The Future of the Booze Business

RNDC and LibDib join forces

It was announced recently that Republic National Distributing Co (RNDC), and Liberation Distribution (LibDib) have formed a strategic alliance and will be working together.

I consider this a huge development for the wine and spirits industries and I was anxious to learn what it means for the future. I very much admire Tom Cole of RNDC and Cheryl Murphy Durzy of LibDib and was thrilled to have an exclusive interview with both of them. The three of us talked about how this development came about and what it means for the distribution of both large and small brands.

RNDC is the second largest distributor in the US, operating in 22 markets with a long history dating back to before Prohibition. It is an organization built on the strong foundations of three family-owned companies. What I’ve always admired about RNDC is their values, marketplace effectiveness, and people you enjoy working with.

LibDib is the first technology company to offer a 3-tier compliant model that provides an option for the growing number of makers (suppliers/manufacturers) that are entering the market. Launched in June, 2016 and they describe themselves as: “A wholesale distributor of alcoholic beverages enabled through a web and mobile platform.” (An earlier article I wrote about LibDib is here.)

As reported by Wine and Spirits Daily, LibDib suppliers will be able to use RNDC’s logistics and expand throughout their footprint, while RNDC will have access to LibDib’s technology and data. To me, it is also a union of the traditional and new routes to market.

So, what does this mean?

Tom Cole, CEO RNDC

 

 

According to Tom Cole:

“When I first learned about LibDib, I was fascinated by the commitment to the 3-tier system…I believe in and am a passionate protector of that system, so the LibDib approach offering effective online ordering, satisfies the need for small makers that are having difficulty getting to market…”

Cheryl Durzy, CEO LibDib

Cheryl added:

“We use the term evolve — How are we going to evolve the 3-tier system to meet the needs of the modern consumer and what they are looking for in spirits and wine.”

In effect, LibDib will have the opportunity to expand from its current operations in New York and California and ultimately operate in RNDC’s 22 markets. They’ll be able to tap into RNDC’s advanced logistics to deliver craft products to buyers in all available markets.

In turn, RNDC will have access to LibDib’s technology and data collection, thereby enabling them to further expand their value and services. In effect, they will be offering their large supplier organizations access to the rapidly changing market place by offering insights and actions into the new and evolving consumer.

What I think is particularly appealing, is that RNDC, which doesn’t currently operate in NY and CA, will have access to those markets in a new and unique way.

The problem being solved

Let’s start with craft spirits products and small brands.

IWSR has produced the Craft Sprits Report 2018, which looks at the current and future growth of craft spirits in the US.

They report that in 2017, the craft spirit volume share of all spirits sales was 3.3% which is 7.5 million 9-liter cases and up 25% from the previous year. They forecast that by 2022, craft spirit brands will account for close to 20% of all spirits and more than double its share at 7.9%.

In terms of value, craft brands accounted for 4.6% share of all spirits and, by 2022, they forecast it to be 10.4%.

What really caught my eye was this statement: “To put the current size of craft spirits into perspective, the 7.5m case total is roughly equal to the entire U.S. brandy category in 2017.”

 So, what’s the problem?

The route to market available to large brands is not generally available to small brands, particularly start up ventures or fledgling brands from small craft or other distilleries. The result is a hodgepodge of distribution solutions. Some large distributors will take on these brands but more as an exception than a rule. Come on… you would do the same if you ran a spirits and wine distributorship. It’s a volume driven business that largely depends on mass and mainstream brands. As a distributor put it to me once, “hey, you want my sales folks to stop focusing on a proven winner to sell your maybe-it-will-make-it brand?”

As a result, small spirits companies often rely on wine and beer distributors. Both wine and spirits companies will aim for importers with a distribution network or companies like MHW LTD or Park Street Imports (both with distributor licenses in a few key markets). All in the hope for an effective route to market and in compliance with the 3-tier mandatory system.

The large company conundrum

Developing new products/brands and getting them to market is difficult for the large makers as well.

Imagine you’re a major player in a leading spirits and wine company. You look around and, while your mass brands are doing okay, the craft/small batch brands are eating away at your volume. The cocktail focus has won the attention of bartenders and consumers alike and your mainstream brand is in danger of becoming yesterday’s newspaper.

Your options are to stick your head in the sand and ignore the changing market place and consumer behavior. That won’t work because your kid needs braces so your bonus might be in jeopardy. So, you figure out that you need to enter the fray and either start acquiring some of those fledgling brands or build your own through your innovations group.

Now you have another problem. The distribution and business models are based on large volume and you don’t want your people, or your distributor’s people, focusing on your new “baby” while ignoring the brands that need the attention. You can either launch a small brand-focused business unit or find a better, more cost-effective solution.

As many of you know, at Seagram I ran new products at one point and this venture of combining the clout of RNDC and the LibDib model would be just what I needed to succeed. In short, this strategic alliance between a top distributor and a company focused on small brands would have made my mouth water by allowing me to get into the small producer game, while still keeping my eye on the (big brand) ball.

How this came about

My hats off to Tom Cole who has the vision and smarts to see where the industry is going and to move his business in an advantageous direction. And to Cheryl, whose tenacity and foresight will reap benefits to her innovation.

I’ve known Tom a long time and he’s a visionary, always attuned to the changing marketplace, and willing to explore new opportunities and directions. It’s no surprise, therefore, that when he learned about LibDib, he looked into it.

Cheryl and her family ran a small winery in northern California and learned firsthand what a nightmare it is for a small company to get to the shelves of restaurants, bars, and stores. She created LibDib as a solution. In a relatively short period of time the company has attracted large numbers of makers and retail (bar and store) accounts in New York and Los Angeles. LibDib has become a viable and growing go to market resource.

After a number of exploratory phone calls, they met at the WSWA and learned that they had a great deal in common — the yearning to find a solution for new brands, a shared vision of the future, the support for the 3-tier system, entrepreneurial focus, and approaches to business management. Back and forth conversations and due diligence followed and a year later RNDC invested in LibDib and they are now partners.

What’s next?

There is much work to be done to maximize the potential of this venture and 2019 will involve some beta testing in NY and LA. Beyond that they will be exploring efforts on a state by state basis. There’s a lot to learn and this is a work-in-progress, undoubtedly with a slow and steady pace, making sure all the kinks are worked out. As Tom put it, “We will do things thoughtfully and correctly and increase our likelihood success.”

So far as I’m concerned, this development changes everything.

RNDC markets
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A National Drink is Born

Mahua, The Traditional Tribal Drink from India, Enters the Mainstream

The US has Bourbon, Mexico has Tequila and Mezcal, Scotland has Scotch, Brazil has Cachaça, and the list goes on and on. But what about India? It’s among the top five alcohol consuming countries in the world and there is a robust spirits/whisky manufacturing industry. Colonial India invented the gin and tonic, but has had no serious candidate for national liquor, until now.

This is the story of the emergence of a national drink, led by one man’s innovativeness and tenacity. An alcohol product with a long history and exclusively Indian heritage, surrounded by legends, and spanning centuries. A historic product from the many tribes in the Central Indian Forest belt.

The products (there are two) are called DJ Mahua and DJ Mahua Liqueur. The man is Desmond Nazareth and we have met him before in this blog. (You will find them here, here, and here.)

Desmond Nazareth, Founder and Managing Director, Agave India.

The Product

Mahua (pr. Ma-hu-a) is a flower that Indian tribes have been fermenting, distilling, and drinking. The Mahua tree has been considered sacred for centuries. Desmond and his Agave India Company have begun marketing the product under the DJ (DesmondJi) brand in liquor and liqueur formats and selling these products as Indian Made Liquor (IML) since June of this year. But his real challenge is to get the widespread liquor authorities to recognize Mahua as an official, potentially national drink.

Here’s how he describes Mahua:

“Mahua is a nectar rich flower of the Madhuca longifolia tree, which grows in the Central Indian Forest belt, historically inhabited by indigenous people of India, so called ‘Adivasis’, or ‘Tribals’. The nectar rich flowers mature and drop for a month or so in the Mar-April-May timeframe. These edible sundried flowers retain a significant part of their sugars, with a pleasant, complex taste akin to a hybrid of sun-dried raisin, fig and date… For centuries, Central Indian tribes have been collecting and storing Mahua flowers, and consuming single distilled Mahua spirit made from the flowers in traditional clay, wood-fired potstills.”

He depicts the products as “forest-to-bottle” and both are 40% Alcohol by Volume (AbV). The DJ Mahua liqueur is blended with honey and spices and there are plans for a DJ sparkling product. I’ve tried both the liquor and liqueur and found them to be very enjoyable products, with unique and pleasant tastes. The DJ Mahua Liqueur product in particular, was most enjoyable both straight and in cocktails.

Desmond describes Mahua as “the only spirit in the world that is fermented and distilled from naturally sweet flowers.” ‘What about St Germain?” I asked. According to Desmond, St Germain is made by macerating and steeping Elder Flower in alcohol; DJ Mahua is naturally fermented and distilled directly.

The Mahua Mystique

Mahua Tree

What fascinates me about Mahua is its colorful history. Spend a few minutes here and you’ll see what I mean.

As legend has it, Mahua is “An indigenous drink rumored to be the elixir of the Gods and the weakness of deities, the tribals tell tales of how it is coveted by deer, birds, and humans alike.”

According to Desmond, Mahua is more than a drink, it’s a reflection of India’s colorful tribal history. The legends and stories abound with tales of hard-working villagers saved from the messengers of death by Mahua; of animals cavorting while tipsy on the flowers. Desmond writes:

“From bark to fruit, leaf to root, every part of the Madhuca Longifolia (botanical name) earmarks our heritage in a way few other elements of our long cultural history do.”

A well-respected English anthropologist working with tribes in Central India named Felix Padel, a descendent of Charles Darwin, tasted Mahua and was surprised that the government did not develop it as an industry. He is quoted as saying, “I wonder why people in India would prefer French wine and English scotch when something fresh and rejuvenating like Mahua is available.”

And that leads us to Desmond Nazareth’s journey to make Mahua the Indian national drink.

The Challenges and Obstacles

Mahua is currently made in over a third of India’s 29 states and getting Mahua recognized all over India is a daunting task, particularly when you’re a niche, craft distiller with limited resources.

The Indian alcohol market is very complex and, to me at least, somewhat confusing. As I mentioned, its alcohol volume consumption is among the highest in the world but its per capita consumption is low. There is a love-hate relationship with alcohol, dating back to Gandhi’s aversion to it and at least four states and one territory practice prohibition. Yet, Indians love to drink and the worldwide cocktail enthusiasm is alive and well in the major cities.

Indian Made Liquor (IML) consists of two types. One is Indian Made Foreign Liquor (IMFL) and is the official term used by governments, businesses and media in India to refer to all types of liquor manufactured in the country other than indigenous alcoholic beverages. The other type is Country products such as Feni and Mahua.

Desmond is trying to get a new Excise category established countrywide. It would be known as Heritage alcohol products and strictly governed by international standards. It would be taxed lower than ‘IMFL/IML’ and higher than ‘Country’. He feels that this would encourage entrepreneurs to explore and exploit the huge treasure trove of Indian alcoholic beverages.

To get Mahua recognized as a national drink means a state by state campaign since there is no central national regulatory body equivalent to the USA’s TTB. “It is a crying shame that there currently is no simple Excise/ Revenue/ Customs mechanism for proudly made in India alcoholic beverages to be placed in Travel Retail (Duty Free) outlets in India,” says Desmond.

Nevertheless, an important step forward has emerged, thanks to Desmond’s efforts so far. The Food Safety and Standards Authority of India (FSSAI) is roughly equivalent to the USA’s FDA and is working to standardized the manufacture of Mahua and the use of its ingredients.

What’s Next?

As you read this, know that Desmond is hard at work on a number of levels. The manufacture and sale of DJ Mahua and DJ Mahua Liqueur in his home state of Goa and elsewhere in India; working on a sparkling Mahua product; and pushing for recognition as a national drink.

My own view of this situation is that it represents a unique and powerful opportunity for a global player to enter the fray. The “size of prize” of the Indian market and overcoming the obstacles for global brands, suggests that the Diageos, Pernods, and others might want to take a close look at Mahua. I think it represents a real opportunity to participate in the development of a new national brand with Indian and global potential. (If I were still at Seagram, I’d be doing just that.)

For a brand to succeed on the global stage, it needs to be good tasting, backed by an entrepreneurial effort, and a have compelling story. DJ Mahua and its variants has all that and more.

It’s time for the product to come out of the woods and reflect its heritage the same way as bourbon, scotch, tequila, and all the other national drinks. I hope that the Indian authorities would grant a type of AOC (protected designation of origin) or Geographic Indication (GI) for Mahua along the same lines as those for cognac, tequila, champagne, and others.

DJ Mahua Liqueur
DJ Mahua
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Black Fig Vodka: A Star is Born

The World’s Only Fig-Infused Premium Spirit

Black Fig is a vodka infused with figs, but far from a flavored vodka. Actually, it’s a Distilled Spirit Specialty whereby actual California figs (roughly a pound per bottle) are naturally infused in a neutral grain spirit (NGS) without added sugar or additives.

From what I can tell, this is a home run and has everything going for it right out of the gate—a great tasting product, a unique concept, an incredible cocktail addition, and a passionate owner who knows what he’s doing.

Consider this:

Michael Davidson, the owner and CEO of Black Infusions, walks into a top restaurant and approaches the F&B manager, who promptly tells him he has no time to speak to him. Michael’s combined chutzpah and Boston charm convinces the manager to give him 10 seconds and “just taste this.” He does and the next thing you know they’re talking for half an hour about cocktails, using Black Fig in food recipes, and a large order for the product is placed.

He gets into one of the Total Wine & More stores and conducts a tasting and quickly sells out the three cases he brought—18 bottles in 45 minutes.

At ABC Kitchen in NYC, a distributor sales rep (MS Walker) pitches the brand, does a tasting, and the Food & Beverage Manager falls in love with it. The next thing Michael knows, Black Fig Martini is on the cocktail menu. They sell 25 to 30 (6-pack) cases a month.

I can go on but I think you get the picture. One sip of this product and you’re hooked. So, let’s take a closer look. (By the way, the brand won Double Gold at the 2017 San Francisco Spirits Competition.)

About the owner

Michael Davidson is a born and bred Bostonian who left his successful family business to follow his dream to launch a spirit brand he came across. He was at a Mediterranean restaurant owned by a friend who served a homemade drink consisting of dried figs soaked in vodka. “That’s vodka? This tastes like liquid fig,” said Michael.

A light bulb went on and, after more than two years in development, the product was ready for market. Over the course of that time, a formula/recipe was developed, a contract bottler was engaged, legal issues were addressed, distributors were found, drink recipes created—and, a brand was born.

Michael is a unique kind of guy. I’ve met scores of startup entrepreneurs but he has most of them beat with his thirst for knowledge and information about the booze business; his willingness to make a difficult decision and still change gears when necessary; and, his understanding that without marketing and sales, a product cannot succeed. Above all, I’m very impressed with his passion for the brand and the business.

I’ve met with Michael a number of times in restaurants and he’s fun to watch as he gently but effectively pitches Black Fig. He listens, a trait many wannabe spirit entrepreneurs need to learn.

He’s gotten the brand into 12 markets with a number of distributors, most notably M.S. Walker, and some top on-premise accounts (ABC Kitchen, Bobby Van’s, Mistral, and more) and off-premise accounts, (Wegman’s, Total Wine & More, Whole Foods to name a few). The brand is currently available in the northeast, mainly New England and parts of the mid-Atlantic.

The product

In a word—amazing. As soon as you open the bottle, the aroma of the figs comes pleasantly through. It’s great straight and on the rocks, and you won’t believe what it does to a cocktail. But let’s start with the basics.

Black Fig is an artisanal product distilled with neutral grain spirit and naturally infused with California figs (about a pound per bottle) in small batches. It is 60 proof (30 AbV) and made without artificial sugars, flavors or colors. And, since the NGS (vodka) is made from corn, it is gluten-free and Kosher if that interests you. The product sells for around $30 per 750ml, depending on where you live.

Ah, but the real joy of this product is it’s mixability and versatility—it plays nicely with other ingredients and enhances your favorite cocktail like a Black Fig Martini, a Fig Mojito, Mediterranean Mule, or a Black Fig Old Fashioned. Michael also has quite a number of drinks that he invented like the Fig Flower, the Black Dragon and many more that you’ll find on his recipe page.

Black Fig martini

The Future and Challenges

Michael “gets it,” and knows that as a small startup he has to work night and day to increase traction and break through the clutter. One of his favorite expressions is, “Sometimes I feel like I’m screaming from the bottom of the Grand Canyon and trying to get heard.”

But by far, his greatest challenge is being a one-man show. To succeed and grow, he will need to get some sales help, focus his time and energy on things that have the greatest return on the investment of his time, and probably both.

He literally does everything but has some marketing help (conventional and digital) from a very sharp woman named Kalen Junda. Kalen is an entrepreneur in her own right and runs a small marketing company called the Tobe Agency. In my view she is also a rising star.

Among the things I admire about Michael is that he’s not falling into the “startup trap” of expanding markets before he’s ready and thereby spreading his financial and other resources very thin. But that doesn’t mean he’s not thinking about the future.

Down the road, he would like to move into southern and western markets. Hey, come on, a Black Fig product made with California figs? He’s got to be in the Golden State.

He is also thinking about what comes next and has decided on a line extension that he’s not yet ready to reveal publicly. He’s told me about it, sworn me to secrecy, and I know it will also be a home run. I guess I’ll just have to keep following and writing about him and see where this journey takes him.

I’ll just sum it up by quoting another favorite expression from Michael, which he got from VinoTapa restaurant’s drink menu— “Go fig or go home.”

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