Direct to Consumer, Industry Matters/News, Marketing and Sales, Trends

The State of the Booze Business: What Does the Future Hold?

July 9, 2024 1 Comment

The U.S. is currently in a period of transformation, with widespread shifts in most businesses. The alcohol industry stands out as it undergoes changes that are not only fundamental but also unique, driven by changing consumer preferences, technological advancements, and shifting demographics.

Here is a close look at the key factors affecting the industry.

The “sober curious” movement

The sober curious movement is a lifestyle approach where people become more mindful about their alcohol consumption without necessarily committing to complete abstinence. It involves deciding if, when, and why to drink. Dry January is a good example.

One of the key factors driving the non-alcohol trend is the ‘sober curious’ movement.

Non-alcohol beverages growth

This shift is strongest among younger generations, with Gen Z (born 1997-2012) drinking over 20% less than other generations did at their age. The non-alcohol beverage market is expected to grow 31% by 2024, making it the third fastest-growing beverage category in the U.S. Source.

This shift is reflected in the market with beer sales stagnating, wine offering alcohol-free alternatives, and spirits brands introducing non-alcohol versions of cocktails.

Premiumization

This is not a new trend; it has grown for years, if not decades, and is accelerating.

First and probably foremost is drinking at home. Most Americans say they consume alcohol at home, and 46% of those surveyed say they are likely to treat themselves to premium options there. In addition, the longstanding idea of “drinking less but drinking better” continues to apply.

Premiumization is most notable in spirits. Overall, 33% of Americans said they had spent $50 or more on a bottle of alcohol in 2022, against just 24% in 2021. Furthermore, six in 10 online shoppers say they spend more on alcohol online than in-store. Source.

E-commerce and Direct-to-Consumer (DTC)

While some recent reports show a slowing of the DtC market, the growth, driven mainly by Covid, is dramatic. Total beverage alcohol e-commerce sales are expected to grow 66% by 2025, reaching $42 billion annually. This trend is fueled by consumer demand for convenience and the industry’s adaptation to changing purchasing habits.

“IWSR predicts a 2023-27 value compound annual growth rate (CAGR) of 7% for online alcohol sales in the U.S., compared to a total beverage alcohol (TBA) CAGR of 1% over the same period. This would result in e-commerce’s TBA share increasing from 3.2% in 2022 to 3.9% in 2027. However, the 7% growth is a drop on the 11% CAGR prediction estimated for 2022 to 2026.” Source.

Functional Benefits

There’s a growing interest in functional beverages that offer benefits beyond taste and alcohol content. The functional beverage market is projected to reach $261 billion by 2032, with a CAGR of 6.5%. These drinks often include added vitamins, minerals, or other health-promoting ingredients.

From Clarkston Consulting:

“While functional beverages themselves aren’t a new concept, the development of functional alcoholic beverages is relatively new to the industry. One of the driving brands in this market, Vizzy, offers fortified alcohol products designed to incorporate vitamins and antioxidants into the drinking experience. Other beverages released include Hard Kombucha, which is low-calorie, made with real fruit, and has an assortment of other natural benefits while still providing the desired alcohol content. FitVine has also released wines that stand out for zero sugar content without compromising flavor or ABV.”

Ready-to-drink (RTD) Cocktails and Canned Beverages

RTD cocktails and canned beverages continue to gain popularity, offering convenience and portability. This category is currently the fastest-growing product in the industry and is expected to earn an additional 8% of the market by 2025. The trend is driven by consumers seeking easy-to-consume options for various occasions.

The RTD alcoholic beverages market was estimated at $18.7 billion in 2023 and is expected to reach $28.6 billion in 2033, growing at a compound annual growth rate of 7.9%, according to this report.

Cannabis-Infused Beverages

This is a trend/prediction that is well worth considering or, perhaps, troubling.

As cannabis legalization expands, THC-infused beverages are emerging as a potential competitor to traditional alcoholic drinks. The cannabis-infused drinks market is projected to grow at a CAGR of 37.8%, reaching $8.7 billion in annual sales by 2032. Source.

According to a recent report on CNBC, for the first time, more Americans are using marijuana on a daily or near-daily basis than alcohol. In addition, from 1992 to 2022, the per capita rate of daily or near-daily cannabis use increased 15-fold.

Other areas

Sustainability and Eco-Friendly Packaging: Introducing recyclable or biodegradable packaging and reducing carbon footprints in production and distribution, to name a few.
Craft and Artisanal Products: While the craft beer boom has somewhat stabilized, there’s still strong interest in craft and artisanal products across all alcohol categories. Craft spirits are seeing growth as consumers seek unique and locally produced options. Source

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The best way I know to summarize the changing climate for the alcohol industry is to leave you with a favorite quote from Peter Drucker, the renowned management consultant.

“A time of turbulence is a dangerous time, but its greatest danger is the temptation to deny reality.”

Revel Avila: A New Agave Spirit and Category

September 19, 2022 No Comments

Move over Tequila and Mezcal

This is the story of an Agave Spirit called Revel, made from 100% agave in Morelos, Mexico, and known as Revel Avila. More about this in a moment.

In the alcohol industry, spirits and wines are protected by law, known as Denomination of Origin. What that means is that it “is a designation that protects geographical status and refers to products specific to a particular region or town, which convey a particular quality or characteristic of the designated area.” (Spirits Beacon)

Some examples: Scotch can only come from Scotland; Champagne can only be called that if it comes from the region with that name; Cognac must come from the Cognac region in southwest France, and so on.

In the world of Agave Spirits, until recently, there were five types of products in Mexico:

Tequila: Must come from Jalisco.

Mezcal: Comes from nine different states, most notably Oaxaca.

Raicilla: It is the same as mezcal — but since it is not made in one of the nine states, it goes by another name. Raicilla comes from the Western side of the state of Jalisco.

Bacanora: Can only be found in the mountains of Sonora, a state in northern Mexico.

Sotol: An Agave Spirit that is technically not an agave spirit. While the base plant, Dasylirion or Desert Spoon, is also in the asparagus family, it is not classified as an agave. Still, the spirit is often roped into the category.

But wait, there’s more. Some time ago, I wrote about Agave Spirits made in India. A Wine Enthusiast article points out that “the plant is now being grown and distilled in California, Australia, South Africa, Peru, Venezuela, India, and elsewhere.”

It is interesting to note that Designation of Origin does not preclude drinkers from choosing Prosecco, Cava, and other sparkling wines; Brandy instead of Cognac; American Single Malt whisky instead of Scotch, etc. Bourbon, however, does not have to be made in Kentucky. Most of the Bourbon comes from KY (over 90%) but also from other states.

Revel Spirits — the Product

In 2018, Revel Spirits created the new agave-based spirit category and named it Avila. Distilled in Morelos, Mexico, Avila must utilize agave grown within the state’s borders, which boasts a terroir different from other regions in the country. According to Revel Spirits:

“An active volcano to the north provides the state’s nutrient-rich, virgin soil, which produces incredibly healthy and robust agave. REVEL’s award-winning Avila is handcrafted using both roasted and steamed pinas of 100% blue weber agave, a process that yields a flavor profile that combines the smoky notes and characteristics of mezcal with that of tequila.”

It turns out that Revel is the world’s first Avila, but this spirit has been enjoyed in Morelos for generations, with deep local roots in the region. The people of Morelos are incredibly proud of this spirit – Revel is simply giving them a conduit to showcase it to the world by bringing the brands to market.

Avila is offered in three variants: Blanco, which is bottled straight after distillation; Reposado, which is aged for 12 months in ex-whisky oak barrels; and Añejo, a 47% AbV spirit that is aged for 24 months in new French oak barrels.

I’m not a tasting expert or even a tequila/mezcal aficionado, but I found the products very smooth, flavorful, and a combination of the smokiness of mezcal and the characteristics of tequila. Yet, the taste is quite distinctive.

The Flaviar tasting notes included this: “Flavor / Taste / Palate We wish we could call it a Tequila, but we can’t, so we’ll call it very Tequila-like with a rich mouthfeel and notes of cilantro, succulents, mint, white pepper, and a hit of zest.”

In addition to the base brand and variants, Revel Spirits have also produced a line of Ready-to-Drink (RTD) products called Avila Spritz with some unusual flavor combinations (my favorite is Grapefruit Rosemary).

Meet the people behind the brand and new category

The founder and CEO of the company is Micah McFarlane, who has spent most of his work life in the music industry as a tour manager. I’m always struck by the ‘smarts’ of some entrepreneurs entering the booze business — eager to learn, adapt their skills, and work their asses off. Micah is all of these and much more. We had a terrific conversation about the similarities between the alcohol and music industries. Both businesses cater to specific consumer tastes, and the packaging is vital, as is promotion activity and dealing with distributors and retailers.

Micah McFarlane (L) and Justin Harley (R)

Speaking of distributors, among the things that impressed me was that Neil Barnett is an advisor to the brand and brought it to my attention. In case you don’t know him (it must be because you are either new to the industry or not in it), Neil was President and COO of Fedway distributors in NJ, the largest independently owned wholesaler. Neil is smart, knows the business better than most, and is very tough and discerning about new products. He is also a great guy, and if he likes a brand, I, for one, will stand up and take notice.

McFarlane partnered with Héctor Ruiz, a restaurateur in Minneapolis and a Morelos native, to bring the agave-based spirit to consumers. Revel Spirits is made at a farm and distillery in Morales, in the south of Mexico, which the Ruiz family owns. For generations, the Ruiz family has produced the agave spirit in Morelos. However, it was only consumed by friends and family until Revel Spirits were formed.

By the way, Micha met Hector Ruiz’s cousin, whose name is Noa Avila, hence the name Revel Avila.

To round out the team, Justin Harley joined as a partner. Justin is an award-winning Actor, Producer, and Director. He starred in NBC’s critically acclaimed, award-winning drama series “This Is Us” and is also known for “Smallville” and “Revenge.”

In addition…

Revel Spirits is the steward of this category and takes its role very seriously. They are leading the charge to get the Mexican federal government to grant a Denomination of Origin protecting Avila and ensuring that no spirit can bear that name unless it’s produced using agave grown and distilled within the borders of the state of Morelos.

During the Covid pandemic, Revel Avila donated 30% of the profits from online sales to the United States Bartenders’ Guild’s (USBG) Covid-19 relief fund to support on-trade workers during the pandemic.

Revel is available in 13 states — CA, TX, ND, MN, MA, NY, NJ, NV, MN, KS, MD, RI, and CT, with more on the way. It’s also available online at ReserveBar and Flaviar.

The Blanco sells for around $50; Reposado for roughly $70; and the Añejo for $175.

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Just this past week, two major industry resources have pointed out the impact on tequila from other agave spirits:

IWSR —”Is Tequila Under Threat?” Link

The Spirits Business — “Alternative agave spirits could challenge tequila.” Link

The Best Dirty Shirley: More than the drink of the summer

June 16, 2022 No Comments

The Shirley Temple Grows Up

The internet, press, and TV are all abuzz with the Dirty Shirley. It’s described as the drink of the summer 2022. The NY Times was among the first to write about it. The Today Show recently went so far as to describe it as overtaking the Aperol Spritzer as the summer drink.

So, it’s not surprising that I thought this drink was worth looking into. Among the first thing I came across was this press release from Black Infusions, makers of Black Fig (Double Gold at San Francisco Spirits Competition), Gold Apricot (96 points from Wine Enthusiast), and their newest product, Dark Cherry. The latter addresses the Dirty Shirley two ways — used as a cocktail at bars and restaurants and a canned version as a Ready-To-Drink (RTD) cocktail.

Black Infusions was created and is owned by the husband-and-wife team, of Michael and Barbara Davidson. I’ve known them since 2018 and wrote about them then. I figured I’d check in with them and learn more about what’s going on in general and with their brands. So, we spoke at length on the phone and here’s the interview:

BB: Before we get into the Dirty Shirley… how’s business overall?

Michael: Business is good, we’re gaining traction from consumers, largely because of our retail distribution. But, you know, it can always be better, so we keep pounding the pavement.

BB: What accounts are you in?

Michael: Off-Premise we’re in Total Wine & More, Kroger, Wegman’s, Whole Foods, Stew Leonard’s, and more. On-Premise we’re in a range of what you might called “marquis” accounts like Fig & Olive, Balthazar, Eleven Madison, Jean-George’s restaurants, and a bunch of others.

BB: How did the Dark Cherry infused vodka come about?

Michael: Our position in the market is based on vodka naturally infused with fruit — just fruit and neutral grain spirits, no artificial flavors, no other additives, no extra sugar. At 60 proof, consumers love our Black Fig and Gold Apricot products because they can enjoy it by itself and in cocktails. When we thought about other products, cherries came immediately to mind.

Barbara: I would add that finding the right blend and especially the right cherries, took time. Like some fine wines, we needed to find the right balance of cherry types. Our blend is 80% Bing Cherries and 20% Rainer.

BB: And how did the RTD product come about?

Michael: Lots of our bartender fans and friends kept making different kinds of drinks with Dark Cherry. One was a Cherry Coke. But the one that got our attention was a Shirley Temple with Dark Cherry vodka… The Dirty Shirley. Then…

Barbara: We felt that just adding vodka to the traditional recipe was wrong. If you order a Dirty Shirley at a bar, the recipe calls for lemon lime soda like sprite, grenadine, and maraschino cherries. Much too sweet and artificial tasting. When we taste our product with the trade, the response we got was, “You ought to put it in a can as an RTD.” So, we did.

Also, It’s special, unique, it’s fun, it’s yummy, and after the last two years, I figured we could all use a reminder of simpler times. Our new Dark Cherry vodka gives us a delicious yet all-natural twist with the convenience of a can.

BB: How is it different than the Dirty Shirley made in bars?

Michael: The RTD has our Dark Cherry vodka, fresh lime juice, some real ginger, and a touch of carbonation.

BB: How is it going so far?

Barbara: We just launched in May and only in a few markets, but we can’t keep it in stock.

Michael: From a business standpoint, the RTD will hopefully accomplish several things: promote the Dark Cherry infused vodka as a brand, highlight our full line and raise awareness of our other real fruit products, and perhaps open the door to other RTD entries.

BB: So, it’s not just a new brand, it will play a strategic role.

Michael: That’s right.

BB: Where can my readers find the RTD?

Barbara: We launched in Boston, at Big Night Live and sold 130 cans in 3 hours. BevMo/Gopuff requested availability in CA. We will also launch Gopuff in MA and DC, and Total Wine in MA.

BB: The best of luck with all your products. You’ve come a long way from when we originally met. Here’s to continued success. Thanks for your time.