Follow up: The Captain Morgan Story

December 15th, 2014 4 comments

Things I overlooked

captmorgan label

Lots of different labels over the years. Note the prominence of Puerto Rico as the origin of the rum.

Booze Business is about to become five years old and throughout that time, no story or posting has elicited as much comment as last week. From emails to comments to the Booze Business Facebook Page to LinkedIn, the story has generated interest, memories and opinions.

Some of the feedback pointed out a few aspects that I missed. So, here are some additional elements to the story.

The People Behind the Brand

I referenced Alan Feldman and Sam Ellias, partly because of their role in launching the brand and partly because of the insights they provided when I interviewed them. But I didn’t set out to provide a list of all those who made it happen in the beginning. The story was about all the people at Calvert who defied the odds and overcame the negative expectation to make this brand happen.

If I had set out to provide awards or recognition, I certainly would have mentioned Marty Bart and Shelly Katz who ran the company and its sales team. For that matter, I should have mentioned, by name, all the people who worked long and hard in bars and stores. But this was about people collectively rising to an event.

The Legal Aspect

Before Captain Morgan came along the designation for such products by the BATF (the regulatory body at the time) required that if a brand was not “Rum” it had to be designated “Rum Liqueur” or “Flavored Rum.” The development team insisted that the legal folks push the BATF with the “Spiced” designation and to everyone’s surprise it went through. That designation, “Captain Morgan Original Spiced Rum”, meant that the flavor description could be used in place of “Flavored.”

Had the new products team backed away, the allure of “Spiced” would not have happened and Captain Morgan would have gone to the Seagram new products graveyard. To their credit, the legal department, despite their misgivings, agreed to try and the rest is history.

So, add interdisciplinary teamwork to the mix.

Peach

I left out an important subplot from the early days of Captain Morgan – a line extension that failed.

Along about the mid 1980s, a new cocktail emerged that swept the country. It was called the Fuzzy Navel and was invented by Ray Foley, a world-class bartender and founder of Bartender Magazine. The key ingredient was DeKuyper Peachtree Schnapps. By about 1985/6 the suggestion was made by the owner to introduce Captain Morgan Peach Rum to capitalize on the Fuzzy Navel phenomenon. Bad idea.

Here was this swashbuckling, rogue pirate who came to life at drink nights in bars with trinkets (plunder) and his famous Morganettes — attractive, sexy and charming. Would this character be seen drinking peach rum? Much less be the purveyor of such a product?

Nevertheless, the owner insisted that this line extension be introduced. I don’t know who it was, but someone mustered up enough courage to suggest a test market before national rollout. To his credit, the owner saw the wisdom in the suggestion and agreed.

Leaving the image issue aside, the product had formulation problems and curdled on shelves in at least one market, Indiana.

Good thing it failed. It meant that ridiculous line extensions could wait for the current owner.

The Captain Morgan Story

December 8th, 2014 10 comments

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How a Seagram orphan brand became an icon

Despite the problems the brand has encountered in recent years, Captain Morgan Original Spiced Rum changed the spirits industry in a number of ways. It was the first brand that managed to put a dent in the rum category powerhouse by the strategic use of flavoring. Further, the brand pioneered the important role of flavors, a phenomenon we take for granted today.

But it didn’t start out that way.

In the early 1980s, the new products group at Seagram was charged with filling gaps in the company’s portfolio. At the time, spirits sales were languishing in general and, unlike more recent times, whiskies were on the decline. So the gaps to be filled were in the so-called white goods arena with rum at the top of the list. The brands already in the stable were either price driven (Ron Rico) or weak and on life support (Palo Viejo). Myers’s rum, the upmarket brand, was (and still is) a small volume brand, limited to special occasion usage. In addition, the product is outside the traditional white, light rum taste profile.

Enter a consultant

The new products group engaged Kahn Associates, headed by Bernie Kahn, a former creative director at Grey. Mr. Kahn’s claim to fame was the slogan, Choosy Mom’s Choose Jif, a slogan that propelled the brand to number one in peanut butter.

The key issue behind the assignment: How do you go up against an 800-pound gorilla like Bacardi, which had an overwhelming share of the rum category?

Consequently, it was clear to everyone that the only viable pathway was a “value added” proposition. Unless you have a boatload of money to go “head to head” with a dominant market leader, go for an end run and outflank them. Even with a ton of marketing funding, taking on Bacardi was, more than likely, a losing proposition.

Based on the views of the new products people, insights from marketing research and the advice of Kahn Associates, it was decided that the new rum entry would be a flavored product.

But, what flavor and what to call it?

The flavor decision

While there is some ambivalence about how the decision to go with spice came about, it was clear that two hurdles needed to be overcome. First, since the vast majority of rum drinks are mixed (and at the time, predominantly with cola), the flavor had to accommodate a mixed drink such as rum and coke. Second, flavoring and tastes can be polarizing (love it or hate it), so the flavor to be chosen had to have the widest appeal.

The decision was reached to add vanilla and call it “Spiced Rum.” Vanilla and the other ingredients delivered a pleasant and desirable taste and the ubiquitous word “spiced” added mystery and avoided automatic rejection. Not only that, the word spiced allowed consumer to project what they thought it might taste like and the flavorings lived up to the promise. A winning formula was born.

Branding

captain morgan rum 3Here is where Seagram’s corporate culture entered the picture. Everyone had an opinion and thought everyone else’s stank (to paraphrase an old, off-color expression). So the brand name fell into one of those corporate vicious cycles whereby a proposal goes round and round and no decision emerges. To compound matters, names that had broad management support turned out to be already trademarked and not available.

At last, someone realized that the company owned a brand in the UK called Captain Morgan. A star was born.

Who will manage it?

At the time, Seagram had four operating divisions handling the spirits business. They consisted of Seagram (Seagram named brands), General Wine and Spirits (the upmarket brands), Calvert (price and push brands) and Summit (the brand hospice). Both the Seagram and General Wine and Spirits divisions were out because they already had rums and there is no way a newborn brand could go to Summit.

That left Calvert Distillers, the home of Calvert Gin, Lord Calvert Canadian, among others. (People at Seagram used to joke that Lord Calvert Canadian’s popularity was it’s square bottle. That meant it wouldn’t fall off the truck.)

Lord Calvert Canadian whiskey

Lord Calvert Canadian whiskey

In retrospect, putting Captain Morgan into Calvert was a gutsy decision. After all, the Calvert marketing and sales people were used to pushing their brands with little consumer pull and relied on pricing and point of sale promotions to move the goods. In fact, the people who worked at Calvert were looked down upon by others at the Seagram Corporation and were paid less than their counterparts at the other divisions.

Maybe putting the new brand into Calvert was a magnanimous gesture on the part of management, or maybe it was a plot to kill the brand, or even a cruel joke. But, I think that the single most important factor in the success of the brand, while at Seagram, was due to the Calvert people.

Success factors

So picture this… You’re a sales person at the Calvert Distillers Division of Seagram and, to put it bluntly, you’re viewed as the runt of the litter and always sucking hind tit. The brands you’re selling are a challenge, you’re making less money than your counterpart two floors above you in the same Seagram Building and, to quote Rodney Dangerfield, “You get no respect.”

Suddenly, a new rum product falls in your lap. The product tastes great, there’s a story behind the branding and above all, it’s a fun brand with lots of room for promotion other than on the basis of price. There is the potential for great drink night promotion at bars (the Captain and the Morganettes) and outstanding retail POS items (see the mirror).

The Calvert people go to work with strong motivation, with zest and zeal and with something to prove to their colleagues in other divisions. Their

The famous Captain Morgan mirror

The famous Captain Morgan mirror

sales philosophy departed from the usual and, instead of loading up retailers, all initial orders were limited, thereby encouraging reorders. They went aggressively after sampling opportunities with drink nights and co-packing small sizes with Coke.

The rest is history. The test marketing (1982) was a huge success and by 1983 the brand went national.

The line extensions

By the early 1990s (under my watch), while the brand was a winner, there were some hurdles in the way of further growth. Captain Morgan was amber rum and the preponderance of consumption was light/clear. Further, Malibu had come on the scene with a coconut flavor. Above all, Bacardi gave up waiting for the brand to fail, woke up and came after us by introducing their version of spiced rum. Their proposition was that CM was for younger drinkers and their product was for the mature and serious rum aficionado.

The response was line and brand extensions with specific strategic roles. Each of the three extensions had an objective, which went beyond shelf space acquisition and copycat products. A silver version was introduced and replaced Captain Morgan Coconut, which was a feeble previous attempt to take on Malibu. Instead, that coconut product became Parrott Bay by Captain Morgan with it’s own imagery. Finally, Captain Morgan Private Stock was the upmarket entry designed to deal directly with the new Bacardi product.

Captain Morgan today

The overall Captain Morgan franchise, as managed by Diageo, is doing poorly. Their efforts seem to me to be all over the place with a range of line extensions that well, frankly, make little sense. Meanwhile, the base brand languishes.

From what I’ve seen, over the last ten years, Captain Morgan franchise grew at 3-4% compound annual growth rate but in the past five years it’s been flat to down. Further, the overall growth has been a function of line extensions at the expense of Original Spiced.

In fairness to Diageo, the marketplace has changed appreciably. There are a number of spiced rum brands and a few powerhouse new players, including Sailor Jerry and Kraken. Both these brands have strong taste profiles and imagery in tune with today’s drinker.

Yet, if you go to the Captain Morgan web page, you’ll find such peculiar and tactical line extensions like 100 proof, Black Spiced rum (a blatant Kraken lookalike), Lime Bite, Tattoo Spiced, Long Island Iced Tea and even plain old White Rum. Most of the line extensions (9 of them) appear to me to be declining and even hurting the original product. I’ve mentioned this a number of times on this blog – a line extension should feed the base brand, not eat it.

Perhaps Diageo should try to hire former Calvert people.

(I was not at Seagram when Captain Morgan was conceived and launched. So, I’m grateful to two people who were there and were kind enough to be interviewed for this posting. One is Alan Feldman who was in new products as the brand was born and who nurtured it in the beginning. The other is Sam Ellias, the first brand manager of Captain Morgan and the person widely recognized as the driver of its success in his Calvert Distiller days.)

(For other posting on Captain Morgan please use the search box at the top of this blog. Start with this one.)

Agave India: What’s in a name?

November 18th, 2014 1 comment

A Tequila product from India?

Yes, that’s right. But, even though Agave India produces an outstanding 100% Agave product, the term ‘Tequila’ or even ‘Mezcal’ is protected by designation of origin registration and reserved for use by Mexico.

(You’ll find previous blog posts on how the agave plant found its way to India from Mexico here and issues related to Appellations of Origin (AO) here.)

DesmondJi Products

DesmondJi Products

As a result, Agave India Industries Pvt Ltd, the craft distiller behind Agave India, can only use the generic Agave designation and be content with the following on their promotional material:

100% Agave product, a gift of the blue-green Agave plant. 

A plant grown in the red and black volcanic soils of India’s Deccan plateau and nourished in a semi-arid micro-climate similar to that of Central America.

In other words, it walks like a duck, squawks like a duck, tastes like a duck but… it is not a duck. Or, better, you can’t call it a duck.

Undeterred by this and secure in the knowledge that he makes world-class spirits products, Desmond Nazareth (under the brand name DesmondJi®) has been producing his products since 2011.

Meet DesmondJi®

The term Ji is a suffix used in India as a sign of respect, also known as an honorific and comparable to the Japanese –san or the Mexican Don, as in Don Julio. Kind of ironic actually, since I couldn’t tell the difference between DesmondJi 100% Agave and Don Julio Blanco in a blind taste test. Yes, it is that good.

Desmond is a graduate of the Indian MIT known as Indian Institute of Technology Madras (IIT-M) and moved to the US as a software entrepreneur. In 2000, he moved back to India. But, while in the States, his home bar became known among his friends as the place to go for the best margaritas. Alas, back in India, tequila products were not widely available (still aren’t due to tariffs) much less orange liqueurs or margarita blends. Too bad, he thought.

But, if you’re an entrepreneur, a problem can easily become an opportunity.

Desmond spent several years researching agave plants and the making of agave spirits including visits to Mexico to understand cultivation and

Cocktail glass water tower at the distillery.

Cocktail glass water tower at the distillery.

distillation. Back in India, he recalled seeing the distinctive agave plant in the Deccan plateau. The next thing you know, he builds a micro-distillery and produces a range of products. Agave India is the country’s first fully integrated “field to bottle” alcohol beverage company focusing on global spirits made to international standards with Indian raw materials and know-how.

When he and I spoke I asked him what the enormous agave plants were used for before he came along. His answer, “They were used as fences.”

Desmond Nazareth and Indian Agave Plants.

Desmond Nazareth and Indian Agave Plants.

A portfolio of 8 products

Under the DesmondJi® label, the company produces a 100%, a 51% Agave spirit and a 51% Agave Gold spirit with an oak finish. In addition, they have an Orange and Blue Curacao liqueur made with the Nagpur orange. After all, you can’t make a decent margarita without an orange liqueur and if you’re using Indian agave, you also should use a liqueur made from Indian oranges. In addition, they produce alcoholic margarita blends or, as we call it, a premixed margarita.

Finally, the portfolio also contains a Pure Cane spirit (think cachaça) made from locally grown sugar cane.

Challenges

While India is primarily a (scotch) whisky drinking country, white spirits like vodka and tequila have shown growth and future promise. But, for now at least, non-whisky alcohol products are a drop in the barrel, ur, bucket.

Desmond would like to set his sights on the US, the largest tequila consuming market in the world. But, I don’t need to tell you that while not yet saturated, the US tequila market is very cluttered. Can a craft agave spirit from India gain a foothold? Even if its terroir and geographic location is comparable to that of Mexico?

Still, the Indian population in the US (according to The Times of India) is the third largest from Asia, after those from China and the Philippines. They are mainly centered in the Boston to DC megalopolis and in Northern California. Further, I’ve been told that more than 60% of retailers in New Jersey are from the Indian sub-continent and in New York City, roughly 45%.

So the challenge is – will consumers from India or of Indian ancestry, have an interest in agave spirits from India? Will retailers?

Maybe the answer is that it’s not about national pride or appellation alone. Maybe it’s about a high quality product that uses these two elements to kick start a venture in the US.

To me it’s like brandy vs. cognac or champagne vs. prosecco – it’s not about nomenclature, it’s about quality.

What do you think?

The Agave India distillery

The Agave India distillery

FEW Spirits: Contradictions Result in Excellence

November 4th, 2014 4 comments

A craft distillery seems to be getting it right despite the odds

FEWSpirits_logo_bwFew Spirits, run by Paul Hletko in the Chicago suburb of Evanston, is based on a number of inconsistencies. He built a distillery in a town where prohibition ended in 1972 (40 years late) and where there is not a single bar, to this day. Further, Evanston was the home of the Women’s Christian Temperance Union, one of the driving forces behind the “noble experiment.”

Oddly enough, the co-founder and longtime leader of the WCTU was Frances Elizabeth Willard, whose initial are – F.E.W.

I asked Paul if he named the distillery and brands after her. His response was no. He named it Few as in selective, as in small, as in a few products. Whatever the reason, he makes outstanding spirits.

An interesting entrepreneur

Paul Hletko of Few Spirits

Paul Hletko of Few Spirits

“All my life, I’ve tried to be a creative person.”

Before I tell you about the products, let’s spend a minute on Paul Hletko, who is not your typical startup distiller.

He has an engineering degree from Michigan and is also an attorney. Prior to founding Few, Paul had a career in music with a rock and roll band, a record label and a company focused on designing and building custom guitar effects pedals. None of it worked out.

That led his creative efforts to follow in the footsteps of his grandfather who owned a brewery in Europe before World War II. But, instead of beer, he decided to become a distiller who produces true farm-to-bottle products.

While many so-called craft distillers source their alcohol from industrial distilleries, Few is all about local ingredients – all grain used in his products (corn, wheat, rye and barley) comes from within a 100 miles (often closer) from his distillery.

The products

FEW Rye Whiskey

FEW Rye Whiskey

In whiskies, Few produces a bourbon, a rye (outstanding) and a single malt whisky. All are exceptional products.

Recipe: Few Barrel Gin, Vermouth, Bitters

The Ginhattan recipe: Few Barrel Gin, Vermouth, Bitters

 

But, get this … Few makes three different style gins including Few American Gin, essentially an American genever with 11 botanicals; Few Barrel Gin, a gin aged in new and used bourbon and rye barrels; and, Few Standard Issue Gin, a gin that harkens back to traditional British navy gin at 114-proof. (See the recipe for a Ginhattan.)

I’ve sampled them all and, folks, this is what craft distillation is all about.

The Challenges

Aside from production issues, independent craft distillers face three tough hurdles – marketing, distribution and financial resources. Few Spirits seems to be handling them well.

Take marketing for example. In my experience, spirits startup entrepreneurs tend to be so in love with the chemistry, alchemy, their skills and recipes that they often neglect to focus on marketing and sales. I’ve written about some exceptions (Jackie Summers and Sorel Liqueur, Alison Patel and Brenne Whisky), so add Paul Hletko to the group. From concept to packaging to promotion, PR, social media, etc. – Paul knows what he’s doing. In fact, Paul travels all over the country promoting his products at tastings and at meet and greets. I met him in NYC last week at Whiskey Park.

Distribution is another obstacle. The large mainstream wholesalers will either not want to talk to you, try to become your partner, expect you

Paul Hletko and Ian Goddard of Blueprint Spirits at Whiskey Park

Paul Hletko and Ian Goddard of Blueprint Spirits at Whiskey Park

to buy your way in or, worst of all, take you in and let your brand gather dust. So, Paul has put together a “hodge-podge” distribution network that includes Blueprint Brands, a division of Great Brewers, craft beer distributors. From what I can tell, his potpourri of wholesalers seems to be working out.

As for financial resources, well, that’s none of my business. But from the look and feel of Few Spirits and it’s approach to brand building, I’d say they’re here for the long run.

Maybe he’ll change the name from Few to Many.

Altaneve Prosecco

October 22nd, 2014 No comments

A distinctive product deals with marketing challenges

Sparkling Wine in the US has grown twice as fast as the overall wine category over the past five years. Within sparkling wine, the non-champagne segment accounts for over 90% of sales (See earlier post on Booze Business) with prosecco leading the charge.

In fact, in a recent article in Shanken News Daily:

“The Prosecco DOC Consortium recorded a 34% increase in exports to the U.S. market in the first half of 2014, with volume reaching 1.27 million cases.” 

In effect, prosecco has challenged champagne for the top of the sparkling wine domain. In so doing, prosecco has changed the occasions for drinking sparkling wine. While champagne is for celebrations and special occasions, prosecco is for everyday and any time. Further, at $12 to $15 per bottle, prosecco has an advantage for everyday use.

But, just as there are $12 bottles of wine as wells as $20, $30 even $40 still wines, can an upmarket prosecco capture a significant share of that market?

Enter David Noto with Altaneve Prosecco

David Noto

David Noto

It’s quite an interesting story. David’s family has been making wine for 10 generations in Italy and he grew up with a passion for prosecco, particularly the high quality end. So he changed his career from engineering and finance technology and brought this product to market a few years ago.

According to David, “The US market is not deeply familiar with the broad range of prosecco, so we felt it was time to introduce the best.”

In addition, the brand has an interesting story to tell. Altaneve means high snow in Italian and is a reference to the snow capped peaks of the Dolomite Mountains that can be seen from the vineyards in Valdobbiadene where the prosecco is produced. The production facility is the second oldest in the town where the production of prosecco dates back to 200 BC.

In short, Altaneve has it all, provenance, terroir, heritage and high quality. Taste? I’m a huge prosecco fan and, while I’m far from a connoisseur, I think it’s the best tasting prosecco I’ve ever had. It’s versatile (any occasion with or without food), and unlike other

Presecco production area

Presecco production area

prosecco I’ve had, it’s consistent from bottle to bottle.

Altaneve sells for roughly $29.99 a bottle and therein is the problem.

The marketing challenge

I suppose it’s because the prosecco category in the US market is still in its infancy. Or, maybe the current image for the category is that it is generally low in price. As a result, David faces an uphill battle getting the message across that high end prosecco is worth the price. After all, all wine categories segment by price, why not this one?

I can understand the consumer reluctance to trade up. The category is still evolving and they came to it originally for an inexpensive alternative to champagne, so why pay for top shelf. That perception will change gradually over time but for producers like David Noto, accelerating a change in perception will take marketing muscle and lots of money. Altaneve is a startup brand.

The hesitation by the trade (especially bars and restaurants) is baffling to me. The mark up and profitability from Altaneve would make the brand more than worthwhile. Yet, the reluctance to change, to accept a segmentation of the prosecco category, not to mention lack of knowledge, all make it an uphill battle. To me, it defies logic.

Bottle_5I guess the bright side is twofold. First, slowly but surely, better retailers like Sherry Lehmann and important chains like Capital Grille are stocking Altaneve. Then there is David Noto himself. If you’re a follower of this blog, you know I often write about startups and the entrepreneurs behind them. Add David Noto to the list of passionate, smart and committed.

As to the Altaneve product itself, try it and let me know what you think. Unfortunately, it currently is only available in NY, NJ and CT, but also online. I’m betting you’re going to love it.

While you’re at it, check out what Wine Spectator had to say about Altaneve, as well as other info from their Facebook page.

Altaneve products

Altaneve products