Whiskey makers aren’t like most consumer products companies. Distillers don’t spend a lot of time reviewing monthly sales reports or talking about quarterly results. Though just as important to them as they are to folks who make corn flakes, whiskey makers have to take the long view, planning 10, 15 years, even a generation or two ahead.
Fortunately for consumers, the result of distillers’ foresightedness has been a wealth of new products in the past two decades that demonstrate their art continues to flourish. And though the straight whiskey category grew modestly in 2007 – up only 0.9% to 14.7 million 9-liter cases nationally and 1.3% in control states to 3.57 million mixed cases – a lot of brands, particularly at the high end, are seeing solid growth.
With slow growth in the economy, in fact, consumers seem to be turning either to less expensive brands or, for those who have money, to super- and ultra-premium brands, leaving many of the big middle-of-the-road brands with less growth, but growth nonetheless. Both Jack Daniel’s and Jim Beam experienced advances of less than 0.5% nationally in 2007, with Jack Daniel’s posting a slightly better sales gain in control states of about 1.4% over 2006.
The number three and four brands in both licensed and control states, Evan Williams and Maker’s Mark, both experienced positive growth in 2007. Evan Williams was up 5.1% to more than a million 9-liter cases nationally, and up 9.0% to nearly 300,000 mixed cases in the control states. Sales of Maker’s Mark grew a solid 8.1% last year to 720,000 cases nationally, and 8.8% in the control states. Hampered somewhat by supply problems this year, Maker’s said retailers can expect to see more product on the shelves this fall. Wild Turkey, too, posted respectable gains in 2007 of about 4.6% to 588,000 cases nationally and 2.7% in the control states.
Several popular-priced brands among the top ten leaders, such as Old Crow and Ten High, also posted modest sales gains.
Blocking And Tackling
With more than 54% share of the straight whiskey category, the fortunes of Jack Daniel’s and Jim Beam have a big impact on category numbers, but any growth of the two brands represents a substantial number of cases.
“Superpremium brands have done well because people who have money still have money,” said Tim Rutledge, vice president, director of the Americas for Jack Daniel’s. “And there’s some volume growth in the popular-price segment due to people trading down. In the premium category where we play, we get a little traffic from both. A brand like Jack Daniel’s is a great icon for people to trade up to, purchase on a regular basis, or trade down to on occasion.”
Since the on-premise market is a little soft due to a slow economy, Jack Daniel’s has been focusing on building its presence in off-premise accounts, and has shifted some of its promotional budget to support trade activity. After a reorganization two years ago to realign its distributor network with its markets, the brand now offers more promotional tools. The sales team is working with retailers on more display activity and is spending more on retailer ads.
“We have more value-added packs in sheer numbers than ever before, including gift cartons and glass packs,” Rutledge said, “and we have more nimble and variable display pieces to help retailers with any size occasion or event. We’re much more focused and prepared to execute.”
The brand now heads into its fall football tailgate promotions following the traditional summer “Jack & Coke” push. Also this fall going into the holidays, the brand celebrates with 75th anniversary of the repeal of Prohibition (and 70th anniversary of its repeal in Tennessee) with a two-bottle gift pack-one to commemorate national repeal and one commemorating state repeal-in a wooden case.
The brand maintains its high visibility through participation in sporting events like NASCAR and professional bull riding, but stresses responsibility in all its promotional activities.
For its part, Jim Beam is putting almost its entire ad budget behind “The Stuff Inside,” the successful campaign that started out in 2004 talking about the brand and the product. The campaign has shifted to phase two, recognizing people and organizations that remain true to their values, integrity and character.
“When the campaign began, we focused inwardly on the brand,” said Keith Neumann, vice president of whiskeys at Beam Global. “Now we’re focused outwardly on how Beam can help people who share our values.”
The brand is saluting causes as diverse as Operation Homefront, a national program with more than 4,500 volunteers that supports the families of U.S. troops stationed overseas; an amateur photographer; a comedy troupe; the campaign to save Wrigley Field; and the Terry Farrell Firefighters fund. Brand support ranges from a $175,000 cash donation to Operation Homefront to sponsorship of a hip-hop group’s concerts, helping these groups and individuals reach the next level of their potential.
Starting this summer, new ads and point-of-sale material created awareness for the campaign, encouraging consumers to visit a website and participate in events, fundraising, and conversation about what constitutes values and character. A series of in-market “Beam Town” events took the conversation, causes and characters directly to consumers.
Growth In The Middle
While premium brands in other spirits categories struggle, the fact that the middle tier of straight whiskey is holding its own doesn’t surprise some in the business.
“This is a good time to be in the business,” said Larry Kass, director of marketing at Heaven Hill. “There’s been a resurgence of interest in American straight whiskies. For a long time, we had a hard time marketing ourselves, but since the ’80s and ’90s and the introduction of single barrel bourbons, we’ve really hit our stride. With the interest in superpremiums has come a resurgent interest in the classic whiskeys like Evan Williams and Jim Beam – interest and appreciation both in the products and the stories and heritage behind these brands.”
Evan Williams has stepped up its ad support in the past five years, and is a big sponsor of pro bass fishing. The brand has been Jason Quinn’s sponsor for many years in the Bassmaster Elite Series, and this year it signed another pro, Russ Lane. Lane, a former minor league baseball pitcher, turned pro in 2005 and had been in the money in 24 out of 36 events he’d competed in when he joined Team Evan Williams.
The brand also has an on-going promotion this year celebrating the 225th anniversary of Evan Williams opening his first distillery.
Wild Turkey also is growing faster than the category, and is selling well across all of its marques. “Consumers are recognizing the quality of Wild Turkey,” said Andy Nash, global brand director for Wild Turkey at Pernod-Ricard. “There’s also some news in terms of value for their money. In terms of proof points, flavor and quality, consumers are definitely getting value.”
The brand has spent a lot of time and effort this past year promoting its new American Honey liqueur on-premise nationally, sponsoring more than 500 bar nights. Part of the objective, though, is making sure that consumers make the connection with Wild Turkey.
“On-premise promotions are really beginning to pay dividends in the off-premise market,” Nash said. “They’re really bringing attention to the brand. Now we’re working with the trade to make sure the brand is seen by consumers.”
In October, the brand will feature an on-pack offer of a 50 ml bottle of American Honey with the purchase of Wild Turkey 101, where legal. And in time for the holidays, Rare Breed will be offered as part of a gift pack with glasses in a special wooden box.
Maker’s Mark continues to base its success on word of mouth, building its network of brand “friends.” Started by Bill Samuels, Sr., in his kitchen in the 1950s, the brand relied on its folksy story and the smoothness of its product to win over consumers. Those consumers have turned into the product’s best ambassadors.
“The Maker’s Mark story is very powerful and very real,” said Rob Samuels, director, global brand development. “The only way my grandfather felt comfortable sharing his knowledge of bourbon was open his doors and offer tours of the distillery. And it used to be that people would drive down and visit. The brand connection now is about engaging folks who are interested and working like crazy to make sure we give them the story if they can’t get here in person.”
To help, the brand is launching a new interactive website that incorporates a virtual tour of the distillery. The site will be available in six different languages to acknowledge the growing international audience for Maker’s Mark.
“The real story has been keeping product on the shelves the past few years,” said Bill Samuels, Jr., president. “We’ve resisted new expressions because we’ve never found anything to enhance the product we’ve got, and because we’re trying to keep up with the growth we have.”
An expansion six years ago, doubling the size of the distillery by replicating exactly what was already there, should alleviate supply problems, according to Bill Samuels.
Whiskey A Go-Go
Brands that are really fueling straight whiskey growth are the small above-premium whiskeys that attracted consumer attention and interest in the first place.
“The category is playing to some macro trends,” Beam’s Neumann said. “First, the thirst people have for more craft-oriented, authentic products, not just in spirits but across many categories. Second, the development of bourbon connoisseurs not as people age into their 40s, but among people in their 20s and 30s, a real discovery process among people with discerning palates and lots of curiosity.”
For years, the high end of the straight American whiskey category was undeveloped. Brands like Woodford Reserve, Gentleman Jack, Knob Creek, Blanton’s, Evan Williams Single Barrel and others from virtually every whiskey distillery opened consumers’ eyes to the possibilities in the category. Learning about these brands led consumers deeper into the process of discovery about the history and heritage of straight whiskey. From there, word-of-mouth has spread.
“What I see happening is similar to what happened in the Scotch category,” said Joe Murray, brand manager for Old Forester and Early Times at Brown-Forman. “Consumers now have a collection of whiskeys to choose from. You may have a Woodford Reserve or Maker’s Mark in your portfolio, but you also may have a bottle of ‘X.’ We’re even seeing more ‘brown’ bars as a kind of backlash to vodka, like ‘Bourbon & Branch’ [in San Francisco].”
Now there are nearly 300 straight whiskey expressions available from 10 distilleries, and most of those are from only five distilleries. But whiskey makers are betting that consumers won’t quickly tire of all the new entries. In addition to the expansion at Maker’s Mark, Heaven Hill just cut the ribbon on new digs at its distillery that expands capacity by 50%. Pernod-Ricard is investing $36 million in expansion and improvements at Wild Turkey. And the list goes on.
“We’ve seen new product releases and capital investment in distilleries at record levels,” said Bill Samuels, Jr. “We’re all either foolish or optimistic.”
Most in the industry think it’s the latter. “Consumers are still willing to pay for products they think are worth the price,” said Wayne Rose, brand director for Brown-Forman’s Woodford Reserve, “and there’s room for growth. The segment remains underdeveloped. Look at competition; in the tequila category, 18% of volume is at the superpremium level or above. In single malt and superpremium Scotch, it’s about 13%. In bourbon, only about 4.5% of volume is in the high end. We see an emerging consumer opportunity there.”
Woodford Reserve, as one of the pioneers in the segment, is now taking a two-pronged approach to the market. It continues to talk about substance – history, heritage, authenticity – and is proud of its medals in all three major bourbon-tasting competitions. But it now also addresses style more forthrightly, and how the brand fits into the lifestyle portion of the equation.
The brand’s sponsorship of the Kentucky Derby is a big part of that strategy. The brand has moved wholeheartedly into the tradition of horse racing, even owning its own horses. Consumers are encouraged to visit the WoodfordReserveStables.com website to follow the distillery’s forays into horse racing. They’re given the opportunity to help name horses, choose colors of racing silks and track local events.
The brand also is coming out with a new addition to its Masters Collection late this fall.
Most of the small, high-end brands are focused on taking their stories, and products, directly to consumers. Tastings, seminars, educational forums, brand ambassadors are all ways in which these smaller brands can talk one-on-one with consumers about the craft and care that goes into their products, and how they’re different from each other.
Evan Williams, for example, has an “Affinity Society.” Maker’s has “Ambassadors.” Wild Turkey has its “Rare Breed Society.” All are designed to give consumers a more intimate relationship with the brand. Jim Beam has “whiskey professors” that spread the word about whiskey making and its Small Batch Collection. Its “Ask The Professor” feature is the most popular page on the Knob Creek website.
“Its all about experiences and spreading the popularity of a brand by word-of-mouth,” said Kris Comstock, bourbon brand manager at Buffalo Trace. “These consumers drink products not because of their stats or their advertising, but by experiencing them and learning about them online and from friends who say, ‘Hey, you’ve gotta try this.'”
Buffalo Trace encourages both consumers and retailers to visit the distillery, and gives retailers the opportunity to select their own barrel of whiskey. The distillery will bottle it with a special label with the retailer’s name. “It helps bring the distillery experience right into the retail environment,” Comstock said. “Retailers select and recommend the whiskey they like, not just the products we make, giving them a way to open dialogue with customers.”
Getting consumers to visit their distilleries has long been a favored way for whiskey makers to impart the history and tradition of distilling in America. Taking a page from Scotch producers’ playbook, several distillers have banded together to promote the Kentucky Bourbon Trail, encouraging people to tour various distilleries and museums. And the Distilled Spirits Council of America (DISCUS) has an American Whiskey Trail website (www.AmericanWhiskeyTrail.com) that tracks the history of straight whiskey from George Washington’s distillery through Tennessee to Kentucky.
Distillers continue to innovate and introduce new products in the category, giving retailers more ways to keep consumers excited. Buffalo Trace just came out with Charter 101 and its once-a-year release of George T. Stagg vintage 15-year-old. Evan Williams released the first in its Parker Heritage Collection last fall, and this month releases a new edition, a 27-year-old bourbon. Bernheim, a wheat whiskey (as opposed to a wheated bourbon) – using a majority of wheat in the mash bill instead of corn, rye or malted barley – has rolled out to 22 markets and is doing quite well.
“Innovation in the category at the high end is still in its infancy,” Beam’s Neumann said. “There are so many different factors you can influence – proportions of the mash bill, length of aging, and so forth – that we’re not really limited in terms of the flavor experiences we can create. There’s still a wonderful opportunity to capitalize on consumers’ renewed interest in bourbon and straight whiskey.”
