I thought I would look at some world-class new product failures and see if there is some learning behind what happened. Let’s start with Old Breed.

When I arrived at Seagram the product was in a few markets and was failing miserably. The premise was interesting. The owner, aware of ‘shot and a beer’ consumption, decided that a beer flavored whiskey was a good idea and pushed for it.

I suppose that the equivalency issue also had a role to play. A blurring of the lines between beer and spirits sort of makes them equivalent from a product standpoint and flies in the face of the lack of equivalency in excise taxes.

Finally, beer flavored whiskey was seen as a novel new product idea.

The product failed on all counts. Wanting a shot of whiskey with a beer chaser is not the same as a whiskey that tastes like beer. There are expectations about the taste of a shot with a beer that can’t be met with a bottled version. Even if the product tasted great, it can’t replicate the fresh version – much less with a product that tasted like stale beer.

Everyone knew this, I learned when I got there, but no one wanted to tell the emperor that his baby was ugly (to mix metaphors).

So the product limped along until a trade researcher interviewed a retailer who went ballistic when asked about Old Breed as in, “tell them to get this crap out of here.”

What I love about market research is that political correctness has little to no role to play in providing information. As a result, the owner learned what the management team was loath to tell him. The product was pulled from the shelves the next day.

Lessons learned:

To succeed a new product has to be both unique and relevant.

Concepts and premises can be brilliant but the product must deliver. It’s about what’s in the bottle.

A management team concerned about being candid will not succeed.

And, a corporate culture that creates an environment that punishes the messenger is doomed to failure.

To a large extent the booze business is in the entertainment industry with food and drink at the core. After a hard day of meetings, conflicts and difficult decisions, then and now, people in the industry go to dinner — partly for business, partly to get to know the local colleagues/adversaries and partly for the meal.

One of the senior Seagram executives was known for his love of Italian food. He was and is a real gourmet, with knowledge of pasta, sauces and the differences among regional Italian cuisines.

One day he found himself in Montgomery Alabama on a market visit. It was a long day of meetings with the trade, consumers and local Seagram people.

At the end of the day, the Seagram manager said in a southern drawl, “Mr. Smith, it’s been a long, hard day and I know how you enjoy your eye-talian food and ah’ve arranged for us to have dinnah at the best eye-talian restaurant in Montgomery.”

“Really?” said the worn-out exec. “Where are we going?”

“The best place in town…Olive Garden.”

I got a lot of comment (mostly positive so far) about my last posting on “How Small is the Market.”

Like many businesses, the market for alcohol follows the old 20/80 rule. Twenty percent of your customers account for 80% of your business.

I came across a posting on a marketing blog that goes the next step.

I follow Seth Godin, a marketing guru, a prolific writer and someone well worth following and reading. Lots of insights.

A recent post of his is called “The circles (no more strangers)” and deals with the value of a “true fan” vs. “strangers.”

He concludes his posting with:

Let’s say a marketer has $10,000 to spend. Is it better to acquire new customers at $2,000 each (advertising is expensive) or spend $10 a customer to absolutely delight and overwhelm 1,000 true fans?

Check out his blog…there’s good stuff there. Here’s a link to this posting  –  Seth’s Blog

I’m always struck by the size of the spirits category and small number of dedicated drinkers of a particular brand. (Based on US Census and Gallup’s annual survey.)

Let’s do some math (or trust me and skip ahead to the fact that there are ‘only’ 24 million core spirits drinkers)…

• US population over 21 is around 200 million.
• 60% of those over 21 drink alcohol at least occasionally, 120 million people.
• People who drink spirits most often (as opposed to wine or beer) are about 20% of those who drink alcohol. So now we’re down to 24 million spirits drinkers.

(Actually the overall number who drinks spirits is much higher; perhaps 80% of alcohol drinkers or close to 100 million. But I’m focusing on most often, the core of the market.)

The size of the core market at 24 million people can be seen as huge or small depending on your perspective.

If half these drinkers consume Vodka, that’s 12 million people. But, if a brand has a 25% share, the size of the ‘franchise’ is only 3 million consumers.  (The numbers get smaller as you get into different categories.)

What this has always meant to me is, in addition to or perhaps in place of mass media, marketers need to think in terms of ‘a rifle not a shotgun’. Maybe even with a telescopic lens.

Whether aiming at increasing brand loyalty or converting users of competitive brands, it’s all about the return on investment. Efforts such as relationship building programs, digital marketing, database marketing and point of sale programs, to name a few.

Just like the old expression – fish where the fish are… but with a rod and reel not a net.

I bet you knew that.

A very close and dear friend from the Seagram days told me the following story about another charitable dinner event that I’d like to share…

One of the Seagram companies in the past was Four Roses and they had a metro New York manager named Nick Cotter. Nick was not only an ex-cop in NYC but he had been shot five times in a police action/raid. He nearly died and in fact was taken for dead if not for the persistence of an emergency medic.

After months and months of recovery and rehabilitation Nick was on his feet and decided on a new line of work. Four Roses hired him. Nick turned out to be very important to Seagram inasmuch as he became a conduit to the police and fire departments when things needed to get done. (More about this at another time.)

Well, as the story goes, shortly after joining the company he was at a charity dinner. But, in those days there were no pre-meeting to announce your “gift” – you were expected to announce it publicly in a ballroom with 500+ people.

As they were going down the list, someone from Schenley was called and announced, “Schenley Distillers is proud to donate one million dollars.”

Nick Carter, who didn’t know what to expect or make of this event in the first place, was called next. His colleagues were hysterical thinking that they put one over on him.

He stood up, was very calm and announced, “I donate one million and twenty-five dollars from Schenley and Nick Cotter.”

The room erupted in laughter.

I recently learned that the Wine & Spirits Division Dinner of the UJA-Federation of NY is honoring Charlie Merinoff. It made me think of a couple of things.

First, Charlie is a good guy and one of the brightest people in the industry. The Merinoff family has been great for this business and Charlie is a real mensch. It’s an excellent cause and they can use his support. I hope the dinner raises a bundle.

I also thought about the Seagram experience with the UJA fund raising event. It wasn’t pleasant. Here goes…

I came to Seagram as the VP Marketing Research, so I started in a senior position. That was in the spring of none-of-your-business. Three months later I received a memo telling me to report to The Glenlivet Tavern on the 5^th floor of 375 Park Ave. for the UJA “meeting” of the executive group. I had no idea what to make of this gathering. The folks who were on my staff said things like “Uh-ho, they are going to call you by name and expect you to announce your contribution to the annual spirits and wine fund drive for the UJA; going to cost you lots of money but don’t worry the company will match your gift.” What?

I quickly  realized that 1) this was organized extortion 2) I didn’t want to appear stingy 3) I also didn’t want to appear obsequious and 4) it was a good cause but why do I have to stand up and publically declare my gift? I later learned that it was the “tithe” that made the family look good. (Although, in fairness, I should add that the Bronfmans always made a significant contribution in their own right. But, their gift, plus the executives’ gift plus matching funds meant that the Seagram “family” would be giving enough to sustain a small developing nation for a year.)

I came to the decision that I had to do what I had to do and decided on a number that my staff had suggested. You don’t want to know how much. It was over the top.

So I was locked and loaded and ready for the “calling of names” at the meeting. Unbeknownst to me, my colleagues had been through this many times before and knew how to beat the system. They called each other beforehand and decided on the amount that would be given by each managerial level. (Hey folks, thanks for telling me!)

Since my name begins with an S, I had ample opportunity to see what my associates were giving. My planned contribution was way out of whack. I quickly made a readjustment downward.

Lessons learned: After only 3 months I realized it was us against them. I also learned that the advice you got from some was not necessarily reliable. In short, I got the lay of the land pretty quickly.

Please forgive me if the UJA is not at the top of my charitable giving list.

Blame the Bronfman’s.

Two news items that caught my eye recently and just in case you haven’t seen them here they are. Both were reported in Mark Brown’s newsletter.

Southern Wine alcohol distributor seeks loans of $2 billion

Source: The Associated Press

Not even the alcohol distributors are immune from the national financial crisis.

Southern Wine & Spirits of America Inc. is seeking $2 billion in loans to refinance existing debt. The Miami-based distributor is the largest in the United States.

Bank of America Corp. is arranging a $1 billion revolving credit line and a $1 billion term loan, a source said. Both loans will mature in five years.

Budweiser’s Clydesdales now come clopping at a cost

Source: USA Today

The Budweiser Clydesdales are still available for appearances … at a cost.

The St. Louis Post-Dispatch reported Monday that Anheuser-Busch has quietly begun charging $2,000-per-day for Clydesdale appearances, ending the brewery’s long practice of absorbing nearly all of the cost of showcasing the iconic horses.

The brewery says the fee helps to offset the $8,000-per-day cost of putting a hitch team on the road. Until now, event organizers or beer wholesalers were asked to pay nominal costs for stabling and feed.

It’s tough out there…

Gregg Mineo sent me the following story about Sabra Liqueur. It was originally developed and introduced in 1963 by  Edgar Sr. Currently it’s produced by Carmel wineries, I believe.

Back in the days of the Seagram Empire, before the industry centralized and contracted, there were small companies like Park Avenue Imports.  They sold cordials and niche products like Vandermint, Cherry Suisse and, of course, the inimitable Sabra.

Sabra was a quality product, made from Jaffa oranges and Swiss chocolate.  It was packaged in a unique bottle similar to a Genie bottle, but unfortunately didn’t have a long shelf life.  I think in my early days of sampling Sabra, I gave more away than I sold.  It was a hit in assisted living care facilities, and of course Miami.

Well, as the story goes, one of the established retailers in Miami started selling Sabra at a brisk pace, and developed a loyal following, especially with a particular gentleman who was buying a bottle once a month.  He began buying it before the brand took off in this store, and one day came back to return one of the bottles he purchased.  He complained that this bottle of Sabra was not the same product he was used to, that it lacked something special he really enjoyed.

The retailer asked what the difference was, and the customer responded that “it didn’t have the chocolate bits in it.”

Stifling a laugh, the retailer offered him something else; all the while knowing that the bottles of Sabra the customer was used to had passed the expected shelf life. Obviously, the customer didn’t care.

What I want to know is — were the chocolate bits available at no extra charge?

The late Bob Dubin once told me a story about the folks he had to deal with at Allied Domecq.

It seems they weren’t very happy with the way their brands were being run in the States (New York in particular) and one of their top ranking marketing people was coming over for a series of meetings to get to the reasons behind the poor performance.

A senior member of the NY sales team met the executive at the airport when he came through customs. He ushered him to his car and told him that the plan for the first day was to bring him to the hotel, get settled and then they would tour the market.

“I hope to see stores as they really are and not have one of your set up visits,” said the marketing guy. To which the sales person replied, “any store you like…you’re staying in Manhattan so lets start there. You choose.”

A few minutes went by and the visitor exclaimed that he needed to go to a drug store right away. “Please find one close by.”

Thinking that he must have had a headache or some other physical ailment from the flight, the salesman pulled off the expressway and stopped at the first drug chain store he saw.

He was gone for about 10 minutes then came storming out, got back in the car and complained loudly and bitterly that he had looked all over the store and couldn’t find any of their brands.

The salesman patiently explained that in NY, the sale of alcohol was not allowed in drugstores.

“But it is allowed in other states isn’t it?”

“Yes, in a few states” said the salesman.

“So, if you and your associates weren’t so damn lazy, you’d get the law changed, wouldn’t you?”

The salesman didn’t bother to explain.