The Advisory Committee Weighs In

What does the future hold for the control states? And what developments shaped the past year? For insight into these questions, StateWays once again turns to industry executives.

Throughout the year, the National Alcohol Beverage Control Association (NABCA) Board of Directors meets with the Industry Advisory Committee — a group of industry leaders from beverage alcohol suppliers — to address new and ongoing issues facing the industry and the control states. StateWays asks these committee members to participate annually in a virtual roundtable, in which they are invited to discuss accomplishments of the past year, challenges facing their industry and the future of control states.

The theme of last year’s annual NABCA conference was “Bridging Divides.” We suggested that committee members reflect on 2017 and how the message of “Bridging Divides” helped their companies grow, expand, improve and give back.

 

Rick Przebieda, Government Affairs, LUXCO Industry Advisory, Committee Chairman

To most, “Bridging Divides” means to bring two sides closer together to understand and overcome their differences to the benefit of both parties.

Building strong relationships between state liquor boards and the industry is more critical than ever before. With the economic and operational challenges facing state government and companies today, it is imperative that all sectors work collaboratively to strive for success. As Benjamin Franklin was once quoted as saying, “Tell me and I forget. Teach me and I remember. Involve me and I learn.”

For all of us, “Bridging Divides” starts with understanding one another’s challenges and priorities. Open communication and mutual respect are critical to grasping one another’s issues. One needs to look no further than NABCA as an example of an organization committed to open communication, mutual respect and “Bridging Divides.”

Over the years, NABCA’s good work has brought together state liquor board officials, the public health sector and industry representatives to discuss various issues common to beverage alcohol. Most recently, NABCA has worked collaboratively with a variety of beverage alcohol stakeholders on initiatives ranging from alcohol education, trade practices, the growing “craft” business and warehouse logistics. These opportunities to share divergent points of view helped to create a dialogue and spirit of cooperation essential to understanding and overcoming differences. In other words, “Bridging Divides.”

The key cornerstones to building strong relationship starts with a mutual respect for the contribution that each partner brings to the business proposition. The trust that comes from these strong working relationships needs to be built on some basic guiding principles. They include fairness, equal treatment, consistency, transparency and consultation with all interested parties.

As a family-owned and -operated company, Luxco’s commitment to those principles is reflected in the company’s guiding Values: Integrity, Respect and Commitment. Every employee in our organization knows Luxco’s “Four Key Pillars.” Those are: “Work Hard, Serve Our Customers, Have Fun, and, most importantly, Do The Right Thing.” We believe that following these simple principles is the best way to build lasting relationships based on trust and mutual respect.

We are always mindful that people do business with people, not companies. Lasting relationships and mutual respect for one another have been instrumental in Luxco’s success for the last 60 years and will be into the future.

Working in cooperation with the Board of Directors and NABCA, the Industry Advisory Committee is committed to expanding its role in helping to “Bridge Divides.” The addition of David Jackson in his role at NABCA has been a big factor in improving the IAC’s ability to facilitate the exchange of information between control states and the industry.

The IAC is thankful to the Board of Directors for their support in establishing David’s position at NABCA. As Chairman of the Industry Advisory Committee I can say without hesitation that the IAC membership believes this committee is just getting started in its efforts to add even more value to the communication and problem-solving process.

In the spirit of “Bridging Divides” under the leadership of Chairman Deloney — continuing under incoming Chairman Painter and Chair-Elect Noble, and with the ongoing leadership from the NABCA — the Industry Advisory Committee stands as a resource to “Bridge Divides.”

 

Gretchen McDade, General Sales Manager, Spirits Control Region, Constellation Brands

“Bridging Divides.” That phase applies to our business in many ways. It applies to how we work as a company to tackle strategic business goals. It applies to how we work with all of our partners, alcohol boards, distributors and retailers to focus on our shared interests. It also applies to how we connect with and stay ahead of consumers. Consumers help us “Bridge Divides” to fuel our growth.

At Constellation Brands, the consumer is at the heart of everything we do. And today’s consumer has a new set of wants and desires when it comes to beverage alcohol. More than half of total sales dollars in beverage alcohol come from consumers who don’t have specific category preferences; they drink across beer, wine and spirits. That is a big change in consumer preference that both requires that we evolve our approach to meeting consumer needs and, at the same time, fuels our innovation.

As the TBA (total beverage alcohol) leader, you’ll see Constellation Brands continue to take advantage of our ability to see across all categories to meet consumers where they are. Just a few of the category-crossing products we introduced last year to take advantage of this trend include Cooper & Thief sauvignon blanc aged in tequila barrels, Cooper & Thief red blend aged in bourbon barrels, and High West/Ballast Point Victory at Sea.

Through our extensive consumer research, we also have found that the new “multi-category consumer” spends more on their average beverage alcohol purchases. Consumers increasingly are focused on premium offerings across all categories. At Constellation Brands, this supports our strategy of premiumization across our business. We continue to lean into our high-end beer portfolio of Mexican imports and craft beers, and expand and build our strong portfolio of premium wines with new additions such as The Prisoner, Charles Smith and new premium line extensions like our Meiomi rosé. We also continue to expand our premium spirits portfolio to include new brands like High West whiskey and build on our Svedka brand with new consumer-preferred flavors and packaging.

Just as we are investing aggressively in our business to stay ahead of consumers through product innovation, we continue to invest in research to ensure that our marketing connects with consumers in meaningful and relevant ways. In fact, we all have a shared interest in understanding consumers’ changing shopping and purchase behavior. To help us “bridge” our business for the future, Constellation Brands developed strategic partnerships with state boards to share our category and shopper insights. It is in everyone’s best interest to create a “shopper-first” retail environment that optimizes the shelf to maximize sales.

Constellation Brands continues to make big bets to help us “bridge” to the future. From a product standpoint, we have made numerous investments and acquisitions to build a best-in-class portfolio of high-end beer, wine and spirits brands. In the past couple of years alone, we have added brands and products that address Millennial preferences such as premium brands, convenience, flavors and taste trends like rosé, red blends, light whites and sparkling wines. And we have seen the results.

For example, we have seen strong double-digit growth for many of our more recent acquisitions including Meiomi, Charles Smith and High West. We made some big news this past year regarding our investment in a Canadian cannabis company. This investment is consistent with Constellation Brands’ long-term strategy to identify, meet and stay ahead of evolving consumer trends and market dynamics, while maintaining focus on our core total beverage alcohol business. We have no plans to sell any cannabis products in the U.S. or any other market unless or until it is legally permissible to do so at all government levels. As we have seen in many states, many voters approve of cannabis, but we understand, especially from our perspective in the industry, the need for conversations and to “bridge divides” across the states about sales, distribution and enforcement.

In 2017, we saw how consumers’ changing perspective and behavior is dramatically reshaping our world. They get us talking. They get us thinking. And, they have us looking for new ways to cross old barriers to better meet their needs today and where they want to be in the future. Constellation Brands remains focused on the consumer and providing them with a strong portfolio of premium beer, wine and spirits brands for today’s and tomorrow’s tastes.

 

Tony Clark, Director of Sales, E&J Gallo Winery

Once again, I am pleased to represent E. & J. Gallo Winery on NABCA’s Industry Advisory Committee. Our company is very enthusiastic about the partnership we have created with the control states over the past few years and the ability to share our unique perspective to the issues facing organizations. As pioneers in the art of grape growing, winemaking, sustainability, marketing and distributing, Gallo crafts and imports wines and spirits to suit a diverse range of tastes and occasions, from every-day offerings to boutique, luxury bottlings.

We are proud to represent these brands at this year’s annual conference, an event that always spurs our creativity and helps us forge lasting relationships. Last year’s conference theme, “Bridging Divides,” was a very appropriate one for us. We at the E. & J. Gallo Winery continuously evaluate our internal and external decision-making, and have made impactful modifications to the way we do business along the way. Fortunately, many of the changes we’ve made have been positive and have allowed us to prosper.

The investments we’ve made in recent years put us in a strong position for future growth. We have recently invested in our spirits-bottling line, rebuilt our glass plant, made improvements to our supply chain network and unveiled a brand-new company office building at our headquarters in Modesto. This new state-of-the-art facility offers over 140,000 square feet of space to 700 employees, in a design that encourages teamwork, collaboration and innovation. Ideas born in this space will position our company for another 80 years of success.

Our products offered, and vineyard holdings, have changed rather dramatically too. We have long been a world-class producer of both wines and spirits, but in recent years we have also added several exciting names. We have been awarded U.S. distribution rights for Italian luxury wine producer Jermann, purchased the creative and award-winning Orin Swift wine brand, and formed a partnership with Whyte and Mackay, the fifth-largest producer of Scotch whisky. This exciting partnership allows us to bring The Dalmore, Jura, John Barr and Shackleton Scotches to the U.S. Our portfolio now bridges even more countries across the globe.

These are just a few examples of how we at Gallo are embracing change and bridging divides, enabling us to stay relevant with consumers, increase our profitability to our retailers and distributors and be solid business partners with the control states.

I look forward to another successful year in the control states. Thank you for your partnership. All the best!

 

Scott Schrader, SVP/GM Control States, Diageo North America

“One’s philosophy is not best expressed in words; it is expressed in choices one makes . . . and the choices we make are ultimately our responsibility.” – Eleanor Roosevelt

In a time of extreme social, political and economic unrest – domestically and globally – the need to “do the right thing” and lead by example when it comes to corporate social responsibility (CSR) has never been more crucial.

As social responsibility becomes increasingly more important, corporate commitment to social responsibility has evolved from a novel brand differentiator to table stakes. From human rights to environmental sustainability, social media has made consumers more knowledgeable than ever about corporate performance. Also, CSR reporting is moving from voluntary to mandatory.

According to the 2017 Cone Communications CSR Study, 63% of Americans hope businesses will take the lead to drive social and environmental change moving forward, in the absence of government regulation, and 78% want companies to address important social justice issues. The study also found that 87% of Americans will purchase a product because a company advocated for an issue they cared about, while 76% will refuse to purchase a company’s products or services upon learning it supported a contrary view.

There is growing evidence that companies communicating CSR positions must do so with authenticity. The Cone study reports that 65% of Americans will do research to see if a company is being authentic when it takes a stand on social or environmental issues, and for millennials, that rate jumps to 76%.

Potential impact of CSR initiatives goes beyond consumers. In the past few years, CSR has also become a hot button for investors and shareholders. A strong, genuine and long-term commitment to responsible corporate citizenship is not just good business, it is essential to organizational sustainability and self-reporting of CSR progress in annual reports is increasing.

According to “The Road Ahead,” the KPMG 2017 Survey of Corporate Responsibility Reporting, more than 60% of companies are reporting Corporate Responsibility, with 73% reporting from the Food and Beverage sector.

It is critical that organizations embed their CSR positioning within their brands as well. Crown Royal’s current “Live Generously and Life Will Treat You Royally” campaign, designed to inspire and facilitate generosity in all of its many forms, is a perfect illustration of social responsibility and brand integration. The campaign, featuring real people, places and moments that exemplify true generosity, embodies the belief that a generous life is a life well lived and that the road to royalty is paved with integrity, charity and passion.

Some examples of this generosity are the stories of musician Ray Johnston, who received a lifesaving bone marrow transplant from a stranger and pays it forward by sharing his music with hospital patients; military hero Omar Valentin, who serves as an ambassador for Healing4Heroes, which connects wounded veterans with service dogs; and bartender Brian Floyd, who created the Barman’s Fund to inspire his fellow barkeeps to donate their tips to local charities.

To be successful, our social impact must align with our business strategy and policies, and we must hold ourselves accountable. As a leading producer of spirits worldwide, Diageo initiated 2015 Sustainability and Responsibility Targets in 2008, based on a 2007 baseline, and has since announced even more ambitious 2020 targets.

Our 2020 Sustainability and Responsibility targets provide a framework to measure and track our progress, as well as ensure we are actively contributing to the achievement of the UN Global Goals. As global targets, Diageo North America plays a significant role, as the company’s largest market, in achieving these standards.

Diageo has three priorities regarding our role in society linked to our 2020 targets:

Alcohol in Society Leadership: Create a positive role for alcohol in society through partnerships and programs that impact misuse.

Building Thriving Communities: Equip people with skills and resources to build a better future for themselves.

Reducing Our Environmental Impact: Make our products and business operations more environmentally sustainable.

One of the best ways we can contribute to communities is by engaging others to become advocates for causes important to them and their stakeholders. Working with governments, NGOs, suppliers, local communities and our consumers means we can make an even greater contribution to socioeconomic development around the world.

Building thriving communities is a core value at Diageo. In 2017, we endured more “super storms” than any year on record, with devastating hurricanes, floods and wildfires. Our industry responded with disaster relief funds, drinking water and several forms of aid to help our friends, families and colleagues that live and work in our own communities. For Diageo, Hurricane Maria was particularly devastating to our St. Croix distillery in the U.S. Virgin Islands. It was heartening to witness and be part of a generosity and passion to help others that was sincere and driven by our culture. There were countless grassroots efforts amongst our offices across the globe, as well as corporate funding, including a pledge from Diageo of $1M to provide hurricane relief to the U.S.V.I.

As film producer Peter Guber once said, “Truth is a point of view, but authenticity can’t be faked.” We need to choose to do the right thing, hold ourselves accountable, nurture a culture that truly reflects what we stand for and – we can be assured – others will follow.  At Diageo, we are committed to doing the right thing and choosing to lead by example.

 

Steve Feller, VP, North American Sales, Heaven Hill Brands

What a great time to be part of the distilled spirits industry!  In many respects, we are embracing a new frontier for our industry. From historic whiskey brands to cutting-edge liqueurs, from flavored spirits to aperitifs, consumers are finding new ways to enjoy a diversity of products.

With vast options for consumers, the logistics for our control state partners have never been more complicated. We at Heaven Hill Brands acknowledge the tremendous work of NABCA in “Bridging Divides” within the control state system. The efforts of member jurisdictions to work directly with federal, state and local governments, alongside the supplier community, is as complicated as it is critical to our ongoing success.

Going forward, our industry must be cognizant of the challenges with a new breed of consumer who has the world in the palm of their hand on their digital device. Our industry must understand this consumer’s expectation of product information, selection and accessibility. Internet sales and delivery are macro trends affecting all global consumer packaged goods, and will no doubt have an impact on distilled spirits sales. We must be aware of how innovation, the lifeblood our industry, must evolve to reach these consumers in a responsive and responsible manner.

As one of the leading suppliers in the control state system, Heaven Hill Brands remains committed to tackling these industry issues. Throughout the three generations of family ownership, we have actively pursued a strong partnership with control states and we value our inclusion as an Industry Advisory Committee member. We embrace the opportunity to work collaboratively with the control states, and our fellow supplier community, to recognize that the changing dynamics of our industry must be addressed in a fair and reasonable process.

This May, we congratulate Incoming Chair Jeffrey Painter and Chair-Elect Dan Noble as they assume their new roles on the NABCA Board of Directors. They follow a superb line of former NABCA chairs in working with the industry to pursue the control states’ mission to “protect public health and safety and ensure responsible and efficient systems for beverage alcohol distribution and sales.”

As the distilled spirits marketplace continues to evolve, our industry must collectively confront a promising, yet uncertain future. While there are many unanswered questions ahead, we at Heaven Hill are committed to approaching these challenges with our control state partners. Together we must ensure our industry maintains its commitment to accommodating consumer wants in an equitable a responsible manner.

 

Todd Steven Pemble, CSS, Vice President Sales, Control States, Bacardi

Over the past year, Bacardi has had an opportunity to change the industry. Not through laws, but with changes in the relationships we have developed and our approach we have taken with various initiatives.

Bacardi made an unprecedented move within the spirits industry by announcing the transition to a single distributor network in North America in January 2016. As the first in the industry for a major manufacturer, we named Southern Glazer’s Wine & Spirits (SGWS) to lead the distribution of its spirits portfolio in the U.S. and Canada. This extraordinary transition has not only provided Bacardi with a competitive advantage. Redefining Route-To-Market (RTM) operations has enabled us to “bridge divides” like never before.

This decision has prepared Bacardi for future growth and changes that are now transpiring within the industry. As trailblazers to this effort, we have created stronger brand relevance within our current portfolio by focusing on four key areas:

Leveraging North America Footprint

With one regional customer representing the Bacardi brands across the vast majority of North America, Bacardi has focused on marketing and building its brands, while SGWS has concentrated on the selling and merchandizing side of the business. This has ensured consistent messages to both retailers and consumers.

Evolving Marketplace

While the spirits business has evolved over the past few decades, the marketplace has also witnessed change as retail customers are consolidating – and continue to consolidate. In 2014, 65% of the national accounts business in the spirits arena was controlled by the 20 largest retailers; the four largest accounted for 38% of the spirits sector.

Reignite Growth, Prepare for the Future

Redefining Route-To-Market for Bacardi and the entire industry has generated top-line growth for the North America business. This has allowed Bacardi to reinvest in its people, brands and infrastructure for a more successful business solution.

Regional, Dedicated Sales Force

The regional model that was put in place has added a significant number of sales team members that are dedicated to the Bacardi portfolio across more than 42 U.S. markets.

After two years since this implementation (and specifically this year), Bacardi:

  •              Was the first to pull off a North American footprint with SGWS.
  •              Built a unique RTM for new brands; and created a dedicated selling division.
  •              Has complete transparency with our distributor/broker. No games, no secrets.
  •              Implemented new ways of working, which included joint and collaborative planning.
  •              Sharing talent and career paths for our people.

We are just getting started. Bridging Divides like this throughout the industry will only help us grow for years to come.

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