How an Olive Launched a Brand

The Ketel One Story

Nolet, the distillery behind the vodka, recently celebrated its 325th anniversary and is run by the 11th generation of the Nolet family. While they rightfully take pride and recognition for this accomplishment, the real credit for the success of Ketel One (partially owned by Diageo) belongs elsewhere.

The distillery has been around since 1691 but they’ve only been producing Ketel One vodka since 1983. And, that’s where our story begins.

David van de Velde

I first met Dave back in 2010 when I started writing this blog. Here is that story. But, there is much more to the launch of Ketel One than I realized at the time I wrote that article.

David van de Velde
David van de Velde

In recognition of the sustained growth of the brand—reportedly selling at 2.1 million cases and the fifth largest import—and given the 325th anniversary, I contacted Dave to get more of the back story. Specifically, what were the most important elements in successfully launching the brand?

Before I get into that, here’s a brief historical context.

Vodka’s growth spurt began in the mid 1980s. The market was dominated by domestic brands (Smirnoff, Skyy was beginning its ascent, and others). Based on a number of factors, Absolut led the charge of the imports and became the poster child for vodka. Suddenly, two other market imports entered the fray with price points much higher than Absolut. One, Grey Goose, had a range of things going for it (name, packaging, country of origin, and the Sidney Frank team). The other had Carl Nolet Sr. and his belief in the ingenuity and business skills of David van de Velde.

The Challenge

The relationship with Carl Nolet, Sr. started with a handshake, a 20-foot container of Ketel One (litres and no 750ml bottles) worth around $20,000. Dave put up around $250,000 and no salary for two years. The US operation started in Dave’s garage in Sebastopol, CA under Luctor International, his licensed import company.

The obstacles were clear and considerable: Limited resources and going up against some powerful competition.

I was head of US marketing for Seagram at the time, and as mentioned in the earlier blog post, all I kept hearing about was this upstart brand and it’s appeal to bartenders and retailers. We paid some limited attention, but often Goliath doesn’t take action until David has made it too late.

How the brand was launched

Three elements became the focus of the launch of Ketel One:

1. An emphasis on the bartender and enlisting them as brand ambassadors.

2. Convincing the trade (sales reps and bartenders) of the taste superiority of the brand.

3. A very unique promotion and value added piece at point of sale in off premise stores.

The Bartender

Dave and Ketel One were not the first to recognize the power of the person behind the bar in influencing brand IMG_0490choice. But he did it in a most unusual way and with the help of technology. The most common approach to sway the views of bar and restaurant people—then and now—is face to face with brand ambassadors, sales reps, other bartenders, special tasting, events, and so on. But what do you do if you can’t afford this approach?

In Dave’s case, he told the Ketel One story on VHS video (this is before DVD) and mailed copies to the top bars, stores, restaurants, hotels, etc. He reports that, in his estimation, the videos were viewed by around 20% of those who received it, and that it created ambassadors on its own.

All I can tell you is that wherever I asked about Ketel One, a bartender or food and beverage manager would wave a copy of the video or tell me about it. While we take such actions for granted today, it was ahead of its time.

The Smell and Taste Test

At the heart of the Ketel One story was it’s clean, smooth taste, based on its unique (at the time) distillation process. How do you get this message across?

For Grey Goose, it was the Beverage Testing Institute (BTI) taste test showing Grey Goose on top of its competitors with a score of 96.

For Ketel One, here’s how Dave describes their program:

“We trained the distributor sales reps to do a “Smell and Taste Test” with the trade. That consisted of asking the storeowner or bartender to smell and taste a sample of his or her own favorite vodka. But, of course, when the alcohol touches the taste buds there is a numbing effect. So the next sample—which was Ketel One—with the nose and mouth taste buds numbed, tasted a lot smoother.”

The “trick” as he puts it, worked very well.

{For another clever/tricky sales taste test see the posting called Salesman in Winter.}

About That Olive…

Actually it wasn’t an olive, it just looks like one. It’s called a TomOlive and is a small green pickled tomato. “For a TomOlives_Aasmall company in the startup mode, it was extremely difficult to get Point-of-Sale (POS) materials into a store…so we decided to do something very unique,” Dave recalled.

It happened this way. Dave received a phone call at home from a stranger, who he assumed was a stockbroker, but turned out to be someone in the movie business. The man told him, “Find TomOlives, make a Ketel One martini with it, and you’ll have discovered the ultimate martini.” Dave tried it and it was indeed sensational.

(Having bought some recently on Amazon and tried them with vodka, I can attest to the fact that they taste great. In fact, we sometimes, add TomOlives to a salad to add a bit of a kick. But I digress.)

photoA week later, Dave was on his way to Alma, Arkansas to meet with the producer of the TomOlive. The next thing you know, he buys the annual production and co-packs it with Ketel One. Some of the Nolet people were “aghast” and said, “we’re not in the fruit business!” But he did it anyway and came up with a terrific marketing program that had bars, stores and consumers clamoring for Ketel One and TomOlives. It became the darling of the sales force.

I know this for a fact, because after telling me about the video, people would add, “and why don’t you have those olives?”

The punch line to the story is twofold. David van de Velde never found out the identity of the mysterious caller with the idea for TomOlives. Second, Diageo no longer uses the exclusive Ketel One TomOlive program. Sounds like an opportunity for another brand, if you ask me.

Oh, by the way, according to Dave, Diageo had the opportunity to own a chunk—if not all—of Ketel One in the early days but let it go by. When they finally got around to a significant investment, it had gone from millions to billions.

He’s Still At It

Power Assist Golf - StrikerOne

Finally, Dave continues to be motivated by the notion, “Find a Hole and Fill it.” He and some colleagues have invented The Striker-One™ Smart Golf Club. It is designed for golfers who can’t play anymore because of injury, disability, age or any number of reasons. You can learn more at info@PowerAssistGolf.com. Or contact me and I’ll put you in touch with David van de Velde.

A remarkable man with a thirst for ingenuity and creativity.

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The Bacardi Story: A Different View

An interview with Mr. Cynic

Bacardi announced this week that it is realigning its U.S. distribution network and joining Southern Wine & Spirits and Glazer’s. They are leaving more than 30 former distributors including RNDC, Charmer (now Breakthru Beverage), Young’s Market, and others.

The spirits and wine industry has been abuzz with press releases, interviews, and statements. Many in the business have done little work this week, instead spending time speculating on why this happened and what the implications might be.

Booze Business has spoken with many people throughout the industry and, aside from those employed by those involved, the reaction was pessimistic and negative. To capture this mood, we conducted an interview with an imaginary industry executive known as Mr. Cynic.

So, here is another side to the Bacardi story.

*          *          *

Booze Business: Mr. Cynic, let’s start with the basic question. Won’t this change in distributors, this consolidation, improve Bacardi’s standing in the market?

Mr. Cynic: Let me ask you a question. When was the last time you went into a bar or restaurant or even a hole-in-the-wall joint and Bacardi Rum or Grey Goose wasn’t there? What distribution problem are they correcting? Seems to me that the wholesaler network they’re leaving did a great job with their two leading hemorrhaging brands. It wasn’t their fault that the company couldn’t fix the problems. How are they going to get deeper penetration than they already have?

Booze Business: Well, they’re saying that they want to consolidate their wholesaler network and have one national entity.

Mr. Cynic: Sure. Dealing with one distributor makes it easier to poke your finger into one chest and demand sales increases than into thirty. Charmer and RNDC made their brands, including the stuff that was impossible to sell. They got screwed. What I don’t understand is how competing brands can be in the same house.

Booze Business: What they’re saying is the Southern-Glazer operation will have dedicated and incremental sales forces.

Mr. Cynic: So they are adding people. Tell me, what were these people doing until now? You mean they’re not getting the best and brightest? Or, are they moving their best people to work on Bacardi?

Booze Business: Come on, a larger and more powerful Southern and Glazer has got to benefit other brands they already handle.

Mr. Cynic: Are you kidding me, we can’t get their attention now.

Booze Business: Well, then aside from Bacardi, will anyone benefit from this change?

Mr. Cynic: I’ll tell you this… there’s a lot of nervous sales reps on the street. But, my money is on the distributors who are losing Bacardi.

Booze Business: Why’s that?

Mr. Cynic: Hell hath no fury like a distributor scorned. This move ignores the consumer and the changing industry. It’s no longer about dinosaur brands like Bacardi Rum or yesterday’s vodka. The industry has become more grassroots focused and this move is old-old school. The distributors they dropped just got a wakeup call. They’ll focus on the new crop of brands.

Booze Business: So who benefits?

Mr. Cynic: Don’t you get it? The winning brands these days didn’t come from the large traditional powerhouse suppliers. They came from consumers—mainly Millennials—with brands like Fireball, Rumchata, and Tito’s. Brands made with “pull” not distributor “push.” These distributors, if they’re as smart as I think they are, will start asking themselves, “Where else can we make money?”

Booze Business: And the answer?

Mr. Cynic: Make the second tier brands stronger and more available. Focus on craft and startups. Take some risks. Change the business model. Give the consumer what they want not what the supplier and wholesalers want.

Booze Business: But won’t this new alignment mean Bacardi will do better with startup brands?

Mr. Cynic: Give me a break. The first order of business will be to manage the consolidation—legal, logistical, resources, etc.—then they need to show the owners that this was a smart move and start making money. The smaller brands… the brands of the future? Forget about it.

Booze Business: What do you think was the most important driving force behind the change?

Mr. Cynic: You want to hear cynical? Can you handle it?

Booze Business: Go on.

Mr. Cynical: Over the last 10 years or so—no, make that ever since I’ve been in this business—Bacardi has changed executives and management more than any other major player.

Booze Business: So what?

Mr. Cynical: This move will take time for the dust to settle. They say one to three years. Ha! This year and part of next will be focused on consolidation. The following year will be better because they’ll be going against soft numbers. Then maybe further growth down the road. Meanwhile the owners will be pleased, and management will have 3 to 4 years of job security. That is, until it all catches up with them. Brilliant move. Better job and income protection than a series of line extensions. Meanwhile, the brands at the other distributors will have real and steady growth.

Booze Business: Why do you think this happened?

Mr. Cynical: Who knows? Maybe it’s as they say, consolidation and one giant footprint will benefit Bacardi. Or, maybe, desperate times call for desperate measures.

Booze Business: Care to sum it up?

Mr. Cynical: Yeah. This deal will cost tons of money to make it happen. And, while they’re focusing on winning, it will create opportunities for the rest of the industry. While Bacardi and their new distributors are concentrating on their new arrangement, everyone else will be moving in a new direction.

Booze Business: Thanks for your time, and a word of advice.

Mr. Cynical: What?

Booze Business: Stay out of Southern Florida.

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Alcohol and Marijuana: Latest Gallup Polls

Income and education are key factors

The Gallup people have just released their latest annual survey of drinking in America as well as a poll on marijuana trial and usage. Gallup has conducted the alcohol survey every year since 1939 and the marijuana poll has been running since 1969.

Some key findings:

  • Overall, 64% of Americans say they drink alcohol – unchanged over the years.
  • Upper income and highly educated Americans are most likely to say they drink alcohol.
  • Beer is the most widely preferred drink.
  • More than 4 in 10 say they have tried marijuana with 10% claiming to be current smokers as compared with 7% two years ago.

Alcohol and drinking over the years remains consistent

Gallup has been asking the same question over the years – Do you have occasion to use alcoholic beverages such as liquor, wine, or beer? The proportion saying yes has remained consistent – 58% in 1939, in the 60% area since then and 64% in 2015.

Alcohol drinking trends
Alcohol drinking trends

The form of alcohol Americans most often drink remains fairly consistent with the past. 42% report beer most often, 34% say wine and 21% favor liquor.

Type of alcohol drank most often
Type of alcohol drank most often

Socio-economic status and drinking correlate

This year’s analysis focused on education and income as it relates to who drinks. In a nutshell, upper income and higher educated Americans are more likely than others to drink. They postulate that upscale Americans have more opportunities for drinking occasions such as dining out and going on vacation. Sounds right to me. But I don’t think that’s it entirely.

What I found most interesting is that nearly half (47%) of those with incomes over $75,000 are more likely to have had a drink in the past 24 hours. Among college graduates it’s 45%. So there’s a fair amount of at home drinking.

They also asked about overindulging and there were no difference by income level. But, there were significant differences by education with college graduates less likely to report being “over served.” They offer two explanations. One is that “those with more formal education may be less willing to report a socially undesirable behavior in a public opinion survey.”

The other is “Data from various government and academic studies confirm the relationship between income and alcohol consumption. The studies also indicate upper-income drinkers mostly drink in moderation, but lower-income Americans tend to abstain completely, or to drink heavily.”

Type of alcohol

As mentioned, beer is the dominant type of alcohol consumed, but before you beer folks start high-fiving, consider the growth in craft beer and the decline in mainstream beer brands. In fact, those with higher incomes are equally as likely to drink beer and wine most often.

Marijuana trial and usage

Earlier in the month Gallup reported on a poll that delved into cannabis experimentation and current use.

As the chart below reveals, the percentage of Americans who say they have tried marijuana has steadily increased since the first measurement in 1969 – from 4% to 44% in the span of less than 50 years.

Have tried marijuana
Have tried marijuana

Legalization in some states plus the growing support for legalization is an obvious factor. In a study conducted in 2014, Gallup found that overall 51% of Americans favor legalization, Conservatives and Republicans are more likely to be opposed and those in states in the East and West are the biggest supporters.

Support legalization
Support legalization

Finally, the recent Gallup study on marijuana shows that 1 in 10 Americans said yes and this is up from 7% two years ago.

Currently smoke marijuana
Currently smoke marijuana

Is there any doubt that marijuana legalization will continue and that usage will as well?

The Northwest News Network (a collaboration of public radio stations in Washington, Oregon and Idaho) reported this week that Washington’s Liquor Control Board is getting a new name. It will become the Liquor and Cannabis Board.

Portends of things to come.

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