“IT’S ALL GOOD.” That could be the mantra for the spirits and wine industries in the U.S., as they continue to march onward and upward, according to the latest statistics just now being released in the Adams Handbook Advance 2007.
Photography by Pat Mazzera
In 2006, distilled spirits consumption rose in the U.S. for the ninth straight year, gaining more than 6.6 million 9-liter cases from 2005 to finish the year just under 176.6 million cases, an increase of 3.7 percent. That gain outpaced the 2.8 percent increase spirits consumption showed in 2005. For its part, wine consumption in the U.S. improved by 3.4 percent in 2006, to 283.1 million 9-liter cases, a more than seven million case gain over 2005. For the record, this was the fourteenth straight year that wine consumption grew in the U.S.
Several positive trends are at play here, including the increasing cultural acceptance of the potential health benefits of moderate wine and spirits consumption and the continuation of a thriving cocktail culture. Increased access to product, thanks to the liberalizing of archaic blue laws nationwide, especially the growth of Sunday sales and a more spirits- and wine-savvy public that’s responding to increasing efforts on product education from retailers, restaurateurs, distributors, suppliers and the media also made a contribution. Further, growing recognition that beverage alcohol can be a flavorful enhancement to meals drove on-premise sales, while the general modernization of retail outlets, as they focus on making beverage alcohol shopping a more enjoyable and less intimidating experience, especially for women, is making exploring beverage options more comfortable for all.
And the golden thread weaving its way through all of these positive trends is the American consumer’s ongoing migration toward luxury products. Indeed, according to a recently released report by the Economic & Strategic Analysis Department of DISCUS, spirits products priced at super-premium and above levels increased their volume by a healthy 17.5 percent in 2006, almost five times the growth rate of spirits overall.
As one would expect, this increase in high-end sales resulted in overall dollar growth that substantially exceeded volume growth percentages. According to the Adams Handbook Advance, combined on- and off -premise retail sales of distilled spirits jumped 9.5 percent in 2006, to $58.6 billion, while retail sales of wine increased 7.2 percent, to $26.0 billion.
Fast Track Brands
Criteria: The brand must have exceeded 100,000 9-liter cases in 2006, with double-digit growth over each of the past four years. All brands must be at least five years of age.
Criteria: The brand must be less than five full years of age, and must have exhibited notable growth over the past few years.
Established Growth Brands
Criteria: The brand must be a top seller, moving a minimum of 400,000 9-liter cases annually, and must have grown moderately or substantially over each of the past four years.
Criteria: Recognizes brands of significant volume that saw a sales decline two years ago but which rebounded last year. This increase, however, must have resulted in total sales that are at least equal to or greater than the 2004 sales total.
SPIRIT CATEGORY OVERVIEWS
Once again, most spirits categories registered increases in 2006, with flavored spirits, especially in the fast-growing white spirits categories, again expanding their volumes and offerings. The largest spirits category, vodka, continued to gain market share with sales of more than 49.3 million 9-liter cases, a 6.7 percent gain over 2005. Rum gained 3.5 percent to reach 22.8 million 9-liter cases, and tequila continued its growth with a 10.2 percent gain to end the year just under 10 million cases.
The second-largest distilled spirits category, cordials and liqueurs, rose another 3.7 percent to 21.5 million cases in 2006, while brandy and Cognac climbed 1.9 percent to 10.4 million cases. Gin registered a slight increase in sales last year to 11 million cases, while prepared cocktails decreased 1.7 percent to 6.5 million cases.
Among whiskies, straights grew 3.8 percent to 14.7 million cases, Irish grew 16.4 percent and Scotch eked out a 0.4 percent gain. Canadian whisky showed a slight 0.3 percent decline, while American blends were also off , by 1.1 percent to 5.2 million cases.
WINE SURGE CONTINUES
Last year’s overall gains in wine sales were again led by table wine, which accounts for more than 90 percent of the U.S. wine market. Led by premium varietals, table wine grew 3.7 percent to 258 million 9-liter cases in 2006. Similar to 2005, imported wines showed a larger percentage gain (+5.6 percent) than domestically produced table wine (+2.7 percent). Still, domestic table wine comprises about two-thirds of the entire U.S. wine market.
Champagne and sparkling wine continued its positive momentum last year with a 4.0 percent gain that put the category at 13.4 million cases, while vermouth and consumption of the dessert and fortified wine category both declined slightly.
Why Growth Brands?
As we’ve been reporting for several years now, “brand equity” is perhaps the most valuable asset a product possesses, particularly in the beverage alcohol industry, where a sudden change in consumer tastes and perceptions can make or break a product. As we’ve previously stated, a combination of resources, creativity, perseverance, the right economic environment and just plain luck often go into creating and developing a successful brand. There are beverage alcohol products in every category and at every price point that, for any number of reasons, have either lagged behind or outpaced their respective competitors.
Although identifying category consumption trends is helpful, actual brand activity can often run counter to them (i.e., Crown Royal outperforms the Canadian whisky category). Thus is the rationale behind “Growth Brands,” our annual report that uses the latest industry results to highlight those wine and spirits brands that have demonstrated noteworthy growth in recent years. [The September/October 2007 issue of Cheers will publish the Beer Growth Brand results.]
Spirits Fast Track Brands
To attain Fast Track status, a brand must have maintained double-digit sales growth over each of the past four years on sales of more than 100,000 9-liter cases. As brands grow larger, this clearly becomes more difficult with each passing year. Thus, the spirits brands that are identified here are the cream of the Growth Brand crop, and often among the fastest-selling spirits in the U.S.
Only 13 spirits brands were included this year, down from 15 last year. Among them are eight vodkas, two tequilas and a single liqueur, rum and whiskey; all except one were included in the Fast Track rankings last year.
Once again, vodka dominates the Fast Track list, and one cannot emphasize enough how the tremendous growth and innovation among vodka brands has shaped the total spirits market. To a degree, the rise of the cocktail culture in the past decade, which has contributed to the amazing gains in spirits overall, can be traced to the prestige and appeal of the high-end vodka tier. In addition, the explosion of flavors in the category has coincided with—and maybe helped spur—the expansion of flavors overall. In the end, vodka now accounts for about 28 percent of all spirits sold in the U.S. Even more significantly, according to a recently released report by the Economic & Strategic Analysis Department of DISCUS, the super-premium segment of the vodka category grew by 38.6 percent in 2006 compared to 2005. Several of these brands made it to our Fast Track list.
Grey Goose Vodka, the high-end import from France, had another stellar year in 2006, gaining an estimated 28.2 percent in sales to reach 2.66 million 9-liter cases. Bacardi purchased the brand two years ago and has continued driving its phenomenal success. The brand recently introduced a new line extension, Grey Goose La Poire, a pear-flavored version, which now joins the portfolio of L’Orange, Le Citron, La Vanille and the original Grey Goose. Skyy, another above-premium vodka featuring five additional flavors and an even higher-end expression in Skyy 90, increased sales to 2.27 million 9-liter cases, while Ketel One, from Nolet Spirits, eclipsed 1.75 million 9-liter cases in 2006.
Svedka, just purchased from Spirits Marque One by Constellation for $384 million, gained almost 400,000 cases last year, a 59.8 percent gain over 2005, and broke the million case point for the first time. Three Olives, another superpremium imported vodka with an impressive lineup of flavors, jumped almost a third to 630,000 cases. UV, from Phillips Distilling, and Vincent Van Gogh (Luctor International) vodkas also feature extensive flavored vodka portfolios.
The only first-time member of the Fast Track is Tito’s Handmade Vodka from Fifth Generation, an ultra-premium product made in Austin, Texas. Pot-distilled in small batches, Tito’s grew 60.4 percent last year to reach 170,000 cases.
Jagermeister, the German liqueur, repeats as top dog in the Fast Track category this year, gaining another 550,000 cases to 2.85 million cases. One of the industry’s fastest-growing brands is Patron, the line of super-premium tequilas, which increased sales a terrific 74.8 percent to deliver annual sales of more than a million cases for the first time. Another tequila, El Jimador, also made the Fast Track, underlining the overall growth in the tequila category nationwide.
WINE Fast Track Brands
If anything reflects the difficulty of attaining Fast Track status, it’s the fact that Yellow Tail, the phenomenally successful Australian wine, has fallen off the list this year, after topping the group last year. The reason? Even though it gained more than a half million cases in 2006, the brand’s growth rate was only 7.3 percent—not double digits as the Fast Track Brands must be. [Yellow Tail—most definitely a victim of a large base number—is now near the top of the list of Wine Established Growth Brands.]
Of the nine brands that are included here—the same number as last year—six of them are repeat performers: Foxhorn, Smoking Loon, Barefoot Cellars, La Crema, Nobilo and Wolf Blass. The top six brands are, for the first time in years, all from California and, except for one—La Crema—are all competitively priced at approximately $10 and below at retail (taking into account that prices vary from market to market).
Name and label design now play an increasingly important role in wine sales throughout the U.S. Indeed, the top four brands here feature a critter, waterfowl or the impression of a bare foot on their labels. Although these are relatively mild examples, the trend toward wilder and wackier wine names and labels is having a noticeable affect on sales, which is evident in our Wine Rising Stars list.
As for individual brand growth, Foxhorn continued its growth, up 300,000 cases last year, to 2.6 million cases, while Barefoot Cellars exploded, more than doubling sales to achieve 2.4 million cases. For its part, Smoking Loon broke the one million case mark for the first time in 2006, and Crane Lake sales improved by more than a third, to reach 875,000 cases. An additional Bronco Wine brand, Salmon Creek, added 50,000 cases to its 350,000 last year. The one above-$10 wine among the domestic brands, Kendall-Jackson’s La Crema, grew to a healthy 560,000 cases.
Among the imported wines included in the Fast Track list is Casillero del Diablo, a label of the Concha y Toro line imported from Chile by Banfi Vintners. The brand grew more than 22 percent last year to hit 240,000 cases. Another import, Nobilo, a New Zealand wine brought in by Pacific Wine Partners, saw sales jump by more than 40 percent. The well-known Wolf Blass, a super-premium Australian import, gained 23 percent to finish 2006 just under 200,000 cases.
SPIRITS Rising Star Brands
This year, nearly twice as many brands—13 in all—met the criteria for a Rising Star than last year, when seven made the cut. Five of them are returning Rising Stars: Seagram’s Vodka, Bacardi Party Drinks, Pravda Vodka, Brugal Rum, Ciroc Vodka. Interestingly, there is a range of product types here that we didn’t see last year, including prepared cocktails, whiskies, rums, liqueurs, Cognac and, of course, vodkas, which lead the category with four representatives.
Following the huge numbers of Seagram’s Vodka’s initial launch in 2003 (460,000 cases), the brand has kept up a torrid pace, even after it was sold by Pernod Ricard, which initially debuted the brand as a worthy companion to the famous Seagram’s Gin, to Infinium Spirits. Like other vodkas in its price range, the brand has offered several flavors to help spur consumer interest.
Pinnacle Vodka, from White Rock Distilleries, has been named a Rising Star for the first time, having almost tripled its sales last year to reach 151,000 cases. Pinnacle had notable success when White Rock “re-introduced” the brand in a new blue-hued PET bottle last year. It also comes in a range of six flavors. Both the third and fourth vodkas included here are super-premiums: Pravda, the Polish import that shot up 40 percent to 140,000 cases, and the French-made Ciroc, produced from grapes.
Reflecting the appeal of certain types of premixed cocktails, Bacardi Party Drinks hit sales of 725,000 cases last year, up 8.2 percent. If it continues its success through 2007, it will graduate to the Established Growth Brand category next year.
First time Rising Stars include Pama, from Heaven Hill Distilleries, which notched sales of 50,000 9-liter cases right out of the chute. The pomegranate-flavored liqueur was the first widely available spirit (to our knowledge) to use that flavor. Since Pama’s launch, pomegranate has become a favorite of spirits producers, appearing in other liqueur brand line extensions and a number of vodkas.
For its part, Sailor Jerry Rum, from William Grant & Sons, more than doubled sales to 125,000 cases. The Spiced Navy rum has an arresting package, featuring two tattooed Hawaiian dancers, and is named after a famous tattoo artist who lived on the island. Two additional rums made the category: Brugal, imported from the Dominican Republic by Shaw-Ross Importers; and 10 Cane, from Moet Hennessy, a super-premium rum that uses the juice from freshly pressed sugar cane in its production process.
In addition, two Irish products are also included here: Irish Manor Irish Cream, which hit 50,000 cases, and a new Irish whiskey, Michael Collins.
WINE Rising Star Brands
If the 32 wines included in the Rising Star Brands category this year are any sign, then it seems that the wine industry as a whole has embraced the wacky, the cute and the odd in the naming and labeling of brands. Obviously, it’s a strategy that works. Consumers are apparently drawn to these cuddly and quirky presentations, spurred to take the bottle with the funny looking label and clever turn of phrase off the shelf and try it.
This year, the Rising Star wines sport labels bearing penguins, fish, moose, monkeys, horses, owls, koalas, emus and even one wine that has a different label/critter for each varietal, to name a few. In addition, boomerangs, thieves, guitars, hangers and high heels, plenty of verbal fun and puns and several unique bottle presentations tempt consumers to trial.
Indeed, it appears as if the wine industry is intent on using several “alternative” means of expanding its appeal to American consumers—the oft-criticized intimidation factor of wine and wine labels is rapidly being replaced by picturesque and approachable packages. This is not a dumbing down, but rather a change of emphasis evident by injecting more lightheartedness into the industry. Still, the wine itself is appealing to consumers’ tastes. There are wines with depth and character here, but there are also plenty of “drink-me-now,” fruit-forward wines made to please the mainstream American palate.
Two years ago 22 labels were represented here, last year there were 26 and this year an additional six make the cut. Eighteen California wines appear on the list, with six Australian efforts, three from Italy, two from Washington State, and one each from France, Spain and New Zealand.
The top Rising Star wine is from Australia— Little Penguin, which gained another 39.1 percent in 2006 to hit 900,000 cases. Other notable Australian wines include Little Boomey, which registered just under 200,000 cases; Twin Fin, which rose to 181,000 cases; Jindalee, which uses different label designs for each of its portfolio offerings; Mattie’s Perch, with sales of 75,000 cases in its first year on the U.S. market; and Four Emus, with a 65.6 percent increase.
Notable West Coast wine Rising Stars include Fish Eye from The Wine Group, which more than doubled its sales to reach 650,00 cases last year on a portfolio of varietal wines in 750 mls with colorful labels as well as in bag-in-box packages; Black Box, which features a line of bag-in-box premium varietals that gained more than 50 percent to hit 571,000 cases; the red, rosé and white wine offerings from Menage a Trois, a Trinchero brand, which showed an 83.3 percent increase. Also on the list are Edna Valley (Diageo), which hit sales of 231,000 cases; 3 Blind Moose (Centerra), which more than doubled its sales to 210,000 cases; Red Diamond (Ste. Michelle Wine Estates), which registered 216,000 cases; Five Oaks (Gallo), whose line of varietals hit 120,000 cases in its second year on the market; 14 Hands (Ste. Michelle), at 95,000 cases; Pinot Evil (The Wine Group), with 80,000 cases in its first year on the market; and Three Th ieves, at 74,000 and featuring varietals packaged in retro-style jugs and tetra packs.
The top European wine cited here is Voga Italia (A.V. Imports), which exploded to 250,000 cases. The Italian Pinot Grigio showcases a highly stylized package, including a cork closure complemented by a large, black airtight twist cap. Two other Italian Rising Star wines are both from Gallo: DaVinci, with its artist-inspired label, which gained another 45.8 percent to hit 175,000 cases, and Maso Canelli, a super-premium import with sales of 95,000 cases.
Two smaller brands, both new to the market last year, round out the European contingent. They are Gala Rouge, from Brown-Forman, a French wine with vintage French poster art on its label that sold 40,000 cases; and Red Guitar (Pacific Wine Partners), a Spanish old vine Tempranillo.
SPIRITS Established Growth Brands
These 27 Established Growth Brands represent many of the largest and most successful spirits brands in the U.S. Often, these brands are leaders in their respective categories, and in many instances, have been cited as Established Growth Brands before. That is no easy task, since these brands must deliver sales gains year after year, through changing tastes and changing macroeconomic conditions.
They are, for the most part, mature brands that have been on the market for years, and have created a loyal following through ongoing brandbuilding efforts. Whether through merchandising support at retail, packaging initiatives, pricing strategies, line extensions, new advertising and marketing programs or other brand positioning techniques, these spirits have succeeded in growing their business by continually appealing to new and existing customers.
Indeed, this list provides a general snapshot of what spirits Americans are consuming. A range of products is evident, from high-image superpremiums to everyday value brands to plenty of well-known, quality spirits in between. Of the 27 brands here, 16 are imports, and every major product category is represented—there are six vodkas, one gin, three rums, four tequilas, three brandy and Cognac brands, three liqueurs, one prepared cocktail and six whiskies (one Scotch, one Canadian and four American whiskies). The variety of price and product type among these top-growing brands serves to underline one of the industry’s oft-spoken “laws”—namely that consumers approach different consumption occasions by purchasing different classes and types of spirits.
All the Established Growth Brands sold more than 400,000 9-liter cases in 2006, with 15 of them eclipsing one million cases. Most impressive was Bacardi, the top-selling spirit in the U.S., which added another 260,000 cases last year to achieve sales of nine million 9-liter cases. Captain Morgan Original Spiced Rum grew by almost 200,000 cases last year, as did Absolut Vodka. Jack Daniel’s gained more than 200,000 cases, for a 4.8 percent increase, while Diageo’s Jose Cuervo and Crown Royal both upped their sales by more than 100,000 cases.
Hennessy Cognac had a stellar year, adding sales of more than 150,000 cases, a 7.3 percent gain, while two brands broke the two million case mark for the first time in 2006: Stolichnaya and McCormick Vodka.
At these volume levels, brands that grow by double-digit percentages are worthy of special note. This year, they include Maker’s Mark, from Beam Global Spirits & Wine, which hit sales of 674,000 cases on a 13.1 percent increase; Burnett’s Vodka, from Heaven Hill Distilleries, which gained 11.0 percent in 2006 to reach 605,000 cases; and 1800 Tequila, from Skyy Spirits, which increased by 10.1 percent to end the year with 435,000 cases.
WINE Established Growth Brands
The Wine Established Growth Brands category includes the top-selling brands that have been growing consistently over the past four years, and this year is once again dominated by domestic and imported table wine. Although many brands sell for below $10 at retail, a significant number are higher priced.
Several of the best-selling wine brands in the U.S. are not included here, a result of the fact that those brands experienced a sales decline for at least one year since 2003. Interestingly, out of the 25 brands to make the list this year, 21 of them were Established Growth Brands last year.
The newcomers include two Australian wines that were previously Fast Track Brands: first, Yellow Tail, imported by W.J. Deutsch & Sons, which eclipsed sales of eight million 9-liter cases last year; and Alice White (Centerra Wine), which registered 760,000 cases. Other newcomers include two sparkling wines. Korbel (Brown-Forman), the California-produced bubbly, joined the category with sales of more than 1.23 million cases in 2006, while Veuve Clicquot/La Grande Dame (Moet Hennessy), sold 431,000 cases, a 13.7 percent gain, which is an impressive performance for a super-premium French Champagne.
Among top-performing California wines included here are category leader Beringer (Foster’s), which added more than 400,000 cases to 8.5 million cases, up 5.3 percent; Robert Mondavi Private Selection (Centerra), which added almost 100,000 cases to achieve sales of more than 1.8 million cases; Clos du Bois (Beam Wine Estates), which gained 5.7 percent to more than 1.77 million cases; Blackstone (Pacific Wine Partners), which hit sales of 1.5 million cases; Stone Cellars (Foster’s), at 1.3 million cases; Sterling Vineyards (Diageo), which registered more than one million cases; Bogle Vineyards, with sales of 831,000 cases; J. Lohr, which grew an impressive 24.6 percent to 770,000 cases; ForestVille (Bronco), which notched 775,00 cases; and Estancia Estates, with an increase of 8.5 percent to reach 661,000 cases.
Several Italian wines are included here, reflecting the latest statistics released by the Italian Wine & Food Institute: In 2006, Italian wine exported to the U.S. has for the first time exceeded $1 billion in value. Cavit (Palm Bay Imports) leads the group of Italian wines among Established Growth Brands, notching three million cases in sales, a hefty 13.2 percent increase, followed by the perennial best-seller Riunite (Banfi), with sales of 2.25 million cases. Martini & Rossi Asti (Bacardi USA) registered just under 800,000 cases, while Verdi Spumante (Carriage House) jumped to almost 700,000 cases. In addition, both Ruffino (Icon Estates) and San Pedro (Shaw-Ross Importers) continued their success, with the former totaling 621,000 cases and the latter hitting an even 600,000 cases.
There were several other notable performers, particularly Lindemans (Foster’s Wine Estates Americas), which gained well over 200,000 cases last year for an 11.7 percent increase—more than 2.23 million cases—and Chateau Ste. Michelle, which also notched a double-digit percentage increase of 13.2 percent to finish the year with more than 1.45 million cases. Finally, the German wines of Schmitt Soehne jumped an impressive 15.0 percent to 880,000 cases in 2006, perhaps partially as a result of its “Little German” marketing campaign.
For these large-volume brands, competitive pricing is a constant issue that must be complemented by marketing initiatives, a quality proposition, a strong distribution footprint and, as previously pointed out, a shelf presence, whether at retail or behind the bar. Clearly, these brands have succeeded in balancing these elements and drawing consumers into their respective franchises, whether at the value, premium or super-premium price points. For these players—and other major wine brands—the signs are positive, with macro trends suggesting that overall wine sales, particularly premium wines, in the U.S. should continue growing for the foreseeable future.
SPIRITS Comeback Brands
This final category recognizes those major brands that experienced a sales decline in