Industry Matters/News | Booze Business: A Blog Dedicated to the Business of Spirits and Wine

The US Census

April 6, 2011 No Comments

This week’s Ad Age had a story and insert about trends from the 2010 census. I found the information and learning interesting as a snapshot of the US market in general and my favorite industry in particular.

If you look closely at Ad Age’s analysis and spend some time with the census results itself, the “story” is about the shifting population. Not a new trend, by any means, but some interesting twists and turns that continue to affect marketing.

First, it should come as no surprise that the US is becoming more diverse — the minority populations grew 8 times faster than the majority white, non-Hispanic population.

Interestingly though, the news about Hispanics is that the population and growth is concentrated, with nearly half of all US Hispanics living in just two states – you guessed it – California and Texas. And, three quarters live in just eight states.

The Asian population is growing even faster and is more highly concentrated. Since 2000, the population has grown by 43%. New York and California have the largest concentrations.

Among African Americans, the Census data reported by Ad Age indicates, “many are moving to the suburbs and to the South…a sign of better job prospects and increasing affluence.”

I think the implications of these shifts are clear. The consumer and the spirits and wine marketplace is anything but homogeneous. Strategies, plans, brand building and related marketing/sales factors that don’t take this into account are simply worthless.

I also think that as affluence and acculturation take hold, the old rules of who drinks what need to be re-examined. As demographics change, over time, so do attitudes, life styles and purchase behavior.

Oh, one more piece of information from Ad Age caught my eye that I wanted to share. In an analysis of Boomers sponsored by AARP, it seems that older Boomers (55 to 65 years) spend as much on alcohol as the general population. But, younger Boomers (45 to 55 years) spend 15% more than the population in general.

No surprise to me…I used to think it was because the empty nest means more entertaining and food and beverage occasions. I now know better. It is not because of the empty nest – it’s more drinking because the kids have come back home.

Cuervo for Sale?

March 21, 2011 No Comments

I no sooner posted the piece below on South America when my inbox lit up with stories about the possible sale of Jose Cuervo International.

(In case you don’t know, the brand(s) are owned by the Beckmann family and distributed worldwide by Diageo.)

Both Buffalo Trace Newsletter and Wine and Spirits Daily had special additions on Sunday reporting that the Beckmann family was in talks to appoint Barclays to explore a possible $2 billion sale of all or part of the Jose Cuervo brand.

I heard from a wide range of people who know the brand and the players well. Their opinions on the matter were all over the place, but very interesting.

Some wondered about the low price…

“As recently as a few years ago, they bragged about a $5 billion price tag …$2 billion must be for part and not the production or for limited worldwide distribution…seems crazy.”

The more cynical views had to do with the historic combative nature of the relationship between Cuervo and Diageo…

“I once heard a senior Diageo executive say that if Patron were available, they would gladly overpay for it in order not to have to deal with the Beckmanns any longer.”

“Diageo’s recent poor performance on the brand now looks like a strategy to keep the value low in order to buy the Beckmanns out.”

My own view is that it could be (as WSD suggests) based on a preemptive move against the possible sale of Sauza, although count me among those who think Beam Global will remain in tact and flourish in the future. Perhaps it’s a warning shot to Diageo to pick up the pace since their contract comes to an end in a few years.

What I can’t understand is where Proximo (also owned by Beckmann family members) fits in the equation. They are doing well and could easily handle the addition of Cuervo to the portfolio. But, their strength is strictly in the US. So, perhaps the low price tag is for international distribution.

One thing for sure is that the Beckmanns are shrewd and unpredictable so who knows what they have in mind.

The WSWA

March 11, 2011 No Comments

And now, on to the foremost industry show of the year, at least in my opinion. The Wine and Spirits Wholesalers of America (WSWA) 68^th annual convention is in Orlando at the beginning of April. Once upon a time this was a key meeting point between suppliers and wholesalers. Speakers, exhibitors, award presentations were all a sideshow to the supplier-wholesaler hospitality suite meetings and dinners. Brands and lines were awarded and lost at this event. Friendships were made and solidified. Animosities were seeded and blossomed. All in all, it was one of the events that drove the business.

But there may be problems this year.

Last week, Wine and Spirits Daily reported as follows:

“WSD had heard rumblings that some DISCUS members will not be attending the WSWA’s annual convention this year. Initially we supposed this was due to disagreements over the CARE Act, but a number of distiller sources we have spoken to say the issues are unrelated and that it is a commercial decision.”

A commercial decision? WSD closed the piece with:

“Our conclusion? While we don’t doubt DISCUS’ reasoning for bowing out, it’s likely that disagreements over the CARE Act sped up the process.”

Ah, the CARE Act (aka H.R. 5034) – let me see if I can simplify the issue.

The CARE Act aims to clarify that states have primary authority to regulate alcohol. I can go on and on with details about letters to congress, lobbying rationales, assorted fine print gobbledygook and each side’s arguments and counter arguments. But it’s simple — the wholesalers want to protect and solidify the three-tier system and the suppliers want to make inroads and cause some erosion.

So, back to the WSWA –

I don’t believe the attendance will be down. I also don’t buy the argument that “we see the wholesalers on a frequent basis already so why go to the event?” Because, it’s called relationship building. Because, the size of the line alone is not the answer for “winning the hearts and minds” of distributors and their salespeople.

As for the wholesalers, if the big boys don’t show in the same numbers as in the past, perhaps they will spend more time in the exhibit area and get to know the smaller suppliers and the new brands and players that may become the powerhouses of the future.

It’s fascinating to see each of the oligopolies battle each other. I guess it’s called the “irresistible force” meets the “immovable object.”