Blog Entries Tagged as spirits

Three-Tier System: Keep the Baby in the Bathwater

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Category: General Blogs  |  Tags: spirits

It always amazes me how quickly people are so ready to throw the baby out with the bathwater when something doesn’t quite work in a manner entirely favorable to them. I’ve been hearing/reading a lot of chatter, particularly in the blogosphere, where folks are taking to task the three-tier system, going so far as to say it should be eliminated. Excuse me?

Look, I am a strong proponent of franchise law reform. In some states it’s next to impossible for a craft brewer or other small alcohol beverage producer to get out of a draconian contract when the supplier/distributor relationship isn’t working out. Now that there are more than 3,100 U.S. small brewers, whose influence continues to grow, I’d like to see them effect real change at the state and federal levels.

But too many people—particular badly informed, one-sided bloggers—equate franchise law reform with dismantling the three-tier system. The two are mutually exclusive.

Ask most successful craft brewers (or distillers and wine makers for that matter) and many likely would admit—albeit sometimes grudgingly—that they would not have grown to the level they’ve achieved without the three-tier system and the work of distributors. Does that mean they shouldn’t be allowed to self distribute? Of course the should. Small producers that operate in states that permit self-distribution have been able to bootstrap themselves to a point where they got on the radar of wholesalers that have been able to help them expand to the next level. Most self-distribution has been out of necessity and once someone else is willing to take it over, the majority of small beverage alcohol suppliers are happy to be out of the distribution business. (Having said that, the three-tier system is far from perfect—at best a necessary evil.)

And about that 3,100 figure. There would only be a fraction of those brewers thriving in the market if there was no three-tier system in place. One need only look overseas for what could have become of the modern U.S. market (and actually had before Prohibition). Walk into an average bar in many European cities and your choices are limited, for the most part, to the products from one brewery. That’s the tied-house system still at work in those countries. The 21st amendment forbids that in the U.S.. And I think we’ve started to take for granted the diversity that our system has allowed us.

Our system is the envy of the rest of the world, by the way. And the U.S. craft movement has sparked revolutions around the world where small brewers are starting to squeeze their way into the market. It’s a little tougher for them to get into existing tied-house bars, so specialty pubs have started to pop up showcasing those small European brands. But those are still the exception and not the rule and still have a long way to go to achieve broader market exposure.

I’ll leave you with this thought. Just imagine an America where an AB InBev or SABMiller got into the pub and retail business and started buying up local watering holes. Then imagine what the array of tap handles would look like. Where’s that diversity now? 

For Your Consideration...

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Category: General Blogs  |  Tags: spirits

We tend to use the term “Emotional roller coaster” so much in our every day lives, both personal and professional, that we’ve become numb and oblivious to just how much of a cliché it’s become. But there really is no better way to describe major global beverage alcohol news from the past month and a half or so. Reading the headlines of the past six weeks has been akin to watching all of the most hackneyed cinematic clichés play out on screen.

There’s the tragic romance in which the overtures of a much more well-to-do suitor (SABMiller) are ultimately rebuffed by the object of affection (Heineken). Of course, that unrequited pursuit may have been in defiance of a forced marriage (AB InBev).

Then there’s the tale of the rebellious, sardonic hipster whose tough, above-it-all exterior really hides a delicate vulnerability (Pabst). That all comes to the surface when the rebel falls for an exotic stranger from a faraway land (Russia).

And, especially this time of year, there has to be plenty of Oscar bait. And who doesn’t like a good, sweeping epic? It’s the story of a nation in conflict (Scotland) and the common hard-working folk (The Scotch whisky industry) just trying to get by as the world around them is nearly torn at the seams. I say ‘nearly,’ as at the 11th hour, that world was forged back together.

Okay, I should get serious for a bit, put on my movie critic’s hat, and tackle each of these in reverse order.

The Scotch Whisky Association sees last month’s “No” vote on Scottish independence as the dodging of quite a bullet. If Scotland had left the United Kingdom, uncertainty and instability in the Scotch market would prevail. Whisky exports already have been falling. If the industry suddenly faced new tariffs as it tried to ship to its biggest markets in the EU—which it would have to go through a potentially lengthy process of rejoining as its own entity—it wouldn’t bode well for the bottom line.

On the Pabst development, I was surprised (well, not really) at how many people expressed shock that the brand that’s enjoyed a renaissance at the hands of American hipsters would be (*GASP*) foreign-owned (and by investors in Mother Russia, no less). To that, I say, “Get over it.” Pabst has been playing ownership musical chairs for years. It’s essentially a trademark holding company, as it doesn’t operate its own breweries. Drinkers shouldn’t get too upset about something as abstract as a trademark. It’ll be business as usual.

As for the AB InBev-SABMiller dance and the SABMiller-Heineken dalliance: That’s a little more serious. If a merger between the two biggest brewers were to take place, it’d essentially create an entity that’s responsible for nearly a third of all beer volume in the world and closer to 40 percent of its revenue. That’s pretty intimidating. But I wouldn’t get too scared because there are far too many regulatory hurdles to jump before such a combination could become a reality. As for Heineken, my hat’s off to the family for, well, wanting to keep it in the family (at least for now). Though, it would’ve given SABMiller a solid and rapidly growing Mexican brand (Dos Equis) with which it can compete directly with the Modelo business that AB InBev now owns.

But I’ve had enough of these manipulative, heart-string-tugging films. I’m in the mood for a feel-good comeback story. And that’s exactly what’s happening in Kentucky. If there’s ever been any doubt that the bourbon renaissance is here to stay, just look at what Diageo’s been up to over the past couple of months. The company broke ground on its $115 million Bulleit Distilling Co. distillery and cut the ribbon on the visitors’ center at the rejuvenated historic Stitzel-Weller facility. When the world’s biggest spirits market gives the Bluegrass State and its distilling heritage that much of a vote of confidence, it makes me eager to get off that chaotic emotional roller coaster in favor of another cliché: raising a glass.

New Products Tap Into America’s Spirits Market

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Category: General Blogs  |  Tags: spirits

I found it interesting while walking the aisles of the Wine & Spirits Wholesalers of America (WSWA) show last month in Las Vegas just how many different types of beverages—even after all these years-—the average American consumer still has little or no knowledge of. There were numerous importers and distillers from other countries at this year’s show, here to publicize their national drinks to the American market. I covered this to some extent in my write-up about the show, which you can find beginning on page 10 of the May issue of Beverage World. But the space there didn’t really allow me to do justice to the passion these companies have behind their products. Two cases in point are Portón, which sells half of all Peruvian pisco exports to the U.S., and CNS Enterprises, the oldest and largest importer of China’s baijiu to the United States.
 
During the show I had the pleasure of spending time with one of the world’s foremost experts on pisco, Johnny Schuler. Having Schuler guide you through a personal tasting and exploration of the delights of this unique spirt is a special experience to say the least. It’s rare to meet someone more enamored of a particular beverage. He detailed for me how Portón is made at the 330-year-old distillery in Hacienda La Caravedo in Ica, Peru. That’s right, 330 years old, making it the oldest working distillery in the Americas, according to Schuler. “We consider Pisco to be the fifth white spirit,” he explained to me. “Gin, vodka, rum and tequila are the four big sisters. And we have the new one on the market called pisco. People have to understand that pisco is a category of its own. It’s not like tequila which is made from cactus. It’s not like vodka, made from grain. Pisco’s made from fruit, the grape. So it’s the only white spirit made from a fruit. And Peru has about 380 distilleries that make hundreds or even thousands of different varieties of piscos. So it’s a wonderful, huge, beautiful world, much like the world of cognac in France.”
 
And yet, ask many Americans about pisco today and they might give you a blank stare. This is especially curious because pisco at one point was enormously popular in some parts of the United States. In fact, if you were to jump in your time machine and travel back to mid-1800s San Francisco, you’d find Pisco Punches being served all over the city. Furthermore, it just so happens that the most popular cocktail in Peru today, the Pisco Sour, was actually created by an American in Peru in 1918—a Mormon, in fact—named Victor Morris. 
 
As for baijiu, the folks with CNS  enthusiastically explained to me how much this spirit is an integral part of Chinese culture (and also that of many other Asian countries). The custom is for guests in China to be greeted with a tiny measure—about half an ounce (it is over 100 proof)—of the spirit when they arrive and everyone begins drinking it before they sit down. (I believe I actually witnessed this custom amongst a group of Chinese at a Chinese restaurant in New York City right after WSWA, purely by coincidence. The baijiu kept the diners quite energized, and on their feet very often during the meal!) 
 
Baijiu is actually the top-selling spirit in the world; almost twice as much of it is consumed around the world as vodka. Now it’s heading here, too.

Going Native

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Category: General Blogs  |  Tags: spirits

How can you not be enamored of a state that has more barrels of an aging spirit in it than it does people? That’s what drives my newfound love affair with the Commonwealth of Kentucky—Louisville in particular. I recently took a trip out to the Bluegrass State to explore a little bit of bourbon country, as well as Louisville’s Urban Bourbon Trail. I had always managed to idealize and romanticize the region in my mind, like I do a lot of places very beverage centric. But I have to say it really lived up to my expectations, and them some.

I was in awe of the sprawling operation that is the Buffalo Trace Distillery in Frankfort, Ky, with its industrial architecture and equipment that appears to have been largely untouched—save for some automated control and monitoring stations—since the period immediately following the repeal of Prohibition. But I also enjoyed the more intimate affair that is the Willett Distillery in Bardstown, where the scent of aging bourbon in charred-oak barrels inside tin warehouses knows no equal.

The bourbon renaissance has enabled 77-year-old Willett to resume distilling activities for the first time since the early ’80s (It was still aging and bottling in the interim, just not distilling at its Bardstown site).

Those were the dark ages for bourbon. The spirit had been seen as “your grandfather’s drink.” The spirits market as a whole was on a similar downward trend a couple of decades ago.  

But thanks in part to the premiumization trend, those days are very much over. Super-premium whiskey has been helping pull the spirits category up to the tune of 3 percent year-on-year. Whiskey alone was up nearly 7 percent last year, thanks not only to the single malt Scotches and Irish whiskeys, but to bourbon and Tennessee whiskey as well. The American offerings’ volume was up nearly 10.5 percent in 2012, according to the Distilled Spirits Council. Super-premium spirits in general enjoyed the greatest gain of all the price segments, up nearly 9 percent last year.

There’s no better time than now for consumers to celebrate bourbon and there’s really no better place to do it than Kentucky. No other region of the U.S. is more closely aligned with a beverage alcohol product than Kentucky is with bourbon. And before every California wine maker cries foul, I argue this because the varietals that are produced there, by and large, did not originate in the U.S. They don’t call bourbon “America’s native spirit” for nothing.

And no other American city showcases its signature beverage better than Louisville. Five years ago, the Louisville Convention & Visitors Bureau created the Urban Bourbon Trail, a network of bars and restaurants in which one can enjoy the native spirit, for just that purpose. There are currently 27 stops (and counting) across Louisville.

It’s clear that bourbon’s time has (once again) arrived and not just in Kentucky. The Urban Bourbon Trail is really just part of the global bourbon trail as aspirational and curious consumers worldwide embark on their own journey.    
 

Distilling the Meaning

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Category: General Blogs  |  Tags: spirits

 

We’re focusing a great deal on craft beer this issue (major congrats to Oskar Blues for earning our inaugural Craft Brewer of the Year Award), so it’d probably be appropriate for me to write about craft beer. But, I’ve written a lot of about the subject lately (including in this issue) and I think I want to talk about spirits. 
 
There were a great many statistical nuggets I took away from the Distilled Spirits Council’s (DISCUS) annual media and analysts briefing last month. For one, total spirits volume grew by 3.0 percent in 2012—an impressive number for any mature beverage category, especially when compared with the likes of U.S. beer and carbonated soft drinks. Volume reached 202 million case equivalents. Total revenue was up an even greater 4.5 percent, rising to $21.3 billion
 
A good deal of overall spirits growth is thanks to the premiumization trend, as a sizeable portion of the category’s growth came from the top two spirits price segments, high-end and super-premium, which grew by 4.8 percent and 8.9 percent, respectively. The two segments on the lower half of the price spectrum, value (the lowest) and premium, grew by a much more modest 1.8 percent and 2.1 percent, respectively. Additionally, the super-premium segment is having a much greater impact than it had 10 years ago. In 2003 the value segment’s total revenue was just under $3.8 billion, while super-premium’s tally was a tad lower than $1.5 billion. Ten years later, value’s annual revenue was only a slightly higher $4.1 billion, but super-premium is getting pretty close to matching it at $3.9 billion.
 
There were plenty more facts and figures DISCUS president and CEO Peter Cressy and chief economist David Ozgo presented at the meeting, but I wasn’t struck so much by what was said, but by what wasn’t said—or at least wasn’t said until the final minutes of the presentation. In the same event held in in each of the past few years, the speakers wouldn’t get five minutes into their presentations without uttering the word “recession” or even “economy” (not including Ozgo’s economist title). But this year I was already packing up my laptop (reporters notebooks are for suckers) before a passing reference to the state of the economy was made late in the session. 
 
And I don’t think that was an accident. When your numbers are as good as spirits’ have been—not to mention steady, as 2011 was similarly positive for the category—it’s perfectly safe to get a sense that things have returned to some form of normal. And when the top-shelf price segments are doing as well as they are, it points to a sustainable trading-up trend that, after a brief recessionary hiccup, is back in full-swing. The gravitation back toward affordable luxury over the past three years is a sign that times could actually be heading back into the “good.” 
 
This in no way is meant to cavalierly dismiss the 7.9 percent unemployment elephant in the room. There’s still a considerable way to go until we collectively reach full recovery. But with some consistently solid numbers coming out of the spirits market, it’s okay to surrender to one’s inner optimist.