How are the control states investing, changing and innovating in the present in order to advance their future value? And how are supplier partners assisting (or sometimes leading) in that effort? To find out, we turned to the NABCA Industry Advisory Committee.
Throughout the year, the NABCA Board of Directors meets with the advisory committee – a group of beverage alcohol supplier leaders – to address new and ongoing issues facing the control state system. Each year, StateWays invites these committee members to share their accomplishments, challenges and initiatives from the past year.
The theme for Jeffrey Painter’s tenure as NABCA Chairman over the past year was “Advancing Future Value,” so we suggested committee members speak about how they’ve worked to achieve that goal.
Ian McLernon, President and CEO, Remy Cointreau Americas
At Rémy Cointreau, our commitment to Terroir, People and Time, is part of our DNA and it demonstrates our commitment to “Advancing Future Value.”
I knew it meant good news for us when incoming NABCA Chairman Jeffrey Painter announced “Advancing Future Value” was NABCA’s theme for 2018. To be partnering with organizations such as the control states and Montgomery County, Maryland, whose strategies aligned with ours, has meant nothing but speed, cohesion and achievement.
The industry’s collective achievements for advancing value is paying off as seen in the NABCA December 2018 end-of-year results. During 2018 nine-liter case spirits sales in the control states grew at 2.8%, up from 2017’s 2.5% and mirroring 2016’s 2.8%. Shelf dollars grew at 5.8%, improving upon 2017’s 4.8% and 2016’s 5.0%
Rémy Cointreau salutes Chairman Jeffery Painter and the full NABCA Board of Directors, the U.S. control states and Montgomery County MD, and our fellow suppliers on the brilliant value achievements made in 2018. This momentum will be accelerated in 2019 by projects currently underway including retail store modernization and remodels, expanded brand and size assortments and progressive marketing and display programs.
Rémy Cointreau’s portfolio of super-premium and luxury brands are among our industry’s greatest in terms of value, profit and prestige. On average, our portfolio generates 2x the industry average in revenue dollars and three-times in gross profit dollars per 9L case. You could say generating value for the U.S. control states and Montgomery County is our niche.
The end results speak for themselves. Our iconic, Rémy Martin Cognac continues to add value to the category, recruit new clients to the cognac category and is enjoying broad appeal that extends across genders, ages and ethnicities. Louis XIII, our flagship brand, is the epitome of luxury. Equally noteworthy are both Cointreau, which has a place in liquor history for being the key ingredient in the Original Margarita, and The Botanist Gin made in Islay, Scotland. Both of these brands are seeing excellent growth and are driving value in the U.S. control states and Montgomery County, Maryland.
Looking forward, in May 2019, we say thank-you to NABCA Chairman Jeffrey Painter for his role on the NABCA Board of Directors. We also welcome the incoming NABCA Chairman Daniel W. Noble, director of the Wyoming Department of Revenue, who was voted chair-elect to the NABCA Board of Directors at its January Board Meeting.
Rémy Cointreau Americas is honored to have the opportunity to work collaboratively with NABCA Board of Directors, the Control State Boards, fellow suppliers and our broker partners, to move our collective business forward in a fair and responsible manner. As a leading spirits supplier in the control state system, Rémy Cointreau is committed to maintaining its strong partnerships, and we value our inclusion as an Industry Advisory Committee Member.
Scott Schrader, SVP / GM Control States, Diageo North America
“People will sit up and take notice of you if you will sit up and take notice of what makes them sit up and take notice.” – Harry Gordon Selfridge, British Retail Magnate
Unlocking Trends to Deliver Value and Drive Growth
As you all know, the theme for this year’s conference is, “Advancing Our Future Value.” The concepts of being future-focused and delivering real, sustainable value are something we at Diageo are constantly thinking about.
At Diageo, we have a purpose that is clear and compelling: Celebrating Life Every Day, Everywhere. This purpose defines everything we as a company do. It inspires us to go beyond the expected celebrations, to challenge convention and innovate, all while keeping a vigilant eye on what’s vibrant and what’s next – for our people, for our customers and for the millions of consumers in North America who enjoy our incredible brands.
The ambition represented by this purpose is increasingly important as the world continues to change at a rapid pace. It’s no secret that consumer culture is shifting, the retail landscape is evolving and products and companies are advancing right along with them. Industries that have enjoyed steady growth and consistency for decades have been disrupted in a matter of months. It’s highly likely that our own industry will not look the same in ten years – or perhaps even five – as it does today.
In the face of so much change, it can be increasingly challenging to maintain brand loyalty among consumers, and to cut through the noise to recruit new consumers to our brands. As we know, retaining repeat or brand-loyal consumers can be one of the most important keys to growth. It’s been reported that repeat purchasers spend up to 67% more than new ones (Bain & Company, Inc.*).
But it is also critical to recruit new consumers. In order to recruit and retain consumers – thereby unlocking growth and advancing your future value – we believe you must offer real value to the consumer. Consumers, therefore, must be placed at the heart of everything we do, and we must constantly remain ahead of the trends and disruptors that are increasingly important to them. Steve Jobs famously once said, “Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.”
Here are a few examples of emerging trends we are seeing which, by understanding and tapping into them, can help deliver value to the consumer.
Purpose-Driven Lifestyles. Consumers increasingly seek “purpose” in their lifestyles and are drawn to purpose-driven brands. These consumers are consistent in their passion for companies that can align to, and authentically represent, a purpose – informing both their short-term purchase patterns, as well as longer-term loyalty behaviors.
Luxury and Democratized Access. The new luxury is more about “what you do” and “with whom you do it” than “what you have.” Its definition has evolved from status symbols, to products and experiences that make any consumer feel “special” in a variety of ways, be it through customization, personalization, uniqueness or exclusivity.
Intrapreneurship ‘Founder’ Mentality. Across industries, there has been an explosion of “small” brands in the United States. In some instances, these “small” brands are capturing significant share of growth in certain sub-sectors. In order to leverage this concept, companies are increasingly looking to their employees to cultivate new ideas through more of an entrepreneurial lens, which includes a laser-focus on consumers.
Shifting Shopper Landscape. The shopper landscape is evolving, with more technologically connected, repertoire-driven consumers (e.g. shoppers purchasing from a solution set versus a variety of single brands). This dynamic is resulting in several trends amongst consumers, leading some to make shorter, less-frequent trips to a retail space, and some to look for convenience anytime and anywhere.
Data, Technology and Analytics. Data, technology and analytics are advancing at an unprecedented rate, allowing organizations to understand customers and consumers more intimately and in more granular and personalized segments. Savvy organizations are mining and using the insights gleaned from this technology in real time to determine what consumers really want and how they behave, which, in turn, is driving purchasing.
Experiences. Underpinning many of these trends is consumers’ increasing passion for unique and special experiences. On a monthly basis, we know that consumers now spend nearly four times more on experiences vs. products. Increased interest in experiences provides brands with new opportunities to introduce themselves to, and engage with, consumers in dynamic and unlimited ways.
Being aware of what is increasingly important to consumers or, quite simply, what’s “making them sit up and take notice,” is the place to start when determining how to provide value, both in the future and right now. Control states will be well-served to consider the same approach in unlocking trends to deliver value and drive growth. In doing so, we will all be rewarded.
Mike Dunne, VP Control, Bacardi
Bacardi has a legacy of 157 years and we have the great responsibility of ensuring this business is sustainable for centuries to come. As a family-owned company, doing the right thing for the long term has always been in the DNA of Bacardi. Since its early days in Cuba, our founder Don Facundo Bacardí Massó believed in giving back to communities, protecting the environment and taking care of people. This tradition remains unchanged seven generations later.
At Bacardi, we believe in promoting a better tomorrow, today. It begins with caring for our planet by protecting the natural resources we use to create our brands and by minimizing plastic use. In the last few years, we’ve exceeded many sustainability goals with a vision to give back at least as much as we take away. We’ve reduced greenhouse gas emissions by 59% by shifting to renewable energy from biogas, heat recovery and wind turbines. We cut water use in half and only 0.4% of our waste currently goes to landfills. We also want to help our partners be part of our future journey, and so, across the globe, we work with local farmers and organizations to instill a practice of sustainable farming, so that local communities can continue their tradition for generations to come.
There has been a lot of noise about plastics in the past year, and we are proud to have been the first major spirits company to make a pledge to remove single-use plastic straws. We committed in March 2016, before this was a trend or a growing consumer request. We did it because we felt it was the right thing to do for the environment and to help inspire a larger conversation about plastic use. We were pleased to see so many companies, both within and outside the industry, follow our lead.
Doing the right thing continues with protecting people – by shining a light on mindful drinking and teaching others to always use our portfolio of spirits safely and responsibly. We believe in celebrating moments that matter one drink at a time. Our entire industry has the responsibility to market brands in such a way as to ensure we do not target those under the legal drinking age and to encourage all those who choose to drink, to do so responsibly. This is critical to the future of our industry and remains a top priority at Bacardi.
Advancing future value is also about making smart investments and putting consumers at the heart of everything we do. We need to listen to consumers in order to stay ahead of the trends, for example with premiumization. A growing taste for luxury is currently driving premiumization and, as the number one super premium spirits company in the United States, we are primed for this trend.
Rum is the last spirit to go premium and, as the original “King of Rums” we have seven generations of rum-making tradition and expertise to lead the trend with our Bacardi 4, Bacardi 8 and Bacardi 10 rums, each aged under the Caribbean sun. A growing consumer interest in tequilas, the fastest growing category, drove our bold move to acquire Patron, the world’s top-selling super-premium tequila. It’s not just about the big names, it’s also about investing in one-of-a kind craft brands that we believe have a long runway for growth, for example St-Germain elderflower liqueur, Aberfeldy single malt whisky, Angel’s Envy Kentucky straight bourbon, among others.
As the largest privately held spirits company in the world, we are free from market pressures and that enables to focus on the long game and properly care for and cultivate these gems which are poised to be the icons of the future.
Tim Rutledge, VP, Director, Route to Consumer, Control States and Sales, Operations Brown-Forman
Brown-Forman is now in its 149th year of business. Few companies have a story as compelling as Brown-Forman’s. Our rich history is vital to the spirit of our organization and gives us a foundation upon which to grow our brands and value into the future. We never would be in this position if it were not for our commitment to taking a long-term perspective in developing our brands and our business. This long-term perspective was instrumental in growing Jack Daniel’s Tennessee Whiskey into one of the most valuable brands in the world and will ensure the continued growth of Woodford Reserve Bourbon, an emerging high-value brand within the Super Premium Bourbon category.
Under Chairman Jeff Painter’s leadership, NABCA rallied around the theme of “Advancing Future Value.” We share this vision. Brown-Forman is proud to partner with NABCA, the industry and control states in ways that focus on enhancing consumer value, responsibly, now and in the future.
We believe the future is bright for control states. One reason for this optimistic outlook is because control states are finding new ways to service consumers. Innovations vary, but we are hopeful about future value when we see advancements in technology platforms, warehousing improvements, special offerings through lotteries, emerging discussions around e-premise, home delivery and other aspects that satisfy the evolving way consumers want to interact, shop, and purchase our brands. Innovation is essential to advancing future value.
Access to consumers is an important part of future value and we see several states supporting extended shopping hours, Sunday sales, etc., and managing and evaluating increased access in a responsible manner. These are examples of the states looking to provide consumers with choices for various occasions and we are happy to participate in developing programs that support responsible consumption of our brands.
NABCA data is also driving more value than ever before. At Brown-Forman, we are leveraging NABCA data to develop insights that allow us to identify important trends and opportunities as well as improve partnerships. These insights are being activated to educate and engage consumers migrating to growth categories like Kentucky bourbon, Tennessee whiskey, Single Malt Scotches, and premium tequilas. We are also using this data to focus on small-size occasions, which we believe offers value growth potential. We are encouraged to see new efforts to improve data quality and new streams including daily sales data, both in the on and off premise sectors.
Relationships are important in this business and Brown-Forman seeks to strengthen our relationships with each state. For example, we were happy to host Chairman Painter and in-coming Chairman Noble, along with several other state commissioners and NABCA officials, at our new Old Forester Distillery in Louisville, Kentucky.
It is good to see the states involved in developing category knowledge by visiting different regions around the world and better understanding things like distillation processes and quality assurances for those suppliers that own and manage their production and maturation supply chain. As control states managed the distribution of beverage alcohol, we believe this enhanced understanding of quality products that are produced and marketed in a responsible manner provide consumers with enjoyable experiences for many years to come, thus creating future value.
We look forward to working closer with each state, in partnership with NABCA, as we think long term about the business and advancing our collective future value. As we continue to develop Jack Daniel’s as the most valuable whiskey brand in the world, and grow premium plus brands such as Woodford Reserve, Old Forester, Herradura, GlenDronach, BenRiach, Gentleman Jack and many others, we embrace the long term perspective NABCA has as control states continue to innovate.
As Brown-Forman nears its 150th anniversary, our ambition remains committed to building our business through positive consumer experiences for many generations to come.
Steve Feller, Vice President, North American Sales, Heaven Hill Brands
The NABCA Roundtable is an opportunity to reflect on the collective success of the supplier and control state partnership. Beverage Alcohol trends increasingly reflect distilled spirits growing in market share thanks to consumers, who are attracted to our industry’s products, which deliver quality, selection, versatility and enhance their enjoyment of life. Together with control state partners, we have achieved greater consumer accessibility in a responsible way.
There are many unanswered questions ahead. Our industry must be committed to accommodating consumer desires in an equitable and responsible manner. Maintaining that dynamic as ecommerce and ease of delivery are on the horizon, which presents a unique opportunity to “Advance Our Future Value” with a focus on infrastructure and brand building.
Heaven Hill Brands is committed to these challenges, working with our control state partners. Through three generations of family ownership, we embrace our relationship with control states. Likewise, as an Industry Advisory Committee member, we have worked collaboratively with the control state system, and our fellow supplier community, to address the changing dynamics of our industry.
Our partnership is critical to building the value our consumers demand. Suppliers have a responsibility to produce and promote products that evolve with shifting consumer patterns. That necessity requires the logistics to quickly and effectively deliver products to the marketplace. With the efforts of member jurisdictions working directly with federal, state and local governments, alongside the supplier community, this complicated, yet critical, aspect of the industry continues to thrive.
We are appreciative of the tremendous work of Jeff Painter and his leadership of the NABCA Board of Directors for the past year. He leaves a strong legacy of “Advancing Future Value” within his own administration and across the NABCA. We look forward to Dan Noble assuming this leadership role and working with the industry to pursue the control states’ ongoing mission.
We have great confidence in the NABCA’s ability to help build our collective business for the long term. As one of the leading suppliers in the control state system, Heaven Hill Brands has a history of quality products, meaningful innovation and an ongoing commitment to responsibility. We look forward to the bright future ahead with our control state partners.
BJ Vorderer, General Manager, Liberty Division, Pernod Ricard USA
Driving Innovation for a Better Tomorrow
At Pernod Ricard USA, we pride ourselves in being “creators of conviviality.” We bring joy, passion and meaning to everything we do to create the moments that make life worth living. It’s these moments that drive us to develop innovative and sustainable solutions that advance future value not only for our company and industry, but also for consumers counting on us to create a more convivial world – without excess.
As a family-owned company, our people and consumers are at the heart of our business. They’re the drivers of our momentum over the last year – Malibu (+7.1%), Jameson (+13.2%), Martell (+18.9%) and Altos Tequila (+38.1%) – and our future success. We’re aligning their aspirations with our comprehensive portfolio and commitment to developing new products, services and experiences, including:
Product innovations. From new flavors to blurring the lines of spirits categories, we continually drive some of the most successful innovations in our industry. Jameson Caskmates emerged from a conversation between our head distiller and the head brewer of Cork’s Franciscan Well Brewery to create a one-of-a-kind spirit finished in stout-seasoned whiskey casks. And the momentum continues with upcoming product innovations including Absolut Juice.
System innovations. Since 2012, our Breakthrough Innovation Group has been working to invent the future of conviviality by developing new products and services to radically change and enhance the consumer’s experience. Created in 2017, Convivialité Ventures is the venture arm of Pernod Ricard. By nurturing entrepreneurship, we play a key role in the development of inspiring new offerings that are shaping the evolution of socializing.
New Brand Ventures. Consumers’ increasing interest in how and where spirits are made has been great for our terroir-based business. Our New Brand Ventures initiative was created to generate future “growth star” brands that can fuel top line growth over the next 5-10 years. In just two years, Pernod Ricard USA has acquired seven brands, including: Del Maguey, Lillet, Smooth Ambler, Powers, Monkey 47, Aberlour and Plymouth Gin.
Digital and e-commerce. We’re focused on delivering the most innovative digital and e-commerce experiences to our consumers. Drinks & Co is our global e-commerce platform that ships any of our wines and champagnes directly to your door. Our Wise Drinking App helps consumers measure and manage their alcohol consumption through a Facebook chatbot.
Most recently, we announced in April our 2030 Sustainability & Responsibility Roadmap – “Good Times from a Good Place.” This strategy for following our passions and advancing the UN’s Sustainable Development Goals builds on a legacy of sustainability, starting with our founder Paul Ricard’s concern for ocean preservation and continuing through the achievement of our 2020 goals. Among the highlights: 93% of our production facilities are ISO14001 certified, an internationally recognized certification standard; 95% of our vineyards are certified according to environmental standard best practices; we’ve reduced water consumption by 20% per liter of alcohol; carbon emissions are down 30% per unit of production and waste to landfill is down 93%.
Our brands have long engaged in sustainability initiatives. Absolut is locally sourced and carbon neutrally distilled, and has been an LGBTQ ally since 1981. This Earth Day, the brand announced a new platform to protect our planet and its people as “Planet Earth’s Favorite Vodka.” By gathering live data and analysis about the environment and conversations from our communities, Absolut will drive actionable sustainability programs across the country. Mumm Napa is the first U.S. winery to achieve four ISO certifications. And Pernod Ricard USA brands are early adopters of LOLIWARE edible and compostable straws.
The 2030 roadmap features eight ambitious targets in four key areas – nurturing terroir, valuing people, circular making and responsible hosting. They address head-on material issues facing the world today, from climate change to human rights and waste.
We’re rallying our people and our brands behind the goals we’ve established and incorporated into our strategic business plan. Our roadmap is achievable and, like the innovations listed above, it’s poised to make a real difference now and for the future.
Mike Duggan, CEO, Phillips Distilling Company
For Phillips Distilling Co., advancing future value means working together with our NABCA partners to do everything we can to create the brightest possible future for our customers and consumers. Over the last year, we’ve had the privilege of developing strong relationships with NABCA board members and employees. It’s evident that our NABCA partners care about taking the right steps toward creating a better future for its stakeholders.
Through our research and experiences, we recognize that today’s consumers across all categories, including spirits, demand transparency, support sustainability and want to make a difference through their lifestyle and shopping choices. With so many brand options, consumers are increasingly selective and committed to putting their dollars toward the brands and products that align with their values.
Phillips Distilling is striving to exceed consumer standards and invoke lasting, positive change through several sustainability and cause-oriented initiatives that advance future value by giving back to our land, farmers, industry and consumers. Most notably, our Prairie Organic Spirits brand recently launched an industry-leading program called the “Spirit of Change Fund,” which donates one percent of sales to support the next generation of organic farmers by helping them transition more conventional farmland to organic. This includes partnering with Rodale Institute, a leading non-profit committed to growing the organic movement through research, farmer training and consumer education. Prairie Organic will provide 10 scholarships for interns accepted into Rodale Institute’s Next Generation Scholarship Program, where they will learn about organic agriculture and get the hands-on organic farming experience.
The Spirit of Change Fund is the beginning of Prairie Organic’s larger goal to make organic mainstream in the alcohol industry, which lags significantly behind the food category when it comes to offering organic options. Specifically, organic alcohol makes up less than one percent of our category, while organic food makes up five percent of its category. If we as an industry caught up to where food is by increasing the spirits industry’s organic share to five percent, we would help transition eight million acres of conventional farmland to organic and save more than seven million pounds of pesticides from entering the land. That’s an enormous WIN, but we can’t do it alone.
To achieve this ambitious goal, we are reaching out to our farmers, distributors, NABCA members, retailers, bars and restaurant partners and other like-minded brands to join us in increasing sustainability efforts, using more organic ingredients and raising awareness of the benefits of organic. Because when less pesticides and herbicides are used, it creates a better environment and future for everyone!
Another brand of the Phillips Distilling Company portfolio, UV Vodka, is also taking strides to create a better future. The “UV Vodka Salute to Heroes” program started as a veteran employment initiative that helps veterans and their spouses find meaningful employment. We’ve celebrated five years of giving back to our United States military members and spouses who make incredible sacrifices to serve our country. We are very proud that together with the help of customers like our NABCA partners, we have generated donations of more than $250,000 to fund job fairs and career development services. We created this program to show our appreciation for our military members. In year five of the Salute to Heroes program, UV Vodka will salute another hero, first responders.
Additionally, Phillips Distilling Company is very proud of our newly created One Team G.R.E.E.N. company-wide sustainability initiative that brings together our employees, partners, suppliers and community to positively impact the environment and encourage a more sustainable industry. Through this program, we are committed to making smart choices that will help in reducing power usage, conducting wastewater studies, sourcing from sustainable vendors, increasing recycling, decreasing waste sent to landfills and, most importantly, recruiting more in our industry to join us!
We’re excited and proud of the steps Phillips Distilling is taking to do our part to evolve our company and industry. By walking our talk and committing to initiatives that support sustainability, organic farming and everyday heroes, we hope we’ll leave this world a little better than we found it. We can make a difference by working together and that’s something to celebrate!