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.”

Do Awards and Medals Matter?

August 31, 2022 12 Comments

Facts and Myths About Awards

Every day, spirit brands seem to be crowing about the awards or accolades they have won. Whether meaningful or not, press releases and brand pitches abound with “we won this” or “we won that” to the point where I often wonder what difference it makes.

At the same time, the purveyors of the award programs are all over the place with implicit vows of brand supremacy and recognition. They seem to be saying that if you enter our contest or event and vie for glory, not to mention recognition, you’ll succeed.

So, let’s take a brief look at awards and accolades from several viewpoints — the awards in general, the trade, the makers, and the impact on consumers. Let’s separate fact from myth, with a few opinions thrown in.

Int’l games award medals. Oriental Trading co.

Fact: Major and mainstream brands don’t need or use awards as a distinguishing characteristic. Of course, they don’t need to at this stage in their development. But, even at the outset, brands like Tito’s, Patron, Absolut, Bulleit, and others did not use accolades as a reason for being. Perhaps it was because there were far fewer award contests or because their message, brand attributes, and market positioning were sufficient to win over the trade and consumer.

The only exception I’ve seen is on behalf of line extensions, and then only sporadically. I suspect that a zealous brand manager from a top brand managing a line extension will be attracted to enter the brand in an award contest to show management that the investment in the extension is worthwhile. (Not to mention how great they manage the brand.)

Opinion: Among award suppliers, not all are created equal. I’m not looking to review these companies or make any recommendations, but the two that stand out, in my opinion, are the Ultimate Spirits Challenge and San Francisco Spirits Competition. Sure, there are many other excellent suppliers, but I’m impressed with these two because of their longevity, the people who run them, and the acumen of the judges most of the time.

Speaking of judges, that’s a critical dimension. I have a client and friend who entered his craft product in both these events. Interestingly, one is on the east coast, and one is on the west: same product but markedly different scores. There must be palate differences east and west — why else would he have received double gold in one place and bronze in the other? The only further explanation is that the product produced in one area reflected the taste of that area but didn’t translate across the country.

Fact: Craft brands enter contests that they presume will enhance their go-to-market ability. It’s about recognition and trying to influence distributors and retailers.

Fact: If a craft brand has deep enough pockets, they can enter tons of award events and collect medals (some meaningful, most not) and get lots of bragging rights.

Fact: The best aspect of awards is the opportunity for brand publicity and use on social media.

Fact: But…It’s not about the award itself; it’s how to monetize it.

Fact: Awards don’t build brands. A unique and relevant proposition, together with sound strategies and tactics, and pounding the pavement is what it takes. There are no shortcuts.

Myth: The trade cares about brand awards. The reality is that they look at new brand awards, and it becomes a sort of ‘ticket of admission.’ For many, it’s like chicken soup when you have a cold; it might not help but can’t hurt.

That’s because…

Fact: Brand awards are overdone and a dime a dozen.

Myth: Consumers focus on awards in their decision-making process.

Let’s get real — there are tons of prizes and brands shouting about them — some are multiple golds and some ‘honorable mention;’ some are from no-name award events, some from meaningful ones. Who has time or interest in considering awards to make a purchase?

I’ll tell you what, in my experience, works best — a number on a shelf talker (adjacent to the bottle). A rating of 90+ captures the attention of someone looking to try something new and has more meaning than tons of not understood and pointless glitter. Thank you, wine industry, for using numeric ratings in highlighting top wine brands.

Fact: The only people benefiting from awards are the organizers of the award events. A close second is the brand owner, who thinks that awards are the quick and easy way to succeed.

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If I were to be philosophical and more than a little meanspirited (who me?) I’d say that the award culture we live in stems from the past 40 years or so, starting with camps, organized sports, and other efforts, whereby just showing up earned an award, plaque, or trophy. As my friend and business partner, Rob Warren, says, “It’s the syndrome where everyone who plays or pays gets an award.”

Sure, show them an award or two as an aside, but not the focal point of your brand proposition. To win in the booze business, you need way more than that.

Let me know what you think.

Welcome to California: Racquet Club Spirits

August 2, 2022 3 Comments

The Story of a New Craft Spirit Company in Palm Springs

In the past year or so, I’ve been off the air for several reasons — business and writing commitments, Covid, and most important, moving from NYC to Rancho Mirage CA. That’s in Coachella Valley, aka Greater Palm Springs, aka The Desert.

Now I’m back and at it. And what does a transplanted New Yorker and booze business writer/observer do? Looks for places to eat and drink (restaurants and bars here are top notch) and entrepreneurs in the Booze Business.

Meet the Owners of Racquet Club Spirits

Matthew Winks and Brian Harke, owners of Racquet Club Spirits

From Palm Springs Life magazine: “The spirit of individuality and fun from the historic Racquet Club spur a desert couple to create a new Palm Springs-inspired liquor brand. A marketing director and commercial producer together for more than 30 years, Movie Colony couple Brian Harke and Matthew Winks have spun their passion for cocktails  into a new line of Palm Springs-inspired spirits, Racquet Club Spirits.”

Racquet Club Spirits is an LGBTQ+ owned company, and producers of Racquet Club Vodka and Racquet Club Straight Bourbon Whiskey. Two truly outstanding products in my view.

The owners, Brian and Matthew, come from outside the Booze Business world but have quickly learned the business and what it takes to succeed. Brian was a marketing director, and Matthew was a TV commercial producer. They used their creative background to work on the classic bottle design with a vintage label.

Their brand launch announcement described their effort this way:

“Racquet Club Spirits celebrates the style and swagger of Palm Springs Racquet Club, a desert oasis that became Hollywood’s legendary playground. The Vodka and Straight Bourbon Whiskey are hand crafted in small batches to ensure that every classic cocktail lives up to their namesake: the exclusive Racquet Club, where movie stars went to escape.”

About the Racquet Club

Coachella Valley and Palm Springs is known for its midcentury architecture, outdoor leisure and history of attracting Hollywood celebrities.

In fact, when we first moved out here, we were thrilled and amused by many of the street names throughout the valley: Dinah Shore Drive, Kirk Douglas Way, Frank Sinatra Drive, Fred Waring Way, Gene Autry Trail, and so on. It’s a fun place to live. (But don’t ask me about the heat.)

In an interview in Palm Springs Life, Matthew described the environs this way:

“Palm Springs is similar to Las Vegas in that for years and years, people have come here to escape. The Racquet Club was certainly part of that because movie stars felt comfortable going and hanging out there. It was beyond the studio zone in the old days of Hollywood, so they were allowed to let loose. That spirit of individuality and fun really connected to us and our vibe.”

In my view, the inspiration of the Palm Springs area, especially its history, sends a message to consumers that this brand is fun, special, and transfers those attitudes to the drinking occasion.

The Racquet Club circa 1930s. From ladyevesreellife.com

The Racquet Club was founded in 1934 by actors Ralph Bellamy and Charlie Farrell so they would always have a court to play in. It served as a gathering place and party venue for much of Hollywood’s show business elite and quickly became the party spot for Hollywood royalty including Lana Turner, Kirk Douglas, Elizabeth Taylor, Errol Flynn, Spencer Tracy, Clark Gable, Natalie Wood, and Robert Wagner who were regular guests. Marilyn Monroe is said to have been discovered there.

The Products

The tradition and lifestyle of the Racquet Club and Palm Springs drove their business proposition — laid back, easy-going, and as they put it, laden with style and swagger. The packaging certainly reflect this with the non-traditional label and more importantly the retro look.

While they do not distill themselves, they have worked very closely with distillers to manufacture products to their vision. Namely products that taste good and makes drinkers feel the Palm Spring vibe.

Their mandate for the vodka was that it had to have notes of vanilla with a soft nonmedicinal aroma or mouthfeel, and fruit over notes. In addition, it is filtered 7 times using a carbon with all-natural carbon originating from coconut husks. Palm Springs all the way.

The distiller is Dry Diggings Distillery, El Dorado Hills, CA. It sells for roughly $32.99 and is 80 proof (40 AbV).

The bourbon is made by Midwest Grain Products (MGP), again with Brian and Matthew’s oversight. I found it very gentle and easy to drink straight yet held up and complimented my favorite cocktail. Again, it’s got a bit of fruitiness and is well balanced, so it lends itself to mixology. There’s a bit of caramel and vanilla with some chocolate notes in there.

It’s 84 proof (42 AbV) and sells for about $42.99.

Both products are available all over the Palm Springs area in top bars and restaurants and in such off-premise accounts like Total Wine and More, Mirage Wine & Liquor, and other leading independents in the valley, and online at Mash and Grape.

The vodka has won several awards including a silver award from the NY World Wine and Spirits competition. The bourbon has received two double gold awards from the Sip Awards and the San Diego Spirits Festival.

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If you’ve been a follower of this blog, you know that I appreciate startup entrepreneurs who change their work lives and enter the alcohol industry. In Brian and Matthew’s case, I especially admire their vision and their hard work to bring it to fruition. When I spoke with them recently, I was struck by their passion and drive, which was very palpable.

Welcome to the Booze Business gentlemen.