The membership of the National Alcohol Beverage Control Association used the forum of its 76th National Conference, held at the Arizona Biltmore, in Phoenix, AZ, to emphasize the importance that the benefits of “Progressive Control” practices bring to the various control jurisdictions. In his “Letter From the Chairman,” NABCA Chairman of the Board J. Neal Insley, noted that the control systems “continue today to modernize their regulatory and marketing operations.” He pointed out that in an “era of downsizing, control systems have outpace private retailers in sales increases and revenue generation and, at the same time, have been able to ameliorate the harms of alcohol abuse, according to most peer-reviewed scientific studies.”
Most importantly, Insley realizes that “the alcohol beverage industry is changing, with new beverage types, new taste profiles and new challenges. In this era of dynamic change, the control systems and industry must be flexible and adaptable to new market and regulatory environments.”
Kicking off the conference, in General Session I, keynote speaker Roger Nierenberg presented a program more unique than anything that this writer has seen in several decades of covering the industry. Nierenberg is a musician and conductor, who led the Jacksonville Symphony Orchestra for 14 years, the Stanford Symphony Orchestra for several years, and guest conducted at well-known symphony orchestras across the country. His presentation, titled, “The Music Paradigm,” uses the dynamics between a conductor and a symphony orchestra as a metaphor for how organizations and their leaders (ie, control state officials) can approach leadership, teamwork and overall effectiveness.
With the hall filled with conference attendees, Nierenberg had members of his full orchestra (gathered together from among professional classical musicians in the area), actually situated throughout the audience. For example, I sat amidst several violinists, and was able to experience their passion and expertise from a once-in-a-lifetime perspective. Through a series of enlightening and funny exercises that he performed with the musicians (whom he had met for the first time that morning), Nierenberg explained the parallels of how the single musician interacts with the entire orchestra to how the single employee interacts with his entire company or organization. “The responsibility of leadership, or the conductor, is to unlock the strengths of individuals in the entire organization,” he said. “Like an orchestra, an organization must have the capacity for adjusting as a team,” he said, “and to collaborate across boundaries.” He added that it is the job of the conductor, or ceo of a company, to communicate the big picture with the rest of the organization, so that everyone feels as if they are a part of the whole.
Though Nierenberg was a tough act to follow, Mike Keyes, president, North American Region, for Brown-Forman, was up to the task in his Business Session I presentation, titled, “Building Brands and Customer Loyalty During Turbulent Times.” After presenting a thumbnail history of Brown-Forman, Keyes addressed how Brown-Forman dealt with the recent Recession, when many consumers were trading down. His company, Keyes said, took the long-term view that the “pendulum always shifts,” and did not lower prices like other companies, and did not shirk from continuing to invest in their brands. “We invested more in VAPs (value-added packaging), and we maintained our advertising presence, until the economy began shifting in a positive direction again,” he said. Now, with premium and superpremium products back in favor, he noted that Brown-Forman is positioned to take advantage of the renaissance in whisky and premiumization. The company is also continuing to innovate with new products, he pointed out.
Regarding industry partnership with the control states, Keyes noted that the control states account for 25% of Brown-Forman’s sales. “At their best, the control states help maintain a balance within the three-tier system,” he said. At the same time, he said his company was neutral on the issue of control versus privatization for individual states. Still, Keyes underlined the progressive notion of control states modernizing, by offering improved access to products, offering faster product listings, improving efficiencies in fulfilling consumer demands, and providing for a better shipping experience for consumers. Overall, he said, control states can provide a powerful platform for brand building.
Following Keyes, Bill Newlands, president, North America, for Beam Inc., addressed attendees with his presentation, titled, “Raising the Bar.” Newlands noted that as the number two supplier in terms of dollar volume, Beam is committed to the notion of “Progressive Control” as a key ingredient in the control environment. With that in mind, he touched on important points the company emphasizes in its drive to be a leader in both the national and control states market. First, a major goal is to get “closer to your customer,” particularly in relation to the control states; second, he noted the importance of investing in thoughtful product innovation: “In fact, 25% of long-term industry growth comes from innovation,” he said. He added that Beam has recently built a 57,000-square-foot facility dedicated to research and development. Third, he stressed the occasional need for strategic acquisitions. For Beam, that relates to the recent purchases of the high-flying Skinnygirl brand as well as the fast-growing Pinnacle vodka brand. Finally, he noted that Beam’s overriding concern is to “stay true to its values, which means doing business the right way.” For example, he pointed to Beam’s high standards when it comes to media and marketing.
The NABCA Trade Show floor then opened, as attendees combined lunch with perusing the many products on display. Seminar I followed, with the intriguing title, “Prohibition Plus 80.” Part of this panel traced the evolution of the industry up to the present time, followed by wide-ranging insights into todays’ beverage alcohol market. The panel was moderated by Tim Poulin, from the Maine State Liquor & Lottery Commission. Poulin introduced some interesting statistics: In 1954, he said, control state beverage alcohol consumption consisted of 86.0% whiskey, 8.1% gin and only 1.0% vodka. In 2012, he said, vodka comprised 35.0% of control state consumption and whiskey 24.0%. In addition, he itemized some of the top suppliers to the control states in 1954: Seagram was first, followed by National, Schenley and Hiram Walker. Though their brands aren’t all gone, the companies are. Today, he said, the top five control state suppliers are Diageo, Beam, Sazerac, Heaven Hill and Pernod Ricard.
Poulin introduced first David Decker, president of Consumer Edge Insight, a firm that does extensive research concerning consumer buyer patterns; and then Kaumil Gajrawala, a director at UBS, who covers the beverage alcohol industry. In his presentation, Decker confirmed that spirits and wine have been gaare ining overall market versus beer. “Spirits success is based on product innovation and brand-building,” he said. Among his many observations was that among the three segments wine has the best image among consumers, in part based on the health benefitsassociated with moderate wine consumption.
For his part, Gajrawala provided an overview of the economic landscape in the U.S. and reasons to feel positive about the future. “We are economically in a good place,” he said. He explained that unemployment, while still too high, is improving, with hiring being broad-based; that the economy is growing, though not as fast as we’d like; that the stock market’s rise has created a lot of wealth; that there is lots of innovation occurring across the country; and that corporations are looking for societal solutions. Demographically, he noted that the next decade will see a huge influx of teenagers.
And, he explained, there is a technology revolution happening here, in the U.S. For example, we are well on our way to energy independence, led by fracking technologies; we are seeing a re-emergence of manufacturing, with the latest 3-D printing technology promising to be a breakthrough; and in healthcare, he said, genome mapping has brought us much nearer to providing incredible new cures for many diseases.
Seminar II, titled, “The Future of Ignition Interlocks,” was moderated by Stephen Larsen, Administrator of the Iowa Alcoholic Beverage Division. With more and more ststes adopting ignition lock laws, the panel offered opinions and evaluations concerning existing ignition lock laws, and how new technologies can be applied.
On the second day of the conference, TV anchor, best-selling writer and correspondent Katty Kay presented “American Politics—From the Outside Looking In,” the title of General Session II. Ms. Kay first explained that she is absolutely non-partisan in her observations, and contended that Washington presents a good news-bad news situation. The bad news, she said, is that the latest so-called “scandals” has made it even harder for the White House and Congress to get things done. “There is almost no trust between the White House and Republicans,” she said, and when we most need effective government, things have become “totally ungovernable.” Additionaly, she said, the media has become more partisan. The good news, she pointed out, is that outside of the “Washington beltway mentality, America is working. The economy is recovering; housing is improving; there in insourcing [bringing jobs back to the U.S.]; there is an energy boom with natural gas; American universities are still the envy of the world; and at the local and state levels, there is a climate of entrepreneurial excitement.” She concluded by stating that the times actually demand a stronger central government, which works and functions. “Both sides have to work together,” she stated.
Ms. Kay also moderated Business Session II, entitled, “The Female Factor.” As the author of the best-selling “Womanomics: Write Your Own Rules for Success,” Kay was a fitting moderator for the panel made up of three female executives from the beverage alcohol industry: Stephanie Gallo, vice president, marketing, for E&J Gallo Winery; Kate Latts, director of marketing, for Heaven Hill Distilleries; and Stacy Tank, senior vp and chief corporate relations officer, for Heineken USA. All three panelists explained that women have become a growing presence in the industry. “While the industry skews male, there are many more women in it than there used to be,” Gallo said. “We have 19 female winemakers at Gallo.”
Latt suggested that trend is so true in the spirits segment. “Even on the retail side,” she said, “top buyers at many chains are women.” And Tank offered that the management team at Heineken is comprised of approximately half men and half women.
As for consumers, women control 83% of purchases in the U.S., the panel noted. And Latts said that 65% of spirits purchases are made by women (though they account for 37% of spirits consumption). But in the wine segment, Gallo noted that women consume more wine than men, as well as being in the majority of wine purchasers.
The panelists all agreed the that the industry is taking a much more proactive of approach these days in creating products that appeal to women.
Indeed, Latts came up with the most amusing statement of the session: “In doing research for this panel,” she said, “I discovered that women speak about 20,000 words a day, while men speak about 7,000 words a day.” That brought laughter and knowing nods among both the men and women in the audience.
Seminar III followed after lunch and the trade show. Titled, “A Close Look at Today’s Alcohol,” it was co-moderated by George Griffin, director of the Montgomery County, MD, Department of Liquor Control, and Shauna Helfert, administrator of the Liquor Control Division of the Montana Department of Revenue. The panelists included Robert Koch, president and ceo of the Wine Institute; Peter Cressy, president and ceo of the Distilled Spirits Council of the U.S. (DISCUS); and Joe McClain, president of the Beer Institute. One issue addressed was the rise of craft products throughout the industry. McClain noted that for beer, craft is the “rediscovery” of great beer traditions. Koch added that “small family wineries are the foundation of the California wine industry,” which his organization represents. There are 3,500 wineries in California, he said. In the spirits segment, Cressy explained that wholesalers and retailers have been “terrific about providing opportunities for craft distillers. It’s great for innovation.” He added that DISCUS has instituted an associate program for craft distillers.
Seminar IV, titled, “The Washington Experience,” addressed the initial results of recent privatization of the control system in Washington State. The session was presented in a unique fashion, reminiscent of an actual Senate hearing, with the “senators” questioning representatives from Washington. The “senators” included: Jeff Anderson, director of the Idaho State Liquor Division; Cassandra Skinner, chair of the Oregon Liquor Control Commission; Mac Gipson, administrator, Alabama Alcoholic Beverage Control Board; Andrew Deloney, chair, Michigan Liquor Control Commission; and Skip Brion, chairman of the Pennsylvania Liquor Control Board. The representatives from Washington included: Sharon Foster, chair of the Washington State Liquor Control Board; Pat Kohler, administrative director of the Washington State Liquor Control Board; Mitch Barker, executive director, Washington Association of Sheriffs and Police Chiefs; and John Guadnola, executive director, Association of Washington Spirits and Wine Distributors.
The “testimony” from the panelists explained that, although there is better access to products across the state, there have been significant price increases for consumers, both on-premise and off-premise (11.0% off-premise). In addition, they concluded that the big box stores have generally benefitted, and that with the ending of uniform pricing, there is “no longer a level playing field.” Approximately 1,000 jobs were lost, due to the closing of the state stores, and illlegal youth access and theft have become more prevalent.
General Session III, titled, “Prohibition and Moonshine,” was presented by Matt Bondurant, author of three novels and other writings. His novel, “The Wettest County in the World,” was turned into the 2012 film Lawless, about moonshining during Prohibition. In addition, Shawn Walker, Virginia ABC director of the Bureau of Enforcement, along with members of his team, discussed how they try to break up and prosecute modern day moonshine operations.
Next year, the annual conference will be held on May 19-22 in Marco Island, FL.
