Blog Entries by Jeff Cioletti

What price freedom?

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Category: General Blogs

Anyone who’s been in a supermarket or an industry trade show in the past handful will not have been able to escape freedom. Never has the word “free” been so oppressive. Spend barely 20 seconds speaking with product marketer and you’re likely to hear the word “free” at least three times. “This beverage is gluten-free and GMO-free and its bottle is BPA-free.”

Market research company Mintel recently studied the phenomenon. Eighty-four percent of Americans buy what Mintel terms “free-from” foods because they are seeking out more natural or less-processed foods. And there’s no disputing that natural and less-processed foods tend to be better for you.

But when as many 43 percent of consumers agree that free-from foods are healthier than those without a free-from claim, you have to question how many of them are actually fully informed about what “X-free” or “Y-free” even means.

Take the gluten-free craze, for instance. Gluten is a true scourge for anyone who suffers Celiac disease. The Mayo Clinic estimates that 2 million Americans suffer from Celiac disease (I know at least three people in my own social/familial circle who have it and it’s brutal). However, there are more than 2 million consumers on a gluten-free diet who do not suffer from the disease. They read in some magazine or heard from celebrity health advocates like Dr. Oz that gluten-free is the way to go, regardless of whether you’ve exhibited any symptoms of a gluten intolerance. (The cider boom has been partially credited to the rise in gluten-free diets).

It makes me think of a scene in the 2013 film, “This is the End,” when Seth Rogen (playing himself) tells Jay Baruchel (also playing himself) that he’s on a gluten-free diet, but can’t really explain what gluten actually is. “Calories, that’s a gluten; fat, that’s a gluten,” Rogen says.

And then, take GMO-free foods, which are all the rage these days. In fact, Mintel found that GMO-free claims are important to 58 percent of those “free-from” consumers.  (Those attitudes are more pronounced among millennials)

Many consumers feel you need to avoid genetically modified organisms like the plague, but truth is, most scientists think they’re fine. Earlier this year the Pew Research Center released the results of a study where it surveyed members of the world’s largest multidisciplinary scientific professional society, the American Association for the Advancement of Science (AAAS). Eighty-eight percent of scientists in the study said genetically modified products are safe to eat and drink. Neil DeGrasse Tyson, on of the most respected scientists in the world also says they’re fine. A video of Tyson criticizing the non-GMO hysteria went viral last year. He points out humans have been genetically modifying what we consume since the dawn of agriculture. “So now that we can do it in a lab,” Tyson said, “all of sudden you’re going to complain?”

I’m a staunch advocate of transparency on product labels. But I’m equally passionate in my belief that beverage marketers play an important role in educating the public. Slapping a buzzword on a label or inserting it a salesperson’s talking points without supplying the necessary facts to support it is a hollow gesture.

And, ultimately, a product and a company risk getting slapped with another “free” label: integrity-free. 

Over a barrel

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Category: General Blogs

As we were putting the finishing touches on this year’s Beverage Almanac, it became clear that whiskey was, once again, the big story in alcohol. However, to say that whiskey is doing well across the board would be a bit of an overstatement. In fact, there’s one major segment that didn’t have a good year at all. 

The Scotch Whisky Association reported that exports—the part of the business it relies on for most of its growth—fell 7 percent in 2014. And, can you guess which market was mostly to blame? That’s right, exports to the U.S. fell a full 9 percent. 

And remember, this is all happening when bourbon, Tennessee and Irish whiskey are enjoying high single-digit/low double-digit volume and revenue growth. 

So why is Scotch, which long has been seen as the whiskey drinker’s whiskey, struggling to hold on to its consumers? There’s no easy answer. One could argue that all of the new Irish whiskey drinkers are pulling from Scotch, but Irish tends to be the spirit that introduces consumers to whiskey and is more likely to be attracting drinkers away from vodka and other white spirits. 

Another argument is that drinkers are gravitating away from Scotch toward bourbon and other American whiskeys, but that’s probably not the case either. Though the bourbon boom can be attributed to growth across most demographic segments, millennials are responsible for an outsized portion of the volume. And before they were drinking bourbon, most millennials weren’t really drinking whiskey. 

However, some insight might be gleaned from the bourbon/millennial connection. Bourbon makers have been able to connect with and become relevant among those of the younger LDA demographic. The authenticity component, which is at the very core of bourbon’s value proposition, has been particularly attractive to millennial drinkers. There’s also been a very obvious kinship that bourbon and other American artisanal whiskeys share with craft beer and marketers in both categories have been able to promote that link through efforts like beer/bourbon pairing events, barrel aged beers and hop-infused whiskeys. And those marketers have been quite adept at telling consumers about those activities through social media—the direct hotline to the millennial generation. 

What’s really pulling Scotch down is the fact that the vast majority of volume is blended versus single malt, by a more than four to one margin. Single malt volume, for the most part, is doing well. There’s just not enough of it to keep the category in the black. There’s a lingering perception that Scotch is grandpa’s drink because its most visible brands are the blends widely consumed by earlier generations before single malt was even a viable segment. 

But things are changing, albeit slowly. My recent tour of Scottish distilleries revealed that many have been working around the clock to ramp up the innovation with new single malt expressions and new barrel finishes. Some potentially game-changing products are still sitting in barrels. 

Hopefully, Scotch marketers will be able to turn the tide before the whiskey wave subsides. Their segment could be the next stage in the renaissance that has brought bourbon, rye, Tennessee and Irish whiskey to a new generation. However, first they’ve got to figure out how to connect with that generation—and fast. 

Producers Great and Small

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Category: General Blogs  |  Tags: beer, alcohol

The beer industry is always trying to figure out how it can better emulate the spirits business. After all, distilled spirits volume has been growing steadily, while beer, overall, has been flat to down in most years. 

Last year, for instance, MillerCoors unveiled Miller Fortune, whose marketing directly targeted spirits drinking occasions by playing up its whiskey-like hue.

It’s true that there’s a great deal that macro beer can learn from the distilling community, but it’s got little to do with consumer usage occasions or image advertising. 

It was at the recent American Craft Spirits Association’s (ACSA) second-annual conference where a key difference between the beer and spirits categories became crystal clear to me: collaboration. 

The sometimes uncomfortable relationship that craft and macro beer share seems to make headlines every month. Industry observers may say that big brewers are finally embracing craft by acquiring small brewers. However, as the peach-pumpkin-flavored advertising misstep I referenced in last month’s column proved, the macros’ attitude toward craft is more a grudging acknowledgment than full-fledged respect and admiration. They’re making acquisitions because they feel they have to, not because they want to. 

But when it comes to spirits, there’s more of a cooperative dynamic beginning to play out between the mega-marketers and the burgeoning craft distilling segment. The Distilled Spirits Council’s (DISCUS) presence at ACSA’s conference in the event’s inaugural two editions has reflected that. But this year, a comment DISCUS VP for government affairs Michele Famiglietti made to the audience of artisanal producers perfectly encapsulated the relationship between big (DISCUS member companies) and small: “You are the face of the industry.”  When the DISCUS team meets with members of Congress, the first thing they usually ask is “Do I have any distilleries in my Congressional district?” The crafts are a huge asset in the talking points of an organization whose membership is largely composed of foreign-owned conglomerates. 

It’s odd that crafts don’t get the same recognition from the macro-brewers, which, after all, are predominantly foreign-owned entities. 

When it comes to public policy, Famiglietti noted that DISCUS “actively and aggressively” supports craft distillers’ efforts to get Congress to roll back the excise tax on small producers. Meanwhile, in the beer world, macros and crafts are competing for Congressional attention on the tax front. Craft brewers, led by the Brewers Association, have been lobbying for the Small BREW Act, while the large companies, represented by the Beer Institute, have been pushing the Fair BEER Act. The latter’s tax cuts apply to all brewers, macro and craft, while the former’s only applies to craft. 

The bigger issue is that the beer industry is not speaking with a single voice on Capitol Hill.  Getting on the same page, as the large and small distillers seem to be, enables the industry to present a unified front—which is more likely to generate results favorable to everyone. 

Small beverage producers have different needs than large ones, so it’s unrealistic to think that they’re going to agree on everything. But, as the spirits world already is demonstrating, there’s always some common ground to be found.

Of Bud and mud (slinging)

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

We’re already at least six weeks past the Super Bowl, so I’m probably the last person to weigh in on the brew-ha-ha over Budweiser’s “Brewed the Hard Way” ad—you know the one where Bud proudly owns its “macro-beer” cred and gets in a jab about “pumpkin peach ale.” But the ad’s still in fairly heavy rotation as of this writing and the chatter surrounding it seems to be lingering long after the Patriots’ last victory lap. 
It was the (some say cheap) shot heard ’round the craft beer world, which was predictably, but understandably up in arms.
I completely get where Anheuser-Busch was coming from with the ad’s tone. It was 100 percent in line with the brand’s personality and spoke directly to its target demographic. Bud drinkers are unapologetic about being Bud drinkers even when they’ve got a growing number of friends and acquaintances who make a sport out of bashing the brand and try to get them to drink craft (many brewers of which AB InBev now owns). The ad reinforces their Bud-loyalty and keeps them from straying outside the trademark. In politics, they’d call that “playing to the base,” which is exactly what A-B needs to do for a brand that continues to hemorrhage volume in the low single digits each year. 
The spot does make its share of missteps however—and, to be fair, it’s a tall order for all 60 seconds of any minute-long ad to be perfect. 
The obvious component, and the one that I am by no means the first person to highlight, is the “pumpkin peach ale” slam. While I’m sure it wasn’t the company’s intention, it comes off as a dig at a craft brewer it just acquired barely a week prior to the ad’s debut: Elysian Brewing Co. Elysian is well known for its diverse array of pumpkin beers (sans peach). 
And I’m not even going to get into the subtext embedded in “pumpkin peach ale.” Tonally, it equates such a style with being a “girlie” beer, which does little to reverse the generations-long trend of alienating women from the category.
The spot also does somewhat of a disservice to the brewers and QC staff of Budweiser itself. Saying the brand is not to be “fussed over” is probably news to the production team. The production team fusses over it plenty to make sure it is of consistent quality and flavor, batch after batch, year after year. It also contradicts the “Brewed the Hard Way” mantra. People should make a fuss over the end product of so much hard work. 
Oh, and one more thing about making things the hard way. Get any 100 craft brewers in a room and I’d be willing to bet that not one of them characterizes what they do as “easy”—especially when they’ve got a fraction of the operations staff that the King of Beers has on the payroll.  
To A-B’s credit, it’s a brilliant marketer and knows exactly who’s drinking and whom it expects to drink each product in an increasingly diverse portfolio. The company will do well to continue to play to those bases. However, to use another political analogy, the path without so much mud slung on and around it is the clearer path to victory. BW

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