Control States

Have you been following the press about privatization of some Control States?

In case you haven’t, Wine and Spirits Daily (June 7th edition) has a great score card on what’s been happening.

NABCA has issued a resolution in support of Control States. No surprise but people I’ve talked with have wondered why they didn’t do this some time ago. WSD reports that 4 states (NC, PA, WA and VA) are looking closely at privatization. So the debate must be getting serious.

I’m not sure I know how I feel about privatization.

Those who want to keep government involvement argue about jobs and the need for industry regulation or control in their jurisdiction. But the NABCA resolution states, “there is irrefutable proof that alcohol control systems have a positive public health and safety impact on their communities.” Does this mean that the 32 open states are not doing a good job in protecting health and safety? Or, that the industry, unless governed by state officials, will behave badly?

Follow the money. As WSD points out, in tough economic times, states will look to a range of resources to increase revenue including taxes, fees and privatization.

Hey, look at California – on the ballot this November is a voter initiative to legalize marijuana. The tax revenue from sales is seen as a way to help the state’s budget difficulties.

Interesting that the economic climate has created change in government’s involvement in the social climate. But I guess it’s always been that way.

Here’s a thought if you’re working in a state store that gets privatized – think about moving to California.

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Beer Market Woes

Today’s issue of Ad Age Daily has a lead story on declining beer sales. Ad Age Daily

Industry shipments are down 4% (Beer Institute); for the four weeks ending May 16, only 4 of the top 30 brands posted gains  (SymphonyIRI); the big boys saw large declines – Bud Light down 5.3% and Miller Lite down 7.5%, both vs. 2009 sales.

How come?

I don’t think it’s the economy, beer held its own vs. spirits and wine at the height of the recession…why should it decline now?

Could it be the growth at the top and bottom of the beer market? Craft beers and imports are doing okay as are the price brands. Bud Light and Miller Lite are hurting and that’s enough to upset the entire category.

Maybe after a few years of substituting beer for wine and spirits, consumers have returned to pre-recession consumption patterns.

My view is that the marketplace is cluttered with light beers including new entries such as MGD 64 and Budweiser Select 55. Adding to the clutter is a barrage of new products, line extensions, brand extensions at all price tiers, especially the top end. And, let’s not forget about the growth in craft beers.

So, maybe it’s just that consumers are drinking less but drinking better. Those of us in the spirits world know that phenomenon well.

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New product failures I have known – Old Breed

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.

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