NABCA Industry Steering Committee Roundtable

Throughout the year, the National Alcohol Beverage Control Association (NABCA) Board of Directors meets with the NABCA Industry Steering Committee, a group of industry leaders from multiple distilled spirits companies, to address new and ongoing issues facing the beverage alcohol industry. StateWays again this year asked these committee members to participate in a virtual roundtable where they were invited to discuss accomplishments of the past year and the challenges facing the beverage alcohol industry and control states in the coming year. With an eye to “Responsible Control,” the theme of the NABCA’s upcoming 73rd Annual Conference, Industry Steering Committee members who offered their thoughts this year include John W. Byrne, Director of Control States, Rémy Cointreau USA, and Vice Chairman, NABCA Industry Steering Committee; Julious Grant, Senior Vice President, Sales, Bacardi U.S.A.; Steve Bjeldanes, General Manager, Control States Region, Beam Global; Mark Hubler, President, Control States & National Accounts, Diageo North America; Steve Feller, Director of North American Sales, Heaven Hill Distilleries, Inc.; Rick Przebieda, National Sales Manager, Luxco; Scott Oppenheimer, Senior Vice President, Control States, Moet Hennessey USA; Jim Evans, Senior Vice President, Pernod Ricard USA; and Tricia Brungo, National Control States Sales Manager, White Rock Distilleries.


 


John W. Byrne


Director of Control States                  


Rémy Cointreau USA, Inc.                


Vice Chairman


NABCA Industry Steering Committee


Focus, ingenuity and resolve have been the key drivers sustaining the alcohol beverage industry through the challenges of the past year.


Rémy Cointreau USA, Inc. faced the demanding business environment by viewing challenge as opportunity. Primarily, we sharpened our competitive advantage by consolidating sales operations into four divisions, enabling fast and nimble adaptation to changing market conditions. In parallel, company-wide sales efforts were strongly integrated with our key business partners, wholesale distributors and brokers. Tom Jensen, chief executive officer of Rémy Cointreau USA, Inc. summarizes our approach best: “In light of the economic situation, we realigned our priorities and adjusted our company model with one goal in mind-emerge from this economic storm as a stronger more focused company.”


Rémy Cointreau USA, Inc. is firmly committed to the responsible working partnership it has developed with control states, led by creative marketing and sales programs which successfully engage consumers. Our results-proven Rémy Martin V.S.O.P program and The Macallan “heavy-up” marketing strategies utilize on-premise tasting and local advertising tactics to energize consumer awareness and lead to purchase.


This year, members of the Industry Steering Committee began to meet individually with NABCA Directors during their board meeting processes to discuss operational, legislative and technological obstacles facing both the state and industry in control state markets. These meetings are the beginning of a continuing dialogue which the alcohol beverages industry believes will strengthen our collective partnerships with states to ensure best practice efficiency, profitability and marketplace safety. The Industry Steering Committee has invested substantial time analyzing specific challenges in each control jurisdiction, including warehousing, mark-ups, product quotations, data collection, listing and de-listing, among others. At the annual conference, Industry Steering Committee members will meet again with NABCA Directors and staffs to identify and understand key special-attention issues and subsequently devise integrated partnership actions to ensure profitable and efficient distribution of products to the consumer.


Given the myriad fiscal challenges control states face today, it is more crucial than ever for states to challenge traditional and reactive operations management. Otherwise, the opportunity-cost consequences of idle policy are manifold. The norm belief expressed as “this is how we always do it” may not be successful in today’s fiscal environment. Through adoption of best practices of fellow states or the industry, control states may find a better dynamic to serve the consumer while maintaining a healthy environment. The conference offers seminars in shelf management, technology advancements and product knowledge which will educate and enable states to expand and be more efficient and profitable. Rémy Cointreau USA, Inc. stands ready to assist and empower control states via Industry Steering Committee initiatives, and ensure consumers and the public at large are properly served through programs balanced with significant states profitably gain.


The Rémy Cointreau USA, Inc. portfolio of iconic heritage brands offers an advantageous market proposition focused on profit and prestige. Our flagship brand, Louis XIII de Rémy Martin, is the celebrated cornerstone and reference of all luxury spirits. The market for distinguished brands offering a fine quality/price ratio will always endure, as the marketplace has repeatedly proven, and it is in this lucrative segment that we will continue to target our marketing strategies.


 


Julious Grant


Senior Vice President, Sales


Bacardi USA


While we are all aware of the tough challenges the economy and our industry have faced in recent months, I would suggest that it’s now time, more than ever before, to look forward positively. There is every indication that gradual stabilization in consumer confidence will take place over the course of 2010. As this confidence gathers momentum, it is up to us, suppliers and control state retailers alike, to remind our customers about the genuine quality and value that affordable, premium-priced brands bring to our everyday responsible consumption.


Why is that so important? As state after state across the nation faces unprecedented funding pressure, due to traditional revenue streams diminishing, both the responsible promotion and sale of premium-priced products are a sure way to deliver improved revenue growth.


In this approach to raise revenues, control state officials, and the jurisdictions they manage, have emerged as part of the revenue solution in terms of delivering meaningful funds to State treasuries, even as these officials continue to promote responsible use and fight alcohol misuse. I don’t think there has ever been a more difficult time than the present where control state officials and their team members have had to deliver challenging revenue goals set forth by State Government officials. 


From a revenue standpoint alone, then, the responsible promotion of premium-priced brands is worth reminding consumers where a product’s affordability meets with their demand for quality.


It all comes down to our steadfast belief, born of decades of experience, that in both good times, as well as during those periods of economic downturn, the prominent positioning of premium brands for ease of selection by control state shoppers is a sure fire method for protecting and growing revenues within control state jurisdictions.


As for the theme of this year’s conference, “Responsible Control,” all key players-including NABCA, Distilled Spirits Council of the U.S. (DISCUS), the Century Council and others who have been long supported by the beverage alcohol industry’s leading companies-should be proud of the collective history and unwavering commitment to responsibility.


Corporate responsibility is an integral part of the operating strategy of our company, and covers many areas including responsible consumption in the marketplace and care for the environment.


We at Bacardi are particularly proud to be recognized as an industry leader in these areas. Recently we became the only major spirits company to be certified to be operating in accordance with all three of the leading global standards of quality, environment, and health and safety (ISO 9001, ISO 14001 and OHSAS 18001). Also, early this year we officially opened our new office spaces in Coral Gables, Fla., offering employees a high-performance environment that will meet the criteria for LEED certification.


We continue to lead in our support of the “We Don’t Serve Teens” campaign. This powerful education campaign underscores that serving alcohol to teens is unsafe, irresponsible and illegal. The campaign is a joint private/public partnership that provides critical information, such as most teens who drink obtain alcohol from older friends or family members, or at parties, or take it from their home without parental knowledge (www.dontserveteens.gov).


Last year we activated “Champions Drink Responsibly,” an international social responsibility campaign, featuring Formula One seven-time champion Michael Schumacher, in 34 countries. Over one quarter of a million visitors to the program’s website have learned about the important message of responsible control.  Bacardi also launched www.enjoyourbrandsresponsibly.com, providing consumers with nutritional and production information and responsible drinking guidelines.


We are especially proud of these on-going efforts given all the consumer social responsibility accolades and awards Bacardi U.S.A. has received over the years. We further pledge no let up in these efforts, as we are all in this together, and we all wish to see our products enjoyed responsibly.


 


Steve Bjeldanes


General Manager, Control States Region


Beam Global Spirits & Wine, Inc.


Balancing Responsibilities


This year’s conference theme of “Responsible Control” helps us at Beam Global Spirits and Wine bring into focus the two equal “responsibilities” we believe all must have within the control states, those being:


1. Delivering on fiscal goals to the various entities in our states and our companies. 


2. Ensuring that spirits products are regulated, marketed and sold in the right way. 


 


The states have revenue obligations to their state budgets and to the departments and programs that are funded by them. The supplier organizations have profitability requirements that need to be met to ensure businesses stay viable and healthy. Both the state and supplier attainment of their goals and obligations on this “responsibility” have been put under stress in the new economy, especially as consumers heighten their focus on true quality or value in all they purchase.


As states seek methods to fill budgetary shortfalls, the key issue of tax or margin increases tends to be the focus on spirits. However, we find from historical evidence, and the basic laws of economics, that there are limits to what one will deem as a reasonable price to pay for a product. Subsequently, it is indeed possible for a product to return less revenue on the whole even with (or due to) a per unit price increase.


Furthermore, evidence suggests that consumers who reduce or eliminate their spirits purchasing due to retail price escalation may gravitate toward more “accessible” products, such as beer and wine. Beer and wine are neither taxed nor are they regulated at the same level as spirits. Therefore, less revenue per unit on a serving of beverage alcohol is realized by the state when people choose beer or wine over spirits. Less control and less revenue realized on beverage alcohol sales goes contrary to the two overarching responsibilities highlighted earlier.


Some advocates of higher retail prices on spirits state that a benefit of that is it will reduce alcohol abuse. However, many studies show that consumers who do abuse alcohol (binge drinking, drunk driving and under-age drinking) are not necessarily impacted by higher retail prices. Rather, the alcohol abuse is better addressed through social responsibility programs aimed at improving parental interaction with children, providing alcohol education and facilitating behavior modifying counseling. This is precisely the reason why Beam Global has developed a robust social responsibility program.


 


Corporate Social Responsibility


Beam Global continues to seek to be both an industry and community leader in the promotion of social responsibility. Our priorities in this area are:


• Alcohol Education


• Under-age Drinking Prevention


• Drunk Driving Prevention


 


Alcohol Education and Under-age Drinking Prevention


We believe that education begins at home and, to that end, we have published an Alcohol Education Guide for our employees. We ensure that all employees have access to educational materials on the effects of alcohol and how to consume it responsibly and intelligently. We also believe that helping parents educate their children, and exhibit the right behavior with their families, is probably the most powerful way to instill the right messages around alcohol awareness and healthy behavior. This is especially important as we seek to address and prevent under-age drinking, so we have designed our educational materials with the intent that they will be used by parents, in the home.


Ultimately each corporation is responsible for their own activities, their decisions, and for “doing the right thing.” To this point, Beam Global has developed a detailed internal Marketing Practices Code that is focused specifically on social responsibility in the context of how we advertise, market and sell our brands. Our employees have been educated on this “Code” and are aligned behind it.


As part of our Marketing Code, Beam Global has mandated a minimum 75% LPA media placement standard in the U.S. (5% above current industry guidelines) and a minimum 85% annual aggregate standard per brand and medium. This increase has been endorsed by 37 State’s Attorneys General. While this self-imposed mandate limits the amount and types of media on which we advertise, Beam Global considers it “the right thing to do.”


Beam Global’s communication platform for alcohol awareness, drink smart®, takes on many forms. We have a publicly-accessible website at www.drinksmart.com which offers vital information on alcohol awareness. The site offers an education on how people can enjoy alcohol responsibly and how different types of beverage alcohol may affect an individual.


Beam Global is also working to expand alcohol education and awareness on college campuses. We have partnered with the International Institute for Alcohol Awareness to bridge the gap between public health, the community and industry in an education program called “Be WISE”. As part of this effort we have produced a Best Practices Tool Kit and website www.be-wise.org/ for college communities.


And as part of our self-regulation philosophy, Beam Global will never market at or participate in activities or occasions around “Spring Break” events.


 


Drunk Driving Prevention


History has shown us that repeat DWI offenders are not responding to the way traditional courts and the criminal justice system are handling these cases. Beam Global’s partnership with the National Association of Drug Court Professionals to create the National Center for DWI Courts-a program targeting hard-core drunken drivers with the support of judges, prosecutors, law enforcement officials and advocacy groups-seeks to get these drivers off the road.


Beam Global received a NESLA Best Practices Award in Social Responsibility for its Voluntary Principles on Alcohol Advertising and was honored in the Health and Safety Category in recognition of its partnership with the National Center for DWI Courts.


In addition to all these Beam Global-specific initiatives, we are an active member of DISCUS and The Century Council. Both of these organizations do great work on behalf of the industry in general and for our states. We are proud to be a part of these efforts in defining the alcohol responsibility issues and applying real critical thinking, actions and resources to address them on behalf of industry participants.


We at Beam Global believe that we all have a responsibility to ensure that the distribution and sale of beverage alcohol are held to the highest of standards. But, we must also ensure that our methods benefit our various organizations and states, just as any healthy business or revenue generating arm of government is obligated to do. This balance can and should be driven equally, but with real clarity and partnership in understanding the ways one goal driving activity affects the other.


 


Mark Hubler


President, Control States & National Accounts


Diageo North America


In The Waning of the Great Recession: A Time to Invest


Now that it looks like the Great Recession is waning, I want to propose that it is time for both suppliers and NABCA members to step up our investments in the things that count most for our mutual future: Consumer innovation, responsible drinking programs and our own relationship.


The time is now because major economic signs really are pointing to the waning of the Great Recession. For example, recent retail sales data show that the consumer remains active with most business sectors enjoying a reverse-even if slight-in the downward trends they have been suffering for the past year. 


These trends are especially promising across the country in our own sector of beer, wine and spirits and in those sectors that are “tell tales” for us nationally. And, of course, in control states both volume and value continue to grow-+1.7% and +2.3% respectively over the last 12 months ending February 2010-outpacing U.S. Food and Drug. A key issue continues to be the consumer’s shift away from the on-premise; however, even this trend is improving, while still negative, over the last two quarters ending December 2009. What that means is that suppliers and our business partners, including control states, need to manage our businesses for growth, so that we can emerge stronger from this period and well-placed to capitalize on the eventual upturn in the economy.


One way we can do that is by continuing to invest in and support the ongoing consumer desire for innovation. Innovation is an important growth driver for the industry, as we know from its effect on Diageo’s business. In fact, according to IRI, six of the top 15 new items in 2009 were Diageo products, and they made up 41 percent of total new item dollar sales. You know the premium examples as well as we do and their importance to your business: Smirnoff Cocktails, Captain Morgan 100 Proof and Jeremiah Weed Sweet Tea, among them.


Control state stores can support this consumer desire for innovation by investing in your consumers in much the same way we are. We are investing in our priority brands such as Smirnoff and Captain Morgan. You will see this investment in the form of new television spots, radio and out-of-home. In fact, we aired more than a half-dozen new advertising spots this past year under the highly successful “Calling All Captains” campaign. And this spring our media investment ensures that our target consumers will see a Captain Morgan ad at least once a week between now and summer. With comparable support in your stores, innovations like Captain Morgan Lime Bite will continue the string of Captain conquests for both of us.


Second, we can, and must, continue to invest in responsible drinking programs. Even during the worst of the recession, neither we – nor you – let up on support of such programs. For example, at Diageo we maintained our 20% of A&P spend on responsible drinking messaging. We underwrote a Brandon Silveria tour of 10 of our plant and sales cities in which Brandon gave eloquent, personal testimony to the dangers of underage drinking from his own terrible experience as a teenager. We continued our NASCAR safe ride program. And we produced a Spanish-language version of DRINKiQ.com, which has become a resource for control boards and local organizations to post resources on responsible drinking. In fact, DRINKiQ.com is featuring material on responsible hosting from the Department of Liquor Control in Montgomery County, MD., in English and Spanish. 


Finally, we need to make the most fundamental investment in our own relationship. This investment is primarily a supplier responsibility in my own mind. At Diageo we believe that our obligation goes well beyond selling you our products. For us, investing in the relationship means providing exceptional support. We can do so much more in order to achieve our aspiration of being your best business partner-whether that is helping you with warehousing issues or understanding your consumers and how they operate. 


All in all, I believe this year is going to be great for both of us. Most signs are pointing toward an economic recovery. We are better positioned than most business sectors to take advantage of the general recovery and return to a stronger growth position. And we know that the way to grow is to invest-in our consumers’ desire for innovation, in social responsibility and in our relationship.


 


Steve Feller


Director of North American Sales


Heaven Hill Distilleries, Inc.


As we come to another NABCA Conference, we at Heaven Hill Distilleries, Inc. feel that, with a rebounding economy and increasing emphasis on corporate responsibility and stewardship, the state of the industry is sound and getting sounder. After what has clearly been a challenging two years for the distilled spirits category, the efforts to “tend to one’s garden” are paying off. We have effectively adapted to a changing economic landscape, we have focused greater efforts on social issues and sustainability, and we have responded as consumer demand shifted away from the on-premise environment to retail.


We do know that consumers have been shaken, and as a result have changed their buying patterns, perhaps for the long term.


As the largest independent, family-owned-and-operated company in the business, Heaven Hill brings a unique perspective to the shifting landscape. While we are privately held and fiercely independent, we are the 7th largest overall spirits supplier and the 4th largest in the control state system, with leading brands like Evan Williams Bourbon, Christian Brothers Brandy and Burnett’s Vodka. And while our independence has allowed a certain measure of self-determination, we have also been fully engaged in refining and codifying our corporate social responsibility and environmental sustainability policies, not because these things have been demanded of us by shareholders, communities or industry associations, but because it is the right thing to do. The value of sharing and improving upon best practices through forums like the NABCA Steering Committee cannot be overestimated, as it is clear that a rising tide will raise all boats.


The theme of “Responsible Control” at this years’ conference is apropos in many ways. We all manage the paradox of growing while doing so in a responsible, and measured, fashion. With the coming of the “new frugality” that consumers appear to be embracing, and the further blurring of the lines between marketers and their audiences in social media, today’s LDA consumer looks at companies much differently than they did even 10 years ago. We must be proactive, and that proactivity is, in our opinion, a key part of responsible control. In addition, the digital revolution has effectively shrunk the world, so messages can multiply and morph, and one must assume that everything is visible to everyone and act accordingly. Consumers also regularly engage companies through forums, blogs, and social media, and they expect responsiveness.


So while the recent past has been tumultuous, it has also undoubtedly made us look inward and thereby reflect on how we can manage the two sides of our businesses: The realities of economics and the necessity of corporate responsibility. In the next year, we expect to maintain our positive growth pattern while continuing to strictly adhere to our mission statement and responsibility and sustainability guideposts. And, as a group, with increasing pressures on the control state system coming from state budgets and duality as a public entity, it is more important than ever to work together and determine our own fate, rather than have it determined for us.


 


Rick Przebieda


National Sales Manager


Luxco


Change is Constant


Over the many years I have worked in the control states, there have been significant improvements to the quality of service at all levels. Remember counter stores, tax stamps and only receiving sales data from NABCA on paper? Fortunately, today many of those things seem like ancient history. Over the years, control states jurisdictions have been challenged with the difficult task of working to improve the quality of service offered to their customers and increase the revenue stream, all while never losing sight of their regulatory obligations. Facing challenges, adapting to an ever-changing economic environment, overcoming major obstacles and improving quality requires foresight and a spirit of cooperation by everyone to insure a quality shopping experience is enjoyed by all of our customers. Working through NABCA, cooperative efforts between control states and industry, like the Administrators Conference and the sharing of best practices, have helped spread many great ideas that have improved the quality of service, improved efficiencies, helped reduce costs, modernized stores and enhanced the shopping experience in all control states. Some innovations that have accelerated the quality of service and quality of product mix are seen across many states, like changes that have streamlined the listing procedures, expanded store hours and, of course, Sunday sales.


Providing top quality products at a fair price has been a core guiding principle at Luxco that has driven our business from day one. Providing quality products in all categories and at several price points has been critical to Luxco’s success. To remain viable in today’s ever-changing marketplace, suppliers must continually examine and re-examine the quality of their products and portfolios. Over the years, Luxco has continually examined and improved the quality of packaging for many of our most popular brands like Ezra Brooks Bourbon, Admiral Nelson’s Spiced Rum, Saint Brendan’s Irish Cream, Juarez Tequila, Pearl Vodka, Rebel Yell Bourbon and the Arrow family of products. More recently, and moving forward, Luxco continues to enhance the quality of the portfolio with the introduction of products like Rebel Reserve; El Mayor Extra Aged Tequila; Salvador’s 100% Agave Margarita and the repackaging of Pearl Vodka 1.75 liters.


Under Chairman Helfert’s stewardship, NABCA has continued to lead the way toward increasing the exchange of ideas through a variety of vehicles, like the Administrators Conference, including all of its “Best Practices” elements, and by expanding cooperation and interaction between the control states jurisdictions and industry by inviting the Industry Steering Committee to participate in the Board of Directors meetings. The Board of Director’s support of the Information Technology and Legislative and Policy subcommittees of the ISC have been instrumental in moving agendas for change and improvement forward.


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