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.

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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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New Booze Products: Brilliant and Dumb

Wine and Spirits Daily had two announcements about new spirits product recently. One makes sense and the other, well, you decide.

Highlander honeyGood Idea

The flavored whiskey category has been on fire with brands like Wild Turkey American Honey, Jack Daniel’s Tennessee Honey, and Jim Beam Red Stag among others. Now the folks from Dewar’s Scotch (owned by Bacardi) are entering the flavored whisk(e)y category with Highlander Honey, a scotch infused with honey.

Imagine, they have the audacity to try to break down the stuffiness and out-of-date sacred walls of the blended scotch category. Never mind that blended scotch growth has been declining to flat in the past decade while other whiskies (including malts) have been growing. It’s not about adapting to changing tastes, it’s about a stiff upper lip refusing to swallow change.

Check this out. The Diageo head of whisky outreach (huh? I think that’s a way of saying, ‘can I buy you a drink?’), was quoted as saying Scotch has too much “integrity” and “authenticity” to get into flavors. Diageo and integrity in the same sentence? My word! Also, the Scotch Whiskey Association is not very happy about it. Better to go down with the ship, eh, what?

Hey, it’s a good idea for the reasons I shared with Wine and Spirits Daily,

“It’s a terrific idea and well worth trying,” long-time industry exec Arthur Shapiro told WSD. ” First, the blended scotch market is declining and this could be a shot in the arm. Second, the flavored whiskey (US) brands have ‘greased the skids’ so consumer acceptance would be easier than it might have been before these brands came on the market. Third, it adds contemporariness to the scotch area and removes the stuffiness. Fourth, probably makes for a good mixed drink. Finally, I like the ‘seriousness’ of scotch and the fun of a flavored scotch product.”

Put that in your copper still and cook it.

Mama WalkerYou gotta be kidding me

Pernod Ricard, who until recently earned my respect for terrific innovations and new products, has launched what seems to be an April Fool’s joke.

They are introducing a line of new products under the Hiram Walker name called Mama Walker’s breakfast liqueurs. Apparently it’s intended to “tap into the comfort food, sweet and savory flavor combinations” trend (or is it fad?) not to mention the confectionary/cake vodka flavors. This breakfast of champions is available in Maple Bacon, Blueberry Pancake and Glazed Donut.

Come on folks, are you serious? Next thing you’re going to tell us is that they hardly taste artificial.

Can’t you just see the ad campaign?

“A bit hung over from a hard night of drinking? Looking for something to smooth out the rough edges? Forget about the all night diner and the bacon, eggs and pancake special. Try some of Mama Walker’s breakfast liqueurs… we’ll perk you right up with our original comfort booze. Just remember… your Mama knows best.”

Or:

“Tired of the same old breakfast? Cereal, eggs or fruit can be soooo boring… Start you day off right with Mama Walker’s breakfast liqueurs. What a great way to face the stress of what awaits you. Boss on your back? Kids on your nerves? Mama can help…Comes with or without a brown paper bag… But, remember, don’t eat breakfast and drive!”

Any thoughts on either product?

 

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Great Tsotchkes (aka Swag) I Have Known

In keeping with the theme of the last few postings on sales promotion, dealer loaders and assorted point of sale issues, I thought I would continue that theme particularly in light of the holiday season. The Advertising and Promotion Awards in the Nov/Dec issue of Beverage Dynamics also prompted me to address this subject.

First, for the uninformed, the Urban Dictionary defines Tsotchke as “free goods given by companies to consumers, buyers, trade-show participants or other target audiences to promote brand recognition or customer loyalty.”

So, here are some points of view on the subject including some picks and pans from yours truly…

The most consistent and impactful POS has to go to the Absolut folks, particularly their multi-case floor displays. In fact, Beverage Dynamics gave it 1st place for 2010. No wonder, since Carol Giaconelli at Pernod Ricard (and a Seagram alumnae) is among the most imaginative sales promotion people I know. Even after working on Absolut for many years and for different regimes, Carol maintains her creative edge.

While I’m on the subject, I suppose the Hall of Fame for floor displays with loader items has to be the Captain Morgan mirror. According to Sam Ellias, the CM guru back in the day, that promotion was a prominent reason for the brand’s early success. Apparently, all a sales person had to do was to show the mirror in order to get the question, “how many cases do I need to buy?”

I managed to find a photo online. Despite it’s popularity at the time, you can still get one on eBay for under $25.

Now to the pans…

There are lots of awards in Beverage Dynamics for co-packs, gift packs and cartons/tins. The so-called value added packaging. Sorry, but I still don’t get it. In this environment manufacturers expect to entice consumers with Tsotchkes? If you want to measure effectiveness go to a flea market or eBay after the holidays and you’ll find glasses, shakers and pitchers galore. I wouldn’t be surprised if most of them came from retailers.

The Hall of Shame best/worst sales promotion item of all time came under my watch on behalf of Coyote Tequila. Don’t get me wrong the promotion item was great. It was a back bar pedestal with a howling Coyote as the centerpiece with a bottle on the base. Each time the bartender picked up the bottle a button was triggered and the sound of a howling Coyote was heard. Very cool. Very effective.

Just one small problem — Coyote Tequila tasted like crap. As the saying goes, “I wouldn’t drink it with your mouth.”

And now, dear reader, I have two questions for you.

Care to share your nominees for the best and worst promotions you’ve seen now or in the past? Either hit the comment button or send me an email.

Also, as I went through the 40 advertising and promotion awards by Beverage Dynamics, there were lots of first, second or third place winners from many major suppliers — Brown Forman, Heaven Hill, Skyy/Campari, Pernod, Bacardi and others. None were from Diageo. I wonder why? It could be that their market position and brand shares allows them to spend in other ways. That would explain the dearth of POS recognition. But no ads, traditional or digital, made it either. Huh.

As we used to say in Brooklyn, wait ‘til next year.

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