Sweet Innovation

It’s been called the flavor revolution, that wave of new product introductions that have emerged as a result of changing American drinking habits. While most of the attention has been paid to newly popular flavored vodkas and rums, the revolution has racked up significant growth among cordials as well, with suppliers rushing to introduce the next new thing. Explosively fast-growing brands have found favor in the past few years, and a range of flavors that include such disparate sources as pomegranate, watermelon, elderflower, pumpkin and others are fighting for spare shelf space.


“Nobody wants the ordinary anymore,” said New Hampshire Liquor Commission spirits buyer Rick Gerrish. “Everybody wants something special and that really comes through in the cordials and liqueurs category.”


Issuing items they hope will become special has been high on the list of things to do for cordial suppliers – the category underwent the second largest number of new product introductions between 2003 and 2006, with about 110 new items entering the market, trailing only vodka.


But how does a retailer manage all these new products and what’s the best way to sell them?


Making sense of this category has even plagued suppliers; in fact, a current initiative from leading cordial line brand DeKuyper has just broken, as the company announced a new approach to segmenting its various brands, reorganizing its portfolio of 59 flavored items into five families in an effort to simplify things and make it easier for consumers to shop and retailers to sell. (See sidebar)


It’s the kind of move control state officials may welcome. “Segmenting helps consumers select and shop,” said Matt Ulrich, the Pennsylvania Liquor Control Board category manager who oversees cordials and liqueurs. “Everybody’s looking for different flavors, and people are looking to mimic what they see in Martini bars. That follows through in cordials and liqueurs – what better way if you have a couple of different flavors you like, than to get vodka and mix the drinks yourself.”


In Pennsylvania, managing the vast array of cordials takes effort, said Ulrich, with frequent shelf resets required to manage the eight sub-categories they feature – schnapps and liqueur shooters, plus coffees, creams, cocktails, fruits, nuts and specialties. “It’s about individuality; everyone’s trying to find a certain identity that’s different and exciting and new.”


 “The cordial customer is definitely willing to experiment,” added Ulrich, and Pennsylvania stores are experimenting, too, with new shelf sets to break cordials into different types. “When the cordial shopper comes in, if they’re looking for a coffee liqueur, they tend to look at all of them and experiment within the category; the same with the fruit section, but sometimes they change it up. They are not necessarily like the vodka consumer who keeps to one brand.”


 “We’ve tried to revive the category a little bit,” noted Gerrish of New Hampshire, where 15% off sales for second purchases and added displays employed around Thanksgiving drove cordials and liqueurs sales increases of 35% to 40%. “We tried to focus on them a little more – they get neglected a little bit sometimes in the holiday season, but there is good usage by consumers during that period.”


 


Reinventing Retail Approach


Reinventing a retail approach to these products is welcomed, said Cort Kinker, brand manager for cordial line Hiram Walker. “This is a category that should be extremely dynamic but you walk into so many stores and find them all at the bottom of the shelf in the back of the store. In some cases, retailers are putting non-alcohol mixers in better locations in their stores, but I don’t know that they’re making any more money off them, and the cost per use to the consumer is higher.”


The major driver of experimentation and growth, according to most industry observers, has been the cocktail craze, with consumers buying cordials that help them make currently popular drinks like the Sour Apple Martini, the Margarita and the Cosmopolitan at home. With slightly older drinks like the Nutty Irishman or others regionally popular, consumer interest using cordials in mixed drinks is high, said Gerrish.


“This is a safer way to drink, because they don’t have to worry about driving home. And it’s basically less expensive and more customized. It’s a little bit more work, but with the economy the way it is, people are willing to spend the money to make their own,” commented Ulrich.


Different companies and states sell these sweet liqueurs differently. But with such a vast collection of brands doing battle, StateWays decided to take a look at cordials segmented into a variety of sub-categories, and the activities of the leading brands within each group.


 


Fruit


Perhaps the largest category, fruit cordials include such popular brands as Grand Marnier, Chambord and most of the items from the leading cordial houses like DeKuyper, Arrow, Bols and Hiram Walker.


America’s fruit-flavor obsession has bolstered the category and new flavors continue to arrive; launching shortly are two new flavors from Hiram Walker, Blueberry Passion Schnapps and White Peach Liqueur.


This sub-category, above all others, has been driven by the consumer trend in home cocktail making. Promoting those drinks is important to this group of products, few of which are meant to be consumed on their own.


“The key is that drinks can’t be 18 ingredients,” said Sheryl Rosenberger, senior brand manager for the category leader, DeKuyper. “We need to make great cocktails that a consumer can manage using three to four ingredients, top.”


One of the brands leading the category is Grand Marnier. J. C. Iglesias, business director for the Grand Marnier Group at Moet Hennessy USA, said the brand has benefited greatly from the cocktail revolution, specifically from the continued and growing popularity of the Margarita.


     “Today, any consumer that’s come to us in last five years, there’s a 40% chance that they came to us through the Margarita. We’ve doubled our Margarita business since 2002,” he said. The brand has shown increases for 14 straight years.


Like many other brands, Grand Marnier marketers have been focusing on promoting home consumption of cocktails like the Cosmopolitan, made with their brand. “Especially with Margaritas and Cosmos, people are making them at home more often then they used to,” said Iglesias. “People at home used to drink beer or wine or simply make a long drink, but now they are trying to make these slightly more complicated drinks more often.” As a result, Grand Marnier, even in its value-added programming, focuses on the Margarita with recipes and partnerships with various tequilas.


The other well-known orange-flavored liqueur is Cointreau, which had been priming its marketing efforts in the past few years with its “Be Cointreauversial” campaign. The campaign is currently focused on the new Cointreau brand ambassador Dita Von Teese, a modern burlesque star. Less controversial are classic Margaritas and Sidecars using Cointreau.


For their fruit cordials, Hiram Walker has also focused on cocktails, according to Cort Kinker, brand manager. “For summer cocktails, we’ve got a lot to offer. The cordial and schanpps category is really turning into a Martini flavoring, and it’s a big portion of the business right now.”


What the sour apple flavor pioneered with the Sour Apple Martini was not only the idea of making drinks at home with contemporary cordials but also of the importance of color. “And that’s what’s important because people want these exciting-looking, flavorful and colorful drinks,” said Kinker. As a result, Hiram Walker’s new flavors – Blueberry Passion Schnapps and White Peach Liqueur – were formulated with color in mind. Other recent innovations, like Pear Schnapps, Pumpkin Spice Liqueur and Pink Grapefruit Schnapps, arrive with lots of recipe support from the supplier.


Other Proprietary Brands


Jagermeister, now the number one cordial among all products and lines of cordials, has been a 21st century miracle. “If you want to hear a success story, this is it,” said Pennsylvania’s Ulrich. “It’s a huge phenomenon, consistently up and a very unique item.”


 “The surge in popularity of energy drinks has fueled the growth of Jagermeister through the Jager Bomb. It’s become incredibly popular,” said Lee Einsidler, ceo of Jagermeister importer Sidney Frank.


“This year we believe that we have a real opportunity for the first time to do 3 million 9-liter cases nationally of Jagermeister,” he said. “For the longest time, Jager was very skewed to the on-premise; it’s only in the past few years that the popularity has caught on off-premise. Now, more people are looking for home usage opportunities.”


      Gaining that ground has been spurred by the five Jagermeister promotional Winnebagos criss-crossing the country, and the work of the famous Jagerettes, as well as a new tap machine that has taken hold among some retailers, who are either buying them to rent for home party usage, or in some cases, selling them on the retail floor.


     “Smart retailers know in states where you can sell them together, co-merchandising is like money in the bank,” said Einsidler.


Campari, the venerable Italian aperitif created about 150 years ago, has been getting traction with its “Campari Tales” marketing campaign, which focuses on famous actresses, including Salma Hayak and, most recently, Eva Mendes. The secret family recipe used in producing Campari includes about 150 ingredients, among them quinine, orange peel, rhubarb and many different spices. Known as a bitter, the aperitif is the main ingredient in the well-known Negroni cocktail.


Southern Comfort has based much of its recent marketing efforts around its New Orleans roots as well as its SoCo Music Experience, where it sponsors a variety of bands and tours. The brand is the third-largest liqueur nationally, selling more than 1.51 million 9-liter cases in 2007; it grew by 1.1% in the control states in 2007. The fruit, spice and whiskey-flavored liqueur was famously created in New Orleans by bartender M. W. Heron in 1874. It is made from a blend of whiskey, orange, vanilla, sugar and cinnamon flavors, and is served in a multitude of drink combinations. Most recently, the brand has been promoting SoCo and Lime, among other cocktails.


Of more modest volume but with plenty of heritage behind it is Irish Mist, a traditional liqueur made from Irish whiskey blended with honey, herbs and other spirits. It is purportedly based on an ancient recipe dating back more than 1,000 years. According to Skyy Spirits, Mist is being promoted as an “Irish whiskey liqueur,” underlining the Irish whiskey aspect of the brand.


Creams


Cream liqueurs have been consistently strong in the U.S., with most of the activity coming from the big brands, specifically Baileys, which grew 5.8% in the control states in 2007 and is the fourth largest-selling cordial overall in the control states. Overall, it accounts for more than half of the sub-category. Last year, the brand increased its focus off-premise and in 2006, it debuted two brand extensions, Baileys Caramel and Baileys Mint Chocolate.


      “We had an enthusiastic launch of Baileys flavors in 2007 and have continued to see support behind the brand,” according to Melissa Woodbury, Baileys brand manager. “Consumers are still trying the product and have been very supportive of both flavors.”


     This summer, the brand will focus on promoting a summer drink, the Baileys Shiver, made by blending Baileys with ice.  It will be supported by TV advertising and off-premise sampling during the summer.


   Meanwhile, new brands, like Café Boheme, a vodka, coffee and vanilla cream, are seeking a way to break up the Baileys monolith. Number two brand Carolans Irish Cream continues to try to make inroads nationwide, while another, St. Brendan’s Irish Cream, focuses on its traditional appeal, highlighting the fact that it’s made with Irish whiskey and real Irish cream. Other creams, like Tequila Rose, showed significant growth in 2007 in the control states. Tequila Rose is made with a blend of cream, tequila and natural strawberry flavorings, and includes two line extensions – Tequila Rose Java Cream and Tequila Rose Cocoa Cream, positioning the brand in the popular coffee- and chocolate-flavored realms.


Pennsylvania’s Ulrich noted that Voyant, a cream chai liqueur, has shown promise in his state. Castries Crème, a blend of vanilla, cream, peanuts, spices and St. Lucian rum, is looking to take advantage of the growing interest in rum, joining Cruzan Rum Cream, among others.


 


Coffee and Tequila


If Baileys rules the cream category, so Kahlúa lords it over the coffee sub-category, despite a slight volume downturn last year in the control states.


 “It’s still the dominant cordial up here,” said New Hampshire’s Gerrish, seventh overall in the state in 2007, and ninth overall in neighboring Vermont.


Kahlúa French Vanilla and Hazelnut gained rapid acceptance after last year’s introduction, and Pernod-Ricard plans a follow-up shortly with Kahlúa Mocha, focused on expanding purchases by core users. Made with Arabica coffee, vanilla and dark chocolate, the brand extension will be available in 1L, 750 ml, 375 ml  and 50 ml at retail by early June. (Kahlúa French Vanilla and Kahlúa Hazelnut will also add a 375ml size.) 


 “The launch of a dark chocolate Kahlúa leverages the brand’s exotic origins. Research suggests Kahlúa flavors can drive a 12% increase in purchases among current consumers,” according to Sherrie Berdecia, senior brand manager for Kahlúa.


    This will follow a new Kahlúa ready to drink flavor, Raspberry White Russian, which is being accompanied by a packaging re-design for the RTD line.


     The “Kahlúa Give In To Temptation” summer program is centered on Kahlúa frozen drinks, like the Kahlúa Mudslide, Kahlúa French Vanilla Piña Colada, and the Kahlúa Hazelnut Nutbread Frappe, with additional frozen recipes provided via POS and a website. POS will also include consumer SLO for a complete selection of branded merchandise for outdoor entertaining at value price points. Program elements include:  case cards, shelf talkers, and recipe brochures.


  Other brands, particularly Starbucks Liqueur and Kamora, have been working at chipping away at Kahlúa’s dominance of the sub-category. And then there are brands such as Patron XO Café Coffee Liqueur, made from combining anejo tequila and natural essence of coffee. At 70 proof, the product is more a coffee-flavored tequila than a typical coffee liqueur.


Besides the aforementioned Tequila Rose and Patron XO Café Coffee Liqueur, there are other tequila-based liqueurs. Among them is Agavero Liqueur, imported by Crillon Importers, which is made from a blend of 100% blue agave anejo and reposado tequilas. Another point of differentiation for the brand – it’s made with the brewed essence of damiana flowers, which are indigenous to Mexico’s Jalisco region.


 


Cognac & Others


Cognac-based liqueurs have been appealing to more consumers in recent years, in large part driven by the popularity of Hpnotiq, from Heaven Hill Distilleries. The brand has been selling in the neighborhood of 600,000 9-liter cases nationally, since its debut in 2002. Imported from France, Hpnotiq is made from a blend of cognac and contemporary tropical fruit.


Alizé actually inaugurated the fruit-flavored, cognac-based liqueur sub-category about two decades ago. The brand lends itself to mixing in sweet-tasting cocktails, and includes Gold Passion, Red Passion and Wild Passion among its trio of cognac-based products. The Alizé line also features Alizé Bleu, which adds vodka to the blend of cognac, passion fruit, cherry and ginger. Alizé Rosé, introduced last year, is wholly vodka-based blended with strawberry, lychee and essence of rose petals. There are a host of other cognac-based liqueurs including Remy Red, with its Red Berry, Grape Berry and Strawberry-Kiwi flavors, and Canton Ginger Liqueur, which blends VSOP cognac with the flavoring of baby ginger.


 


New Brand Inroads


Pama debuted in 2006 as the first pomegranate-flavored spirit on the U.S. market and paved the way for other brands to roll out additional pomegranate-flavored liqueurs and vodkas. For its part, Pama reached sales of 60,000 9-liter cases nationally in 2007. The brand is a blend of superpremium vodka, tequila and all-natural California pomegranate juice.


Worth watching is Wide Eye, an energy drink liqueur. From Barton Brands, the prepared cocktail schnapps with extra caffeine is available in three flavors: Pomegranate Spice, Mango Chill and Cherry Bomb. Wide Eye retails for about $20 for a 750 ml bottle and enjoyed sales of 27,000 9-liter cases in 2007. Another new brand, Kajmir, from Constellation, is a 40 proof vanilla-flavored liqueur, made from a blend of brandy, vodka and vanilla. Priced at approximately $19 for a 750 ml bottle, Kajmir sold 20,000 9-liter cases since its debut last year. And finally, St-Germain Elderflower Liqueur, imported from France by Cooper Spirits International, is made from elderflower blossoms picked in the French Alps and macerated in eau-de-vie. St-Germain sold 12,000 9-liter cases in its first year on the market. The 40 proof liqueur has a suggested retail price of $30-$32 and comes in a striking, upscale bottle.


 


Things To Come


Ulrich, the PLCB category manager, says he believes the next big thing in the category will come from antioxidant rich liqueurs, like those flavored with pomegranate and blueberry. “A new one I’m expecting very big things from is a Brazilian liqueur made with the açai berry that tastes a bit like chocolate. It has more antioxidants than pomegranate or blueberry, and is said to be more heart healthy than red wine.”


New Hampshire’s Gerrish said he’s been surprised by the growing appeal of limoncellos, and he now stocks numerous brands as consumers have accepted them. Overall, the cordial market is more traditional in New Hampshire, with the tried-and-true like Kahlua, Baileys, amaretto and Drambuie doing well, especially as a result of apres ski promotions in the winter.


In Pennsylvania, in addition to the big sellers mentioned, brands like Rumpleminze, and peach schnapps are big sellers all year round. But, according to Ulrich, it’s the big headlining brands that still lead the way. “They’re big and solid and continue to do well.”


 


 


 


Liqueur Line Realignment


The growing field of cordial flavors in the past decade may have been a boon for sales, but in many cases the plethora of new products has left customers confused and retailers overwhelmed. Even suppliers recently have realized that many buyers didn’t know the difference between a liqueur, a cordial, a schnapps, a pucker or a burst.


The supplier with the largest line of cordials, DeKuyper, with 59 brands, realized it, too. And so, said Sheryl Rosenberger, senior brand manager, “We really wanted to make a statement in the cordial category; it’s very large and confusing for the consumers, and we wanted to make it simpler for them to shop.” DeKuyper’s research fairly well established that consumers were overwhelmed and that the category needed simplifying.


The result? DeKuyper has relaunched their cordials in five new families – DeKuyper Luscious, DeKuyper Burst, DeKuyper Pucker, DeKuyper Signature and DeKuyper Flavored Brandy, based on each item’s flavor profile and whether the liqueur is used as a mixer, sipper, shot or after-dinner drink. New product packaging and merchandising that reflects each family will support the re-positioning.


The “Luscious” line, which skews more female in appeal, said Rosenberger, emphasizes natural fruit flavors, and will include the Peachtree line, among others, like the recently launched Red Apple, Pomegranate and Tropical line. “Burst” will include more intensely flavored shooter products that both men and women drink, like ButterShots and Hot Damn Schnapps.


 “Pucker,” obviously, will include the company’s well-known Sour Apple and Watermelon Puckers, often used as Martini ingredients, which also skew more female. “Signature” is the line of classic bar staples, like triple sec and amaretto. The flavored brandy line includes sippers such as blackberry and coffee brandies, which are powerhouses in some northern markets.


DeKuyper has been working with distributors about selling the new products and organizing new shelf sets to simplify the category for consumers. As part of the makeover, DeKuyper also looked at their numerous SKUs and eliminated some sizes.

The new packaging is rolling out currently and will be supported by significant merchandising efforts to help retailers organize the entire liqueur aisle. A new shelf set initiative in August and September from Future Brands, created to make it easier to shop across categories, will also include the DeKuyper line.

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