Blog Entries

Pander express

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Category: General Blogs

It seems at least once a day I’m getting a Google alert linking to an article or blog entry about how the millennial consumer is changing the wine business. Some wine producers, for instance, are racing to meet millennials’ demand for sweeter products. Other marketers are cobbling together folksy details about their respective wineries’ histories to satisfy Gen-Y’s supposed quest for “authenticity.” 
And then I read about industry studies that claim millennials like to thumb their noses at consumption conventions and will, for example, drop ice cubes in their fine Cabernets and drink their Pinot Noir out of a red Solo cup with a straw. Because they’re millennials, damn it, and they’ll do things their own way. 
Look, I’m all for beverage categories adapting to evolving markets. The only constant, as they say, is change, and change should be embraced. 
But what marketers should be cautious about is undermining whatever cachet generations before have worked hard to build for their beverages. Don’t sacrifice premium positioning in hopes of wooing a few more members of a generation not particularly known for its attention span. You’ll be working a lot harder to win over the next generations once the current one migrates away from your category. 
That “authenticity” component that those born, roughly, after 1981 crave so much isn’t just about how something is produced or what size company is producing it. It’s also about the classic rituals that make consuming those products enjoyable and a journey worth taking. That means keeping the theater of it all, including appropriate serving vessels, intact. It’s true that millennials rail against pretension, but there’s nothing pretentious about heightening the drinking experience to maximize enjoyment. Instead of trying to bring your beverages to millennials, try bringing millennials to your beverages.
Over the course of these past few paragraphs, the m-word has appeared six times, which, admittedly, makes me part of the problem. I, like the rest of the media, have bought into the concept of the “millennial” (there it is again), formulated by Ivy League marketing MBAs to paint a very diverse and individualistic group of people with extremely broad strokes. My challenge to that generation: don’t let them. Quite frankly, those of that age group within my own social circle actually loathe being labeled with the scarlet M (and they drink their wine and beer in the appropriate glassware, sans straw and sans ice). I have a sense that that may not be such a unique sentiment. Gen-Y should be speaking up and speaking for themselves and not allowing them to be pigeonholed by the establishment. 
And, my challenge to the market: Don’t believe the hype. Market research can be rife with overgeneralizations in its attempt to find some order in data points that are really all over the map. No one knows your consumers better than you do. And they’ve gravitated to your products for a reason. To thine own self be true.  BW

Bottled water as lifeline

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Category: General Blogs  |  Tags: water

Hundreds of people gathered in downtown Flint, Mich., one day late last month to pick up cases of donated bottled water. It didn’t take long for 2,000 cases to be whisked away. 
Flint’s water has been an issue since last year when the city started using the Flint River as its source of drinking water. The city, arguably the state’s most economically beleaguered, made the shift so that it wouldn’t have to buy treated Lake Huron water from the city of Detroit. Residents were told that the shift would be temporary, until a new pipeline to another source would come online sometime in 2016.
But last month the city notified customers that is was in violation of the Safe Drinking Water Act because of high levels of triholomethane, a byproduct of chlorine used to sanitize the water. City and state agencies told residents that the water was safe to drink, but by that time residents began to complain about the appearance, smell and taste of the city water.
On the same day as the water giveaway, the Kroger Co. said it would send truckloads of bottled water to Flint-area stores and that it would lower the price of cases of its store-brand water by $1.00 to $1.99 in response to Flint’s water problems, reported. The price will remain in effect through the end of February, the company pledged.
Kroger spokesperson Ken McClure said in a news release: “Access to clean, healthy drinking water is a fundamental human right. As Americans, I believe we typically perceive the issue of access to fresh water as an issue abroad. Here is an example right in the middle of Michigan, within Kroger’s operating area. It is our obligation to help.”
At the same time last month, residents in Winnipeg, Canada, were under a cautionary boil-water advisory for two days after the city found coliform bacteria in water supply samples. The advisory prompted one man to take to the streets and hand out bottled water with a message wrapped around. The message reminded Winnipeg residents that the Shoal Lake 40 First Nation has been living under a boil-water advisory for 17 years. Winnipeg gets its water from Shoal Lake.
Flint and Winnipeg were not alone last month. There was news of water advisories in effect in other communities, and retailers in towns and cities up and down New England were having trouble keeping bottled water supplies in stock after a huge winter storm knocked out power to rural residents, which meant they couldn’t pump well water.
I could go on with this list of instances where access to fresh, reliable drinking water is being denied here in our developed world, sometimes temporarily (this couldn’t be more relative than when you find yourself without fresh water). The bottled water industry has taken its share of dings from activists, some of whom question its fundamental existence. They should ask residents of Flint, Winnipeg, Maine and and a bunch of other communities where bottled water has been a lifeline, even temporarily.
Bottled water producers should never lose sight of their responsibilities as environmental stewards. But especially during times like these bottled water producers are part of the solution, not the problem.  Bw

Long live the Disruptors

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Category: General Blogs

It’s way beyond cliché by now to describe the beverage world as being in a constant state of change. The business is full of new products—heck, new categories of products, all chasing consumers with changing tastes.

To describe the sweeping changes taking place in the beverage world around us, we’ve often written about it from the point of view of the companies and the products or categories of products that seem to be most in the middle of that change. But we’ve not in a comprehensive way looked at the people running those companies and marketing those products, the individuals driving that change.

The cover feature for this issue has been perhaps the most fun and yet challenging feature we’ve attempted at Beverage World in recent memory.  It’s been fun in the sense that it’s been so challenging.

We wanted to define the group of people who are shaking things up most dramatically in the beverage world.  We choose to call it Beverage Disruptors, borrowing from the concept of “disruptive innovation” that is so prevalent in current business management literature. “Disruptive innovation” in a simple sense describes an innovation that changes a product or company or market in a fundamental or unexpected way.  Therefore a disruptor is a person who innovates to the point of changing the status quo, who changes things in a fundamental way.

To understand the editorial process that went into creating Beverage Disruptors would be akin to peeking into a proverbial sausage factory—you may not want to know how the stuff was made, but you may enjoy the end product nonetheless. Suffice it to say that all of our longtime editors,  Jeff Cioletti,  Andrew Kaplan, Heather Landi and myself, created our own lists, each approaching the assignment through our own experiences in observing the beverage business.

Defining who in the business are “disruptors” is worthy of debate,  then culling the list to 50 and ranking them certainly is as well.  Why isn’t so-and-so on the list? Why is so-and-so ranked so high or so low?  Is the list too long, or too short?

That’s what makes the feature a fun and interesting read, but it’s not intended just as an entertaining exercise. The core idea is to come away with new or hidden perspectives on the beverage business. The list is incredibly diverse in terms of the beverage territory it covers—we wanted to get to the change makers in all corners of the beverage world—and in terms of the individuals and how they have impacted the business.

Some on the list have disrupted based not on creating a new product,  but changing how the product is marketed (marketing bottle water to kids, for example). Some have disrupted by pioneering an entirely new product or product category (energy drinks, coconut waters). Some have disrupted by applying technology to how the beverage is produced and packaged (lightweight containers) or by putting a product in a different style package (craft beer in cans).

The list goes on, as do the insights. Long live the Disruptors.  

Becoming a small fish

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Category: General Blogs

It’s an issue that a good many beverage companies have faced over the years, some with success, some with failure. And for those who haven’t yet faced it, somewhere deep down they probably have at least a passing wish that they will one day. The issue I am talking about is how to maintain your company’s culture when being swallowed up by a much larger company. What do you do when you find yourself suddenly a small fish in a much bigger pond?

The beverage world is notorious for putting companies in this position. Like a minor league ball player hoping to one day make it to the big time majors, many smaller beverage companies—especially in the non-alcohol space—hope to one day be bought out by a Coke or Pepsi. 

Our Disruptors ranking, which begins on page 27 of this issue, refers to several instances where this has happened. Mergers and acquisitions is a constant part of the beverage industry as many of the categories face maturity.

But how does a smaller company maintain its carefully crafted culture when suddenly being bought? One of the Disruptors on the list—in fact, our No. 1 Disruptor, Seth Goldman—has much experience in the matter. Honest Tea, which he cofounded with his partner Barry Nalebuff, was bought by Coca-Cola in March of 2011 after an initial 40% investment in 2008. At first, there were many concerns all around about what the joining would mean to Honest Tea. The company received its share of critical comments from consumers right off the bat, concerns that it had sold out, for instance.

While the relationship continues to be a work in program four years later—Honest Tea just this past year graduated from Coke’s Venturing and Emerging Brands (VEB) portfolio to its water, tea and coffee group, and as a result is now being included in plannograms with other products in Coke’s portfolio—Goldman did share with me some words of advice for other beverage entrepreneurs.

“First of all, I think it’s great that Coke has had the Venturing and Emerging Brands model,” Goldman says. “You often see companies that get bought where there is not really an infrastructure to support the brand or to help steward the brand.” By this he means VEB colleagues are able to deal with a lot of the bureaucracy of the vast organization that is Coke that otherwise he and his people would have to spend time focusing on.  “One good way to kill an entrepreneurial organization is to make them sit through meetings all day,” Goldman says with a laugh. 

The way Coke began as a minority investor in Honest Tea, and maintained that for the first three years, also wins high praise from Goldman. “It meant that we still ran the business with our own team in place and Coke was a supporter and followed the conversations and was an advisor, but they weren’t dictating how we did things,” he says. “Call it a dating period.” 

During this time, both organizations got to know each other closely and were able to scale the Honest Tea business as well. “So when it came time for Coke to exercise the option and to buy the company, we realized what we wanted the organization to look like was what it looked like. We didn’t try to change what was already working. This was a much more gradual exchange of DNA and I would say a healthier one, too.”  

Semper fidelis

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Category: General Blogs  |  Tags: beer, brewing, craft beer

A couple of months ago I noted that the breadth of available choices is what makes the U.S. beverage market—especially beer and spirits—the envy of the rest of the world. I witness this as a consumer, as much as I do as an industry observer. I frequent a lot of bars that boast, 25, 50, even 100 tap handles. Their whiskey lists are intimidatingly robust; I don’t think I’ll get to try half of the items on the menu in this lifetime. 

But is such on-premise abundance always a good thing? 

At many of my local haunts, it’s not uncommon for Monday’s chalkboard list of what’s on tap to look nothing like the one on Thursday. There’s a complete turnover. If you happened to like something you tried Monday night, you’re out of luck if you want to drink it again later in the week. And I’m as guilty of enabling this as anyone. My M.O., more often than not, is to try something new rather than default to the familiar. When there’s wait service, the server returns to my table and usually asks, “Could I get you another X?” My response tends to be, “No, this time I’ll have Y.” 

More than a few distributor reps with whom I’ve spoken have admitted that while it’s great that their on-premise accounts are eager to buy so many small, up-and-coming brands, it stresses their entire system to fulfill such variable demands so frequently. It’s not just a huge order of a handful of high-velocity SKUs anymore. It’s an epic series of micro-orders of much lower-volume products. 

Distributors, to their credit, have adapted fairly well to this new normal. 

The real potential casualty in all this, however, is brand loyalty. I know, I know, marketers always tell me “On-premise is where consumers experiment and off-premise is where they’ll buy the six-pack of the beer or a bottle of the bourbon they discovered during the course of their experimentation.” 

But shouldn’t we be worried that, essentially, on-premise is completely ceding any notion of brand allegiance to the off-premise? 

The craft beer world and now, to some extent, the craft spirits talk about the “wine-ification” of their products. The dark side of that dynamic is that when menus turn over so quickly to keep up with consumers’ brand A.D.D. (again, guilty as charged), bar and restaurant patrons are just going to order by style, not brand, as is often the case with wine. I.P.A. will be the new Cabernet. And don’t think that this behavior won’t spill over into the off-premise as well. It already happens off-premise with wine and I have witnessed it on occasion with beer and spirits. Consumer: “Do you have Russian River Pliny the Elder?” Retailer: “No, but we just got a couple of bomber bottles of this double IPA from a new brewery that just opened in Virginia.” Consumer: “Great, what brewery?” Retailer: “I don’t remember.” Consumer: “Whatever, I’ll take it.” 

And with that brief commercial exchange, another tiny nail is driven in the coffin of brand loyalty.