Throughout the year, the National Alcohol Beverage Control Association (NABCA) Board of Directors meets with the Industry Steering Committee, a group of industry leaders from distilled spirits companies, to address new and ongoing issues facing the beverage alcohol industry and the control states. StateWays once again asked these committee members to participate in a virtual roundtable where they were invited to discuss accomplishments of the past year and challenges facing their industry and the control states in the coming year. The theme of the upcoming Annual NABCA Conference, in Marco Island, FL, is “Acknowledging the Benefits of Control,” and we suggested that Industry Steering Committee members participating could use that as a jumping off point for their comments. Naturally, we also suggested that they can address a variety of issues affecting the industry and the control states: for example, privatization, social responsibility, modernization, best practices, etc. We thank those supplier representatives who took the time out of their busy schedules to respond. These include: Steve Bjeldanes, VP, General Sales Manager, U.S. Control / National Accounts / Canada, Beam Inc.; Marc Satterthwaite, Vice President, Control States and Canada, Brown-Forman; Greg Armstrong, President, Spirits Control, Diageo NA; By John Trainer, General Manager, Control State Division, Pernod Ricard USA; H. Derek Hopkins, Senior Vice President, Sales, Bacardi USA; John W Byrne, Director of Control States & Public Affairs, Rémy Cointreau USA, Inc.; Ted Roman, Senior Vice President, Sales, William Grant & Sons; Rick Przedieda, Sales Manager, Control States and Canada, Luxco; and Steve Feller, Vice President of North American Sales, Heaven Hill Distilleries, Inc.
Steve Bjeldanes, Beam Inc.
VP, General Sales Manager US Control / National Accounts / Canada
Chairman, NABCA Industry Steering Committee
We at Beam Inc. have long been proponents of the Control States system and route to market. In fact, Beam has had one of the longest standing, dedicated Control States sales, field marketing and management structures in the industry.
Some would label the Control States environment as restrictive or prohibitive when compared to the so-called Open market states. On the contrary, we at Beam view the Control States as an area that provides stability and predictably in pricing and promotional costs as well as other areas.
As we know, within the three-tier system, there are several stakeholders along the way to the consumer who impact a brand’s presence in a marketplace. Things like retail price, advertising, promotions and merchandising can either have positive or negative impacts on brand equity or overall brand health. In the Control jurisdictions, the predictability or “guard rails” provided by the states help brand owners position their brands with degrees of certainty and predictably that other states cannot assure.
As Beam continues to seek ways to build on its Social Responsibility platform, we know that our Control jurisdiction partners value those efforts. Too often, how responsibly a brand presents itself or promotes in a market is not a deciding factor for the key decision makers in Open market customers. But in the Control States, we know that irresponsible new product introductions, that either seem to coax in underage drinkers or just tarnish the image of the spirits industry in general, are frowned upon or just blocked from doing business in the state. We believe that this extra layer of protection for the consumer, and subsequently the industry, is a good thing.
A highly debated benefit of the Control system is that it levels the playing field for suppliers. Meaning, the game does not necessarily go to the supplier who spends the most money. Creative, responsible and innovative ways of building brands can be rewarded in the Control States if things are done smartly, regardless of a supplier’s size. Additionally, commitments made through long-term relationship building with the states have real value in the Control system. Both the states and suppliers know that if they invest of themselves in a real partnership, that the overall health of their mutual business will benefit. This certainly happens in the Open markets, but we seem to see it more prevalent and enduring in our Control markets. Administrations and interactions with them seem to be longer range in nature rather than just year to year.
Lastly, because of organizations like NABCA, we have a common forum to have dialog across the supplier community with the Control jurisdiction decision makers. While all of the Control States are monopolies, they are all indeed very different. Having an organization such as the NABCA Industry Steering Committee and venues provided by NABCA offer us opportunities to improve the business across many states for the benefit of the industry. Even though NABCA is centered around the representation of the state employed alcoholic beverage control personnel, the suppliers are very much incorporated into the events and dialogs that take place. This collection of 18 control jurisdictions or customers in one place, figuratively and literally, is a significant benefit for us as suppliers as we look to improve our business in what amounts to over a quarter of the U.S. spirits market.
Marc Satterthwaite, Vice President, Control States and Canada
Brown-Forman
Congratulations! Everyone can place another candle on their proverbial birthday cake since last year’s NABCA meeting in Arizona. Here at Brown-Forman, besides being one year older as a company, we are one year closer – 142 of them and counting – to our celebration of 150 years of business in the year 2020. And, what happens after 2020 you ask? We just buy a larger cake and stock up on more candles! The company’s overarching view of excellence in perpetual brand building is at the heart of how we approach the business.
Recently, we added more clarity and dimension to our strategy that resulted in the strengthening of our behaviors around the concept of innovation. Three of the behaviors dovetail especially well with navigating the waters of change successfully through time. Those behaviors are Be Curious, Be Creative and Be Courageous. For many outside of our industry, a new product introduction such as Jack Daniel’s Tennessee Honey would be seen as evidence of innovation (400,000 cases and still has not earned its one-year candle yet!). Innovation, however, takes on many forms beyond just new products. By its own twofold definition of “introducing something new,” or “making changes in anything established,” it has applications far and wide within all of our operations.
There were numerous examples of changes made within some of the Control States to better meet their consumers (constituents) wants or needs over the past year. It could be classified as innovation just as easily as it might be called modernization. Either way, the wide ranging efforts included: Increasing the number of retail outlets, improving warehouse capabilities, updating stores, adding Sunday sale days, lengthening hours of operation during the week, improving service to the on-premise, legalizing tastings and samplings at retail, and experimenting with new concept stores. Several states also continued to improve their communication efforts via digital technology to grow even closer to consumers. As we head into our 75th NABCA Annual Conference in Marco Island, the external forces of change are hard at work and evident across the Control States landscape. In fact, candles from previous years seem to have come a little easier than this last one. One headline that few saw as initially possible was, of course, Washington’s move to completely privatize. In all of the Control States, whether you are a supplier, state employee, broker or retailer, the passage of this legislation gave reason for pause. In the end, the voters of Washington were consumers who desired a change. Why they voted for it, what they thought they were getting, what will happen to prices, how much product selection they will have…are all chapters for another book. The old adage that, “The only thing constant in life is change,” suddenly seems relevant to us (again!).
So, go ahead and blow out those candles! Not only do they represent years gone by, but they also embody the innovation and change that was necessary for us to prosper through yesterday. I once had a professor in grad school explain that the reason people dislike or avoid change is that it creates incompetence. No one is proficient at something that is foreign to them. This is exactly why we all have to push innovation in our own operations – even when it may not seem comfortable at first.
Greg Armstrong, President, Spirits, Control
Diageo NA
Seventy-five years ago, Franklin D. Roosevelt was president of the United States, the country was in the throes of the Great Depression and the 21st Amendment had been ratified just a few years earlier, bringing to a close America’s great experiment, known as Prohibition.
In the same year, representatives of the 18 control states held the first conference for the newly-established National Alcohol Beverage Control Association, coming together to seek common solutions to the control state issues of the day.
This year marks the 75th Anniversary of the NABCA Annual Conference, during which the industry will continue to explore similar issues – changed for the times of course, but with the same intent. The past three-quarters of a century have seen incredible progress for control states – increased sales, improved collaboration and renewed emphasis on modernization, always with a focus on the responsible use of alcohol. So what will the next 75 years bring?
Consumer Choice
Seventy-five years ago, the industry looked vastly different. Competition, innovation, technology and many other factors have all contributed to a rapidly changing marketplace. The number of products and brands are exploding, causing shelf space to shrink. The one constant over the past 75 years is that consumers ultimately determine the direction of our business. For instance, are suppliers producing innovative products at the right price and are control states making the shopping experience convenient for their customers? Answers to questions like these are critical in defining our future success.
Many states have been busy adapting modernization agendas to better deliver on consumer demand. Sunday sales, longer store hours, shelf-set management and increased access are just some examples of recent improvements to state business operations. Gone are behind the counter sales, books to record personal purchases and dingy, hard to locate stores. Simply put, the control model of 2012 is not your grandfather’s model of 75 years ago.
Business Relations
Thanks in part to the joint efforts of the NABCA Board of Directors, control states have continued to strive for improved operations throughout the last 75 years. All parties are beginning to truly understand that, more often than not, control states and their industry partners are mutually aligned, resulting in real progress. To build on this momentum throughout the next 75 years, it will be important to continue to develop strong relationships with suppliers, brokers, regulators and other key stakeholders to ensure that the system works for the industry as a whole and ultimately, for the consumer.
Diageo dedicates considerable resources to support control states – collectively and with individual states. We look forward to working with states and administrators over the next 75 years to continue to improve key areas of our industry like warehouse redesign, better product management, efficient inventory control, responsible drinking merchandising and marketing and other operations critical to the future of our collective business.
Social Responsibility
The future will continue to include the special focus that control states have always had on delivering meaningful programs to combat underage and excessive drinking. Diageo shares that same mission.
In support of these common values, Diageo has partnered with liquor control boards on many social responsibility initiatives across a number of different control states. Cause marketing, DrinkIQ coasters, ID mats, ID checking calendars and prom/graduation programs have all been delivered in partnership with control states so far this year. Diageo will continue to partner with control states on these types of programs to support control state social responsibility.
Happy 75th Anniversary!
In closing, the National Alcohol Beverage Control Association has enjoyed a rich and successful history for three-quarters of a century. The association has come far and this year’s conference proves that control states, NABCA, and the industry are committed to working together to continue our forward momentum. On behalf of the more than 25,000 Diageo employees worldwide, I wish the association, and all of the people that have been involved in the association through the decades, a Happy 75th Anniversary!
John Trainer, General Manager, Control State Division
Pernod Ricard USA
The theme of this year’s NABCA conference, “Acknowledging the Benefits of Control” definitely resonates with Pernod Ricard USA. That’s because our dedicated Control States Division embraces the mission we share with our partner States: Growing our business while promoting responsibility.
Pernod Ricard USA backs both internal and external campaigns to ensure responsible consumption of its products, ethical marketing practices, and high standards of conduct for employees, customers and consumers. In fact, the company strongly supports its own unique initiative, “Accept Responsibility,” a multimedia campaign that aims to reduce underage drinking, drunk driving and binge drinking by highlighting the excuses people make when engaging in these destructive behaviors. We have brought this program to life through partnerships with many Control States, and our activity continued as strong as ever over the past year.
Last Fall, we joined forces with the Mississippi Department of Alcoholic Beverage Control to sponsor televised “Accept Responsibility” public service announcements reminding young adults about the dangers of binge drinking. The 30-second spots – which aimed to dismiss common excuses used to justify binge drinking – aired on multiple stations in Mississippi, as well as on Memphis, TN.-based stations that reached into Oxford, MS, home of the University of Mississippi. In Washington and Idaho, we supported TV ads and in-store signage to fight underage drinking in the lead up to prom season. In Virginia, we sponsored three weeks of TV ads with a message about fighting underage drinking. And in Ohio, we supported a campaign fighting underage drinking with TV ads and in-store signage during the holiday season.
We are proud of our combined efforts and we look forward to working with more of you in the future. If you have any questions, or would like information about Pernod Ricard USA’s responsibility programs, please contact David Jackson from our Control States team.
Pernod Ricard USA also is proud of its increasingly close collaboration with brokers and Control State personnel to increase revenues. Simply put, we are committed to working with our Control State partners to increase the sales of such leading brands as Absolut Vodka, Jameson Irish Whiskey, Malibu Rum, Chivas Regal Scotch, The Glenlivet Single Malt Scotch, Kahlua and Seagram’s Gin. We take no position regarding “privatization” – this is a matter for individual states to decide, and we will work within whatever framework each state adopts. Regardless of how these developments unfold, we are eager to make continued progress in “market modernization” practices that provide an enhanced shopping experience and improve consumer convenience. We applaud the progress made over the past year in Maine (more off-premise spirits tastings allowed and floor display project authorized); Oregon (allowing mixers to be used in spirits tasting events); Utah and Wyoming (additional on-premise licenses); Virginia (expanded Sunday Sales) and West Virginia (spirits tastings legislation and off-premise Election Day sales).
In short, market modernization is all about maximizing business opportunities for the States, brokers and suppliers, while maintaining the overall mission of the Control State system. Achieving this clearly will demonstrate the “Benefits of Control.”
H. Derek Hopkins, Senior Vice President, Sales
Bacardi U.S.A.
The year 2012 marks two important anniversaries: the National Alcohol Beverage Control Association (NABCA) celebrates its 75th Annual Conference – which focuses on the theme of “Acknowledging the Benefits of Control” – and it’s also the 150th anniversary of Bacardi, which was founded in Cuba in 1863 by Don Fecund Bacardi Masson. These twin celebrations also mark the close and longstanding ties between Bacardi U.S.A., founded in 1936, and NABCA, which was established in 1938. During this entire time, we at Bacardi U.S.A. are extremely proud of our work with NABCA; together, we have partnered effectively, time and again, in advancing our shared commitment to the responsible and safe consumption of beverage alcohol. During this time, we have always strived to work closely with generations of dedicated NABCA officials and all their team members, all of whom continue to diligently serve the public and promote the responsible consumption of our brands.
Looking back over last eight decades, Bacardi U.S.A. has worked successfully to support the key principles, programs and activities of NABCA. At the same time, we are also especially proud of our strong support of efforts by NABCA to innovate, modernize and streamline its operations from behind the scenes programs to safe drinking campaigns in the retail arena.
In this era of rapid change and as NABCA members face new political challenges, Bacardi U.S.A. remains dedicated to the three-tier system in all its diverse variations at the state level, as well as increasing our efforts to collaborate constructively with NABCA members. For better collaboration and alignment with Control States, Bacardi has created a stand-alone division to focus solely on the Control States.
We can confidently state that upholding NABCA’s precepts of control, helping to sponsor public education programs, stimulating revenue generation while advancing safety will all remain important to Bacardi U.S.A. A notable example of our longstanding dedication to these values is our parent company Bacardi Limited’s global responsibility campaign, “Champions Drink Responsibly,” championed by tennis great Rafael Nadal. (For more information, please log onto: http://www.championsdrinkresponsibly.com/lda/). Bacardi U.S.A continues to believe that our diverse portfolio offers great value to consumers, with proven sales that deliver year-after-year revenues to state treasuries.
With the U.S. economy continuing to slowly, but surely emerge from last few years of difficulty and, at the same time, responding pro-actively to public debate about the role of control state enterprises in the aftermath of events in Washington State, it is all the more imperative that NABCA and its individual members successfully tell the story of its effective, modern and forward-looking efforts in terms of both public safety, while returning significant revenue contributions to state budgets. In this environment, then, and more than ever before in NABCA’s history, promoting “drinking less, but better” has the opportunity to deliver growing revenues to state budgets which are increasingly coming under increasing financial pressures.
At Bacardi U.S.A., we remain committed to being steady and effective partners with NABCA members and their teams of officials in collaborating successfully in the drive to modernize your state operations, while also improving the level of customer service in your respective local activities and retail operations. Indeed, we look forward to the next 75 years (and beyond!) in our partnership with NABCA. On the 75th anniversary of NABCA’s first conference, Bacardi U.S.A. joins with other beverage alcohol suppliers in saluting NABCA and its ongoing efforts to serve the public in the responsible and safe administration of bringing our – and our industry’s –brands to the public.
John W Byrne, Director of Control States & Public Affairs
Rémy Cointreau USA, Inc.
Vice Chairman, NABCA Industry Steering Committee
This past year was a year of significant change for both control states and Rémy Cointreau USA.
From an industry perspective, there were several key events that happened in 2011. Many states actively debated the role of continuing state control and, for the first time since Prohibition, we saw one state move away from state control to open distribution of alcoholic beverages. Additionally, several control states are upgrading their warehouse operations, modernizing and expanding retail stores and implementing efficient product selection and category management systems. All of these positive changes should provide a better shopping experience for consumers and return greater profits to the states.
The last year also brought significant positive change to Rémy Cointreau USA. We have new talent in several key executive positions who each bring robust leadership and new energy to the company – including Suriya Parksuwan, President & CEO; Bill Corbett, Senior Vice President, Sales; and Mark Breene, Senior Vice President, Marketing and Chief Marketing Officer. Additionally, for the first time in three years, we’ve witnessed recovery in both the superpremium spirits category and the on-premise channel after year-on-year declines. Consumers are going out more frequently and are trading up in their drinks once again. In fact, President & CEO Suriya Parksuwan sums it up best by saying, “Rémy Cointreau USA has stayed the course in positioning our brands as the preferred superpremium trade-up. This decision to stay premium priced through the recession is the right one and we are seeing positive growth rates this year on higher-priced spirits.”
As we look forward to 2012 and beyond, the core objective of Rémy Cointreau USA is to gain market share with both core and innovation brands, while maintaining our superpremium price positioning. To achieve this goal we will continue to connect our consumers with the unique heritage, superior knowhow and unparalleled product quality of our brands. Moreover, we will continue to creatively engage with our consumers and nourish their connections and demand for our brands.
Already, 2012 promises to be a good year. As a member of the Industry Steering Committee, Rémy Cointreau USA is committed to working with control states to build a strong and supportive partnership.
Ted Roman, Senior Vice President, Sales
William Grant & Sons
As one of the new members of the Industry Steering Committee, I am taking this opportunity to share some of the initiatives William Grant & Sons is executing to build long-term sustainable growth for our brands in the Control States markets. I’ll narrow my comments to four approaches that are contributing to our success to date:
On-premise investment. For the last three years, William Grant has “over invested” in the on-premise channel to accomplish two objectives: first, grow awareness levels for the brands; and second, grow trial and adoption. We are privileged to own an award-winning portfolio of brands: Glenfiddich Single Malt Scotch (the world’s most awarded single malt brand), The Balvenie Single Malt Scotch (the fastest-growing Single Malt brand), Hendrick’s Gin (the fastest-growing superpremium gin brand), Sailor Jerry Rum (Market Watch Fast Growth brand); Milagro Tequila (Beverage Information Group Fast Track Award winner), and Tullamore Dew (second fastest-growing Irish Whiskey brand in the U.S.). We are also privileged to represent Stolichnaya Vodka; one of the leading premium vodka brands in the U.S. market, which is growing +5% through March 2012. These brands benefit from differentiated approaches in the on-premise in order to build consumer loyalty and adoption. While other companies have been putting more and more investment behind price promotion, William Grant & Sons has focused on continued investment behind responsible programming in the on-premise.
Long-term perspective and investment. We are known for applying the long-term perspective, as one would expect from a company founded upon the Scotch whisky tradition and the habit of laying down whisky stocks (assets) for a minimum of 12 years. While having a longer-term view when building brands, I must add that the company also prides itself on being able to act nimbly and take calculated, entrepreneurial risks.
Collaborative approach with our broker and distributor partners. We spend great amounts of time and energy to collaboratively plan our programming and investment with our First Choice partners: Charmer-Sunbelt Group, Wirtz Beverage Group, Young’s Market Company, Republic National Distributing Company, Martignetti Companies and Great Lakes Wine & Spirits. A collaborative process has been built so that all Control State initiatives are agreed to months before the plans are presented to the market. With these partners, we are leveraging all the opportunities the Control States present for our portfolio.
Structure to succeed in the Control States environment. Further, we’ve developed a role in our organization to establish best practice for our brands and business in Control States. Kurt Knop heads this up for us and has implemented some winning strategies that are shared across the William Grant & Sons Control States team. His role is to establish Best Practices throughout our Control States business.
In summary, William Grant & Sons is committed to building our brands with our Control States partners. I am looking forward to even closer ties as a member of the Industry Steering Committee.
Rick Przedieda, Sales Manager, Control States and Canada
Luxco
As the old saying goes, “Change is Constant.” For the Control States and Luxco, there may be no better way to describe the prospects for 2012. At the very least, 2012 will be a year of twist, turns and unforeseen challenges facing each of the Control States and the Industry.
As in past years, each Control States will make their normal adjustments to the “business as usual” environment to improve operations and sustainability. Working together, the Control Sates and Industry will all adapt to those changes and business will move forward. But there is no denying that 2012 will be a year of significant change unlike any other we have experienced in the past. In 2012, all eyes will be on Washington State in particular. With last year’s passage of Initiative 1183, the citizens of a Control jurisdiction have expressed their desire for a different way of managing access to beverage alcohol. Since 1183’s certification, the Washington State Liquor Control Board has worked diligently to implement the desires of the voters. Working without the aid of a blueprint to follow, the WSLCB has had to manage this change while trying to keep all of its internal and external partners informed every step of the way and to the best of their ability. As we have all followed the twists and turns 1183 has taken and will continue to take on the way to implementation, we all recognize that this has been no easy undertaking. While their task has been daunting, we believe everyone at the Board and their staff should be recognized for their efforts as they, in essence, are working themselves out of a job. As for whether 1183 will succeed or fail, time will be the fortune-teller. Washington is sailing in uncharted waters. We at Luxco have always been and will continue to be supporters of the Control States system. In the months and years ahead, Washingtonians will reap what they have sown. We can only hope that the benefits will be many; the unintended consequences will be painless and few; and that the high standards of limiting access of beverage alcohol to minors and the responsible market access to beverage alcohol as established by the Washington State Liquor Control System will continue.
But change isn’t limited to Washington; at Luxco “Change is Constant” as well. 2012 marks th
