Perhaps the most changeable of spirit categories, the U.S. cordial and liqueur market overall saw a fine year in 2013 (the last year for which complete figures are available), up by more than five percent, according to the Beverage Information & Insights Group. Yet, you couldn’t tell it by looking at the numbers of some of the major and best-known brands, many of which have had a multi-year run of poor performances.
The majority of growth is coming from emerging brands like RumChata (up 41.5 percent), Fireball (up 140 percent), Jack Daniel’s Tennessee Honey (up 25 percent), Kinky (up 51.4 percent), Wild Turkey American Honey (up 17.1 percent), and Junior Johnson’s Midnight Moonshine flavors (up 146.2 percent).
Meanwhile, traditional brands Southern Comfort (down 3.9 percent), Kahlua (down 5.9 percent), and Jagermeister (down 10.4 percent) suffered. In addition, full lines of cordials, including leader DeKuyper (down 4.8 percent), Hiram Walker (down 6 percent) and Bols (down 2.5 percent) also wavered.
It’s a sign of how quickly American consumers have turned to flavored brown spirits.
“The flavored whiskies are taking a big piece of the liqueur business, with a lot of the volume coming from schnapps and shooter type items, like Jagermeister,” says Brian Bowden, vice president of spirits, beer and tobacco for the 150-unit California chain, Beverages & More. “The Fireballs and cinnamon whiskies of the world are taking share straight from them as they penetrate the market.”
The emergence of sweetened and flavored whiskies has changed not only the dynamics for brands sold for the shot occasion. Other, classic cordials have seemed to lose steam as mixability and cocktail culture increasingly matter to consumers.
“The older and more traditional brands at the higher end over the last couple of years started to decrease and we saw it a lot more last year,” Bowden says. Replaced in popularity by diverse brands such as St. Germain and Luxardo Maraschino for their mixability, and Viniq, the shimmering moscato/vodka liqueur from E&J Gallo, for its fanciful allure, many classic brands are losing traction at different levels of appeal. (Buoyed by the regional success of Viniq, Gallo announced a national roll-out in February.)
It’s a trend that most major cordial producers are experiencing and dealing with, as flavor-seeking consumers turn away from both flavored vodkas and traditional cordials and explore new items, especially flavored whiskies.
The speed with which some brands have succeeded has caught the industry by surprise. RumChata founder Tom Maas says things could have gone even better for the 460,000 case cream brand in the last two years.
“We need to get our shelf space expanded to avoid the out of stocks we continue to suffer because the brand is growing so fast,” he says. “We are continually seeing stores with empty shelves. It takes time for stores to allocate the earned share of shelf to RumChata because of the rapid growth. When we outsell the cream market leader in a state, the shelves should represent that.”
The brand also heavily promoted RumChata Iced Coffee last summer and will continue through this year with a RumChata Iced Coffee co-pack promotion — they put 250,000 co-packs into retail last summer promoting the concept.
While traditional high-end cordials may have lagged, new players continue to broaden the flavor profile of the category. Patron last year followed its 200,000-plus cases of XO Cafe with XO Café Incendio, a blend of Mexican criollo chocolate, arbol chiles and Patron silver tequila.
“We wanted to create a culinary item that was true to our Mexican heritage as a brand,” says Patron’s chief marketing officer Lee Applbaum. “We wanted it to be very high quality. We didn’t invent anything new with the combination of flavors, but we did want to follow the culinary and mixologist trends — they’ve done some amazing things with Incendio.”
He thinks the brand’s positioning will enable it to be used in a variety of contexts rather than as a shooter, and points out the chile-supplied heat means it isn’t for everyone. “What people from the Midwest think is spicy is a very different thing from what a person from Miami or Southern California thinks. It’s a statement — we didn’t want to be middle of the road, and if that statement meant Incendio was going to be a little polarizing, I’m okay with that.”
Among the brands trying to tack against the flavored whiskey winds is Jägermeister, which declined by 10.4% to 2.2 million cases last year and has lost around 800,000 cases in yearly sales over the past half-decade. The brand is best-known in the on-premise shot occasion but is finding the competition fierce on and off.
It’s fighting back by adding Jägermeister Spice and recently launching Hispanic-targeted advertising, titled “Sin Igual,” which translates to “Like No Other,” featuring randomly selected people photographed by Mexican-American photographer Stefan Ruiz without styling, makeup or a formal studio setup. According to the company, the campaign seeks to highlight Jägermeister’s “authentic and iconic spirit,” as well as the cultural diversity of the brand’s consumers.
Keeping the brand relevant and providing more authenticity is crucial, says Marcus Thieme, Jägermeister’s regional director for North America.
“We have bigger competitors in the Millennial group now as younger generations have gotten into whiskey, a development we haven’t seen before,” he says. “Consumers often get into a brand because of the story and history, and we didn’t really focus on that before. But we can deliver quite a good story about the brand – for instance, not many of our consumers know that Jagermeister is aged in oak before it’s bottled. We have to deliver the consumer’s demand for authentic brand and what they can discover with Jägermeister.”
He also sees the development of the Italian amaro sub-category as boding well for the brand. “This type of digestif consumption is more or less our homeland; in Italy we’re third behind Montenegro and Averna.”
Another major brand that has worked hard at adapting is Southern Comfort, just now rolling out a package redesign as well as another in their flavor line, Southern Comfort Caramel, following a summer TV ad campaign. The new package with a broadened shoulder retains the fluted neck and added an icon suggesting that it is a category of one. Last September brand owner Brown-Forman also launched a seasonal extension Gingerbread Spice.
“Our flavors are intended for 21 – 24 millennial who is all about flavor,” says Jennifer Powell, Southern Comfort US brand director. “These guys grew up with flavor in their water, flavor in their gum, flavor in their yogurt, so these flavors are really targeted to them.”
As she notes, the spirits category has become increasingly crowded, with more than 300 new products introduced in the last three months of 2014 alone. But with flavored brown spirits leading the latest growth spurt, she thinks that SoCo’s target consumer will increasingly turn to the brand for flavor experiences. And while Southern Comfort 70 proof constitutes about 80 percent of the brand’s business, the company is seeing modest growth for the 100 iteration, perhaps picking up from the higher proof whiskey trend.
SoCo isn’t the only brand branching out into caramel: Kahlúa Salted Caramel is a new, limited edition liqueur in the Kahlúa portfolio that rolled out in February, backed with easy to make at home drink recipes, like the Salted Colada — blended Kahlúa Salted Caramel, Malibu, coconut cream and pineapple juice. For the summer months, Pernod debuted the cocktail-inspired “Kahlúa Summer Shake-Up” campaign that included digital and interactive experiences with themed frozen and iced cocktails, as well as ideas for summer entertaining.
Other brands are looking to one-offs to bolster sales. Disaronno, which dropped 13 percent in 2013, recently teamed up with fashion house Versace for the Disaronno wears Versace Limited Edition Bottle. The Versace fashion house showcases the treasures of the Sea God Neptune — complete with shells, pearls and golden statues. A portion of the proceeds from the bottles’ sales will go towards the charitable organization Fashion 4 Development.
But the challengers in flavored whiskey keep arriving, with flavors that make them sound more like liqueurs: Diageo’s Piehole is a blend of Canadian whisky with flavors of apple pie, cherry pie and pecan pie. Says Dan Levine, senior brand manager, Diageo North American Whiskey, “We’ve seen success in the flavored whiskey category as it gives new whiskey drinkers — both men and women — an entry point.”
While the large lines of cordials have struggled to maintain share, some particular flavors are doing well.
At DeKuyper, Peachtree continues to be popular due to its mixability, so much so that owner Beam Suntory introduced a higher end iteration, Peche, to its John DeKuyper and Sons line. Blue curaçao as well as the standard orange curaçao have started to pick up, says Brendan Lynch, senior director of rum and cordials for Beam Suntory. “A fifty percent increase in one year catches your eye,” he says, noting that a recent trend for blue-hued cocktails that started in Los Angeles and then moved to other parts of the country is the likely engine for the growth.
That regional expansion is not new to the category. “In the Midwest, liquor stores often offer cordial aisles tens of feet long, but that’s not the case in most places,” Lynch says. Lines like Pucker do especially well in the Midwest, where the sweet and sour shot occasion is still alive and well.
Bols, too, sees a spike in curaçao, blue and plain, with triple sec, melon and apple liqueurs as well, says Lucas Bols USA marketing manager Jaron Berkhemer. He believes the period of slow decline for lines of cordials is about to turn around now that the confection vodka craze has faded and consumers revert to traditional cordials for their mixability. Even specialty cocktail item Pierre Ferrand Dry Curaçao has caught fire – up 33 percent in the off-premise in 2014, according to company figures, and now sold in 37 states.
“We expect the pure lines of cordials to start growing, and a lot of that growth we project to be in the premium segment,” Berkhemer says. “People are starting to want clean, original flavors, and rather than looking at flavored vodkas, they are now going back to apple liqueurs and coffee liqueurs for more authenticity.”
Going forward, brands will need to increase their attention to cocktail culture, he says, with the consumer following the bartender in trading up. Authenticity is important as well — after purchasing Galliano, Bols returned it to the original recipe in the U.S., where a sweeter version had long been sold instead. “People are looking for authenticity and heritage,” he adds.
Trendy and Mixable
The many types of flavor items in the category – creams, coffees, fruits, schnapps, etc. – make for a fragmented field to figure, says DeKuyper’s Lynch. “Long term, there’s been a lot of consistency in popularity in fruit-based flavors, while the creams are a little less popular overall. And I see fewer of the sort of broad category trend existing than trends growing off individual cocktails getting popular.” With 70 flavors in the DeKuyper, Pucker and John DeKuyper and Sons lines, Lynch is optimistic that whenever a new cocktail hits, his line will be able to benefit.
Bowden of BevMo agrees about cocktails, and sees liqueurs benefiting as cocktails get a little less complicated.
“Five years ago, the cocktails were very complicated, but today, the consumer is looking for a way to use very high quality items at home,” he says. “We don’t see mixology going away. In the past, cordials used to be, for the most, part not especially presented as mixable. Going forward they have to keep thinking about cocktail culture as consumers are more engaged in that culture and they need to have products that fit that niche.”
Even RumChata has benefited significantly from its mixability. “Our mixologist works with new items and suggestions from our fans on a weekly basis and is working on creating new drink recipes all the time,” Maas says. “We know that if we continue to show people new and unique ways to drink RumChata they will do the rest. We currently have more than 150 drink recipes on our website and are updating it monthly with new drinks and ideas.”