The Captain has left the building

The last posting about Seagram and vodka neglected to point out that while there were difficulties in the category (pre Absolut) the company had phenomenal growth with Seagram’s Gin, Crown Royal and Captain Morgan.

In fact, Captain Morgan is a case study — in spirits and other businesses — about how to develop, nurture and grow a brand when all oars in the water are pulling in the same direction. I’ll go into this in more detail another time.

For now, let’s look at some numbers.

Currently, Captain Morgan Original Spiced Rum plus Parrott Bay sells over 6 million cases in the US. But, for the first time in its history, the brand had a down year in 2009. This is probably due, in part, to the economy but also a function of the growth of Rum brands like Sailor Jerry and Admiral Nelson — both brands grew by double digits from ’08 to ’09.

Further, from the birth of the brand until the close of Seagram, Captain Morgan had a Compound Annual Growth Rate of over 16%. For the past 8 or 9 years the CAGR was less than half of that.

Could be due to a number of things…a new generation of drinkers with new Rum tastes and interests, a changing competitive climate, the inevitability of brand life cycles, portfolio focus elsewhere, all of the above and other reasons.

For those who worked on the brand back in the day, I’d bet that among the most vivid recollections is hitting the million cases mark. It took well over ten years for the brand to hit that number in 1995. But it took much less time to hit two million cases.

In fact, between the planning for a million cases celebration and the event itself, the brand doubled its volume.

That, my friends, is called momentum.

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Seagram and Vodka

Until the “acquisition” of Absolut, Seagram was not just a vodka-less company; it was an Ostrich hiding its head in whiskey pretending not to see the world of booze change.

Sam Bronfman’s aversion/reluctance to sell vodka is widely known. Perhaps for him, liquor needed to be aged or brown or have the word whiskey on the bottle. Whatever his reasons, the company was never a vodka player. In fact, when I was in market research, one of the older executives told me the story of how Mr. Sam reacted to a research project about changing consumer alcohol tastes. It may be apocryphal but it sure has the ring of truth.

One of the most notable researchers of the 50s and 60s, Alfred Politz, was an early leader in the techniques of polling and opinion analysis. He was commissioned to do a study of changing consumer alcohol tastes and attitudes. The presentation of the findings took place at an executive retreat and, in an unusual display of bonhomie, Mr. Sam suggested they review the results while sitting around the pool.

Page after page of the report pointed to the potential rise of vodka at the expense of whiskies. Politz was said to have been very clear that the evidence overwhelmingly leaned in this direction. It was also clear that Mr. Sam was getting angrier and angrier. Finally, he got up from his chaise, grabbed the report out of the researcher’s hands, threw it in the pool, muttered some obscenity and stormed off. Politz was said to have been relieved not to join his report.

So while competitors were developing Smirnoff, Popov, Stolichnaya and other brands, Seagram was struggling with entries like Wolfschmidt, Nikolai and Crown Russe.

Finally, someone decided to create a new vodka brand but, unlike most of those on the market at the time, it was to be imported vodka. In fact it was called Seagram Imported Vodka or SIV, as it was lovingly referred to. Imported all the way from Canada.

Management at the time knew that the “white goods” race was passing Seagram by and the pressure to succeed was very strong. So much so that when a presentation to a major California chain was set up to expand distribution, the “brass” decided to attend.

Picture this, a president, an owner, the head of marketing, the head of sales, brand managers…all fly off in the company plane to attend this meeting on SIV. They get to LA early with time to kill before the meeting. Since a few of them had never seen the inside of a chain store liquor department, they decide to visit a few stores.

Next thing you know there are 4 or 5 suits walking the aisles checking the shelves and watching consumers make decisions and purchases. They’re paying particular attention to the vodka section and spot a man looking at the brands and seemingly trying to make a decision.  A member of the entourage goes up to him, takes a bottle of SIV off the shelf, hands it to the man and says, “check this one…it’s imported.”

The man studies the bottle for a moment or two looks at the exec and, as he puts it back on the shelf says, “that’s not imported, it’s Seagram.

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Godiva Liqueur

It took years to get the owners of Godiva Chocolatier to license the brand for a chocolate liqueur. It took a lot less time to learn that building the brand would not be easy.

Despite the absence of a meaningful liqueur in the portfolio, distribution was slow and since liqueurs are not a fast moving category, the turnover rate was even slower.

There’s a great story of a Seagram executive who goes to a Chinese restaurant on Long Island and, while he and his family are waiting for a table, he spots a bottle of Godiva on the back bar. This is the last type of restaurant he would expect to find the product and figures that the distributor sales rep that sold the account must be at the top of his game. What could he have said about the brand that got this small neighborhood restaurant to order it?

He goes up to the owner and says, “What did the salesman tell you to get you to take in the Godiva?” The owner, looked a bit puzzled at first, then smiled and said in a thick Cantonese accent, “Oh, he say two free vodkas if I buy the Godiva.”

After much research and thought, we came to the conclusion that despite the power of the brand name, there was a discontinuity between the expectation of the chocolate taste and the delivery of the product. When you say chocolate to people, they think, chewy, sweet and unique mouth feel. This is hard to deliver in a liquid product without ending up gloppy. So for many, the expectation was chocolate but the product delivered a Kahlua-like consistency.

We had to move out of the chocolate-only world and get closer to cream liqueurs. Two line extensions were introduced, a cappuccino/chocolate and a white chocolate, both cream products.

These strategic line extensions had a number of benefits. First, the facings went from 2 to 6 and the billboard effect on the shelf got the brand noticed and bought. Second, despite the adages not to line extend from weakness, the new forms actually benefitted the base brand (original), which started to grow. A brand that was languishing in the 10,000 cases range grew to nearly 50,000. After Diageo got it, it grew to over 100,000 cases.

I noticed that the brand dropped back to 50,000 in 2009. I also noticed that Campbell sold Godiva Chocolatier to a Turkish company called Yildiz. But I don’t know whether Diageo still has the license and distributes it. Anyone know the status of the brand?

One thing I can tell you is that if you see a bottle of Godiva on the back bar of any Chinese restaurant on Long Island, I bet it’s been there since 1995.

Sort of raises the question about spirits brands and what I like to call ‘borrowed credentials’ – also known as licensed or endorsed brands. Stay tuned…

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