% last year, to 170,000 cases.
Jagermeister, the German liqueur, repeats as top dog in the Fast Track this year, gaining another 550,000 cases to 2.85 million cases. One of the industry’s fastest growing brands is Patron, the line of superpremium tequilas, which increased sales a terrific 74.8% to more than a million cases for the first time. Another tequila, El Jimador, also made the Fast Track, underlining the overall growth in the tequila category nationwide.
Spirits Rising Star Brands
This year, nearly twice as many brands, 13, met the criteria for a Rising Star than last year (7). Five of them are returning Rising Stars (Seagram’s Vodka, Bacardi Party Drinks, Pravda vodka, Brugal rum, Ciroc vodka), and interestingly, there is a range of product types here that we didn’t see last year, including prepared cocktails, whiskies, rums, liqueurs, cognacs and, of course, vodkas, which lead the category with four representatives.
Following the huge numbers of Seagram’s Vodka’s initial launch in 2003 (460,000 cases), the brand has kept up a torrid pace, even after it was sold by Pernod Ricard (which initially debuted the brand as a worthy companion to the famous Seagram’s Gin) to Infinium Spirits. Like other vodkas in its price range, the brand has offered several flavors to help spur consumer interest. Pinnacle Vodka, from White Rock Distilleries, has been named a Rising Star for the first time, having almost tripled its sales last year to 151,000 cases. Pinnacle had notable success when White Rock “re-introduced” the brand in a new blue-hued PET bottle last year. It also comes in a range of six flavors. Both the third and fourth vodkas included here are superpremiums, Pravda, the Polish import that shot up 40% to 140,000 cases, and the French-made Ciroc, produced from grapes.
Reflecting the appeal of certain types of pre-mixed cocktails, Bacardi Party Drinks hit sales of 725,000 cases last year, up 8.2%. If it continues its success through 2007, it will graduate to the Established Growth Brand category.
First time Rising Stars include Pama, from Heaven Hill Distilleries, which notched sales of 50,000 9-liter cases right out of the chute. The pomegranate-flavored liqueur was the first widely available spirit (to our knowledge) to use that flavor. Since Pama’s launch, pomegranate has become a favorite of spirits producers, appearing in other liqueur brand line extensions and a number of vodkas. Sailor Jerry Rum, from William Grant & Sons, more than doubled sales to 125,000 cases. The Spiced Navy rum has an arresting package, featuring two tattooed Hawaiian dancers, and is named after a famous tattoo artist who lived on the island. Two additional rums made the category: Brugal, imported from the Dominican Republic by Shaw-Ross Importers; and 10 Cane, from Moet Hennessy, a superpremium rum that uses the juice from freshly pressed sugar cane in its production process. In addition, two Irish products are also included here: Irish Manor Irish Cream, which hit 50,000 cases, and a new Irish Whiskey, Michael Collins.
Spirits Established Growth Brands
These 27 Established Growth Brands represent many of the largest and most successful spirits brands in the U.S. Often, these brands are leaders in their respective categories, and in many instances, have been cited as Established Growth brands before. That is no easy task, since these brands must deliver sales gains year after year, through changing tastes and changing macroeconomic conditions. They are, for the most part, mature brands that have been on the market for years, and have created a loyal following through ongoing brand-building efforts. Whether it be through merchandising support at retail, packaging initiatives, pricing strategies, line extensions, new advertising and marketing programs and other brand positioning techniques, these spirits have succeeded in growing their business by appealing to new and existing customers.
Indeed, this list provides a general snapshot of what spirits Americans are consuming. There is a range of products here, from high-image superpremiums to everyday value brands to plenty of recognizable, quality spirits in between. Of the 27 brands here, 16 are imports, and every major product category is represented there are six vodkas, one gin, three rums, four tequilas, three brandy and cognac brands, three liqueurs, one prepared cocktail and six whiskies (one Scotch, one Canadian and four bourbon/American whiskies). The variety of price and product type among these top-growing brands serves to underline one of the industry’s oft-spoken “laws” that consumers approach different consumption occasions by purchasing different classes and types of spirits.
All the Established Growth brands sold more than 400,000 9-liter cases in 2006, with 15 of them eclipsing 1 million cases. Most impressive was Bacardi, the top-selling spirit in the U.S., which added another 260,000 cases last year to sales of 9.0 million 9-liter cases. Captain Morgan Original Spiced Rum increased by almost 200,000 cases last year, as did Absolut Vodka. Jack Daniel’s gained more than 200,000 cases, for a 4.8% increase, while Diageo’s Jose Cuervo and Crown Royal both upped sales by more than 100,000 cases.
Hennessy Cognac had a stellar year, adding sales of more than 150,000 cases (up 7.3%), while two brands broke the 2 million case barrier for the first time in 2006: Stolichnaya and McCormick Vodka.
At these volume levels, brands that grow by double-digit percentages are worthy of special note. This year, they include Maker’s Mark, from Beam Global Spirits & Wine, which hit sales of 674,000 cases, a 13.1% rise; Burnett’s Vodka, from Heaven Hill Distilleries, which gained 11.0% in 2006, to 605,000 cases; and 1800 Tequila, from Skyy Spirits, which increased by 10.1% to 435,000 cases.
Spirits Comeback Brands
This final category recognizes those major brands that experienced a sales decline in 2005 (compared to 2004) and reversed that decline in 2006, gaining back at least the same amount of case volume lost in 2005. Among the distilled spirits brands to qualify for these exacting standards are three well-known premium brands.
DeKuyper, the line of liqueurs from Beam Global Spirits & Wine, had long been an Established Growth Brand, with annual sales of well over 2 million 9-liter cases. Last year, the brand showed a slight decline in 2005 and fell off the list. However, in 2006, DeKuyper rebounded by almost 90,000 cases to sales of just under 2.87 million cases, a respectable 3.2% gain. The same process occurred with another over-2 million case brand, Black Velvet Canadian Whisky, from Barton Brands. The brand regained its positive sales momentum in 2006 (after a very modest decrease in 2005) to more than 2.11 million cases, a 2.2% increase. The final brand to reverse a small decline is Diageo’s Johnnie Walker Red, which saw a 2006 sales increase of 2.3% to 676,000 cases. This was a welcomed gain, since Red not only operates in the challenging Scotch category, but also because its higher-image brand sibling Johnnie Walker Black has had such phenomenal sales success over the past decade.
Wine Fast Track Brands
If anything reflects the difficulty of attaining Fast Track status, it’s the fact that Yellow Tail, the phenomenally successful Australian wine, has fallen off the list this year, after topping the group last year. The reason? Even though it gained more than a half million cases in 2006, the brand’s growth rate was only 7.3% not double digits as the rest of the Fast Track Brands must be. [Yellow Tail most definitely a victim of a large base number is now near the top of the list of Wine Established Growth Brands.]
Of the nine brands that did get included here (the same number as last year), six of them are repeat members (Foxhorn, Smoking Loon, Barefoot Cellars, La Crema, Nobilo and Wolf Blass). The top six brands are, for the first time in years, all from California and, except for one (La Crema), all competitively priced at approximately $10 and below at retail (taking into account that prices vary from market to market).
It’s clear to any observer of the wine industry that name and label design are playing an increasingly important role in wine sales throughout the U.S. Indeed, the top four brands here feature a critter, waterfowl or the impression of a bare foot on their labels. Although these are relatively mild examples, the trend toward wilder and wackier wine names and labels is having a noticeable affect on sales. [More on this trend under Wine Rising Stars, to follow.]
Foxhorn continued its growth, up 300,000 cases last year, to 2.6 million cases, while Barefoot Cellars exploded, more than doubling sales to 2.4 million cases. For its part, Smoking Loon broke the 1 million case barrier for the first time in 2006, and Crane Lake improved sales by more than a third, to 875,000 cases. An additional Bronco Wine brand, Salmon Creek, added 50,000 cases to 350,000 last year. The one above-$10 wine among the domestic brands, Kendall-Jackson’s La Crema, grew sales to a healthy 560,000.
Among the imported wines included in the Fast Track is Casillero del Diablo, a label of the Concha y Toro line imported from Chile by Banfi Vintners. The brand increased more than 22% last year to 240,000 cases. Another import, Nobilo, a New Zealand wine brought in by Pacific Wine Partners, saw sales jump by more than 40%. The well-known Wolf Blass, a superpremium-priced Australian import, gained 23% to just under 200,000 cases.
Wine Rising Star Brands
If the 32 wines included in the Rising Star Brands category this year are any sign, then it seems that the wine industry has embraced the wacky, the cute and the odd in the naming and labeling of their brands. Obviously, it’s been working. Consumers are apparently drawn to these cuddly and quirky presentations, spurred to take the bottle with the funny looking label and clever turn of phrase off the shelf and try it. This year, there are penguins, fish, moose, monkeys, horses, owls, koalas, emus, and one wine that has a different label/critter for each varietal, to name a few. There are also boomerangs, thieves, guitars, hangers and high heels, as well as plenty of fun and puns. Add to this several unique bottle presentations, again tempting consumers to trial. And those are only the wines on our Rising Stars list. There are numerous and even more extreme examples of this trend. Indeed, it appears as if the wine industry is intent on using several “alternative” means of expanding its appeal to American consumers the oft-criticized intimidation factor of wine and wine labels is rapidly being replaced by picturesque and approachable packages. It is not a dumbing down; it is a change of emphasis, injecting more lightheartedness into the industry. Still, the wine itself is appealing to consumers’ tastes. There are wines with depth and character here, but there are also plenty of “drink-me-now,” fruit-forward wines made to please the mainstream American palate.
Two years ago there were 22 labels represented here, last year there were 26 and this year there are six more. Eighteen California wines made the list, with six Australian efforts, three from Italy, two from Washington State, and one each from France, Spain and New Zealand.
The top Rising Star wine is from Australia Little Penguin, which gained another 39.1% in 2006 to 900,000 cases. Other notable Australian wines include Little Boomey, which registered just under 200,000 cases; Twin Fin, which rose to 181,000 cases; Jindalee, which uses different label designs for each of its portfolio offerings; Mattie’s Perch, with 75,000 case sales in its first year on the U.S. market; and Four Emus, with a 65.6% increase.
Notable West Coast Wine Rising Stars include Fish Eye (The Wine Group), which more than doubled its sales to 650,00 cases, and offers its portfolio of varietal wines in 750 mls with colorful labels as well as in bagin-box packages; Black Box, which features a line of bag-in-box premium varietals, and gained more than 50% to 571,000 cases; the red, rosé and white wine offerings from Menage a Trois (Trinchero), which showed an 83.3% increase; Edna Valley (Diageo), which hit sales of 231,000 cases; 3 Blind Moose (Centerra), which more than doubled its sales to 210,000 cases; Red Diamond (Ste. Michelle Wine Estates), which registered 216,000 cases; Five Oaks (Gallo), whose line of varietals hit 120,000 cases in its second year on the market; 14 Hands (Ste. Michelle), at 95,000 cases; Pinot Evil (The Wine Group), with 80,000 cases in its first year on the market; and Three Thieves, at 74,000 and featuring varietals packaged in retro-style jugs and tetra packs.
The top European wine cited here is Voga Italia (A.V. Imports), which exploded to 250,000 cases. The Italian pinot grigio showcases a highly stylized package, including a cork closure complemented by a large, black airtight twist cap. Two other Italian Rising Star wines are both from Gallo: DaVinci, with its artist-inspired label, which gained another 45.8% to 175,000 cases, and Maso Canelli, a superpremium-priced import with sales of 95,000 cases. Two smaller brands, both new to the market last year, round out the European contingent. They are Gala Rouge (Brown-Forman), a French wine with vintage French poster art on its label, at 40,000 cases; and Red Guitar (Pacific Wine Partners), a Spanish old vine tempranillo.
Wine Established Growth Brands
The Established Growth category notes the top-selling wine brands that have been growing consistently over the past four years, and once again it is dominated by domestic and imported table wine. And though many brands sell for below $10 at retail, a significant number are higher priced. Several of the best-selling wine brands in the U.S. are not included here, a result of the fact that those brands experienced a sales decline for at least one year since 2003. Interestingly, out of the 25 brands to make the list this year, 21 of them were Established Growth Brands last year.
The newcomers include two Australian wines that were previously Fast Track Brands: first, the aforementioned Yellow Tail (W.J. Deutsch & Sons), which eclipsed sales of 8 million 9-liter cases last year; and Alice White (Centerra Wine), which registered 760,000 cases. Other newcomers include two sparkling wines: Korbel (Brown-Forman), the California-produced bubbly, joined the category with sales of more than 1.23 million cases in 2006, while Veuve Clicquot/La Grande Dame (Moet Hennessy), sold 431,000 cases, a 13.7% gain, an impressive performance for a superpremium French champagne.
Among top-performing California wines included here are category leader Beringer (Foster’s), which added more than 400,000 cases to 8.5 million cases (up 5.3%); Robert Mondavi Private Selection (Centerra), which added almost 100,000 cases to more than 1.8 million cases; Clos du Bois (Beam Wine Estates), which gained 5.7% to more than 1.77 million cases; Blackstone (Pacific Wine Partners), which hit sales of 1.5 million cases; Stone Cellars (Foster’s), at 1.3 million cases; Sterling Vineyards (Diageo), which registered more than 1 million cases; Bogle Vineyards, with sales of 831,000 cases; J Lohr, which grew an impressive 24.6% to 770,000 cases; ForestVille (Bronco), which notched 775,00 cases; and Estancia Estates, with an increase of 8.5% to 661,000 cases.
Several Italian wines are included here, reflecting the latest statistics released by the Italian Wine & Food Institute: In 2006, Italian wine exported to the U.S. has for the first time exceeded $1 billion in value, the organization said. Cavit (Palm Bay Imports) leads the group of Italian wines among Established Growth Brands, notching 3 million cases in sales, a hefty 13.2% increase, followed by the perennial best-seller Riunite (Banfi), with sales of 2.25 million cases. Martini & Rossi Asti (Bacardi USA) registered just under 800,000 cases, while Verdi Spumante (Carriage House) jumped to almost 700,000 cases. In addition, both Ruffino (Icon Estates) and San Pedro (Shaw-Ross Importers) continued their success, with the former totaling 621,000 cases and the latter hitting an even 600,000 cases.
There were several other notable performers, particularly Lindemans (Foster’s Wine Estates Americas), which gained well over 200,000 cases last year, an 11.7% increase (more than 2.23 million cases), and Chateau Ste. Michelle, which also notched a double-digit percentage increase (up 13.2%) to more than 1.45 million cases. Finally, the German wines of Schmitt Soehne jumped an impressive 15.0% to 880,000 cases in 2006, perhaps partially as a result of their “Little German” marketing campaign.
For these large-volume brands, competitive pricing is a constant issue that must be complemented by marketing initiatives, a quality proposition, a strong distribution footprint and, as previously pointed out, a shelf presence. Clearly, these brands have succeeded in balancing these elements and drawing consumers into their respective franchises, whether it be at the value, premium or superpremium ends. For them and other major wine brands the signs are positive, with macro trends suggesting that overall wine sales particularly premium in the U.S. should continue growing for the foreseeable future.
Wine Comeback Brands
Similar to the Spirits Comeback Brands category, Wine Comeback Brands must have regained at least as much sales volume in 2006 as they lost in 2005 (compared to 2004). This year, there are three fairly well known wine brands that have regained their sales momentum.
Arbor Mist, from Centerra Wine, engineered a dramatic turnaround in 2006, gaining more than 160,000 cases from the previous year. The line of lightly carbonated, low-alcohol fruit flavor-driven wine now totals just under 4 million cases in sales.
Jacob’s Creek, the popular line of Australian varietal wines, imported by Pernod Ricard USA, likewise reversed a downward trend in 2005. In 2006, the brand gained 5.5% to 905,000 cases. Another Australian wine, Banrock Station, rounds out the Comeback Brand category. Imported by Pacific Wine Partners, the brand has been promoting its support of environmental initiatives, which may have played a part in its excellent 26.2% growth in 2006, to sales of 410,000 cases.