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Spinning The Flavor Wheel Producers Take a Gamble on Flavored Whiskey

Posted on  | December 1, 2010   Bookmark and Share
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As sheer numbers go, flavored bourbons have everything going for them: They combine the strength of the robust bourbon category with the increasing popularity of flavors (according to Nielsen, flavored spirits growth is more than double that of their unflavored counterparts). Yet the reality is far more nuanced, since the traditional brown spirits consumer is very different from the flavor consumer, and the category—at least the new generation of brands to hit the market—is so fresh, it’s hard to tell how they will fare long-term. Estimated by some to be a 500,000 case-category today, flavored whiskies are a small piece of the spirits pie, but their growth rate is what has people paying attention.

“Flavor is definitely the way this category is going,” says Lena DerOhannessian, Southern Comfort’s U.S. marketing director. Many category newcomers take credit for “inventing” flavored bourbon, but the fruit- and spice-infused Southern Comfort was probably the first. It was concocted in 1874 by M.W. Heron in New Orleans’ French Quarter with the intention of masking the highly inconsistent and often unpalatable taste of many bourbons of the day. Today it’s a 1.3 million-case brand.

Although DerOhannessian—along with most consumers—considers Southern Comfort a stand-alone brand in a category of its own rather than a “flavored bourbon”, she closely follows the way flavor is transforming the brown spirits category: “Consumers are open to a different kind of bourbon—there is no longer a purist approach. The brown spirits resurgence we are seeing right now is largely driven by innovative products with consumer appeal that never existed before, and flavor will be the most important way this category will evolve. This is where we have enjoyed tremendous growth over the years, and other brands are just tapping into it.”

Moving Beyond the Whiskey Category
Of the new introductions, the leader out of the gate is Red Stag by Jim Beam, a Kentucky straight bourbon infused with natural black cherry flavor. Launched in 2008, Red Stag has shipped 230,000 cases and was the second fastest-growing spirit launch last year. “We knew that consumers were looking for more flavor—in their food and in their spirits—and we responded to this insight,” says Drew Munro, Beam Global Spirits & Wine’s general manager, bourbons.

Another major player in the mix is Evan Williams. On the heels of Evan Williams Honey Reserve which came out in fall of 2009 (and won a silver medal at the San Francisco World Spirits Competition), Heaven Hill recently released Evan Williams Cherry Reserve. Both are bottled at 70-proof with the intention of making them more approachable, heightened by the tagline “All Flavor. No Sting.”

As the fastest growing premium bourbon in the business with a double digit increase last year, Evan Williams hardly needed a boost, but brand manager Susan Wahl says the company couldn’t resist the opportunity to expand the consumer base: “The flavors allow us to bring in people who might be afraid of brown goods or who haven’t tried them in a long time; they present a smoother, easier taste profile and provide a great entry point to the category.” Wahl admits the company had the female consumer in mind when creating the flavors. They promote them as mixable cocktail ingredients (a signature drink is their Cherry Margarita) which also helps capture that demographic.

Greater mixability was a goal for Red Stag as well. States Munro, “We were going after those looking for a mixable, more approachable whiskey option; it lets us target those who would otherwise order something else entirely—beer, wine, liqueur or vodka cocktails. We’ve found that we’re sourcing occasions from many categories outside bourbon.”

The Flavor Gender Divide
But are women the only ones drinking flavored whiskey? According to Brad Williams, head buyer/director of merchandising at Liquor Barn, Kentucky’s largest chain with nine stores, flavored products “do make whiskey more accessible for women, and opens up the category for them.” But they aren’t as gender-exclusive as that, he believes: it all comes down to what flavor you’re talking about. “Men might shy away from some of the flavors, but they buy the honey. They see honey-flavored whiskey as a great shooter,” he explains. “A lot of customers bring them to tailgating parties and consume them as shots. My dad drinks it on ice cream; it has crossover potential as a nightcap. You’re not going to find cherry bourbon on a deer hunt.”

The undisputed honey leader is Wild Turkey’s American Honey which is technically a liqueur, featuring a fairly sweet, lower-proof taste profile. Williams credits American Honey with really energizing the flavored bourbon category since its 2007 launch. Maura McGinn, Skyy Spirits’ group brand director, vodka and cordials, refers to it as a “modern cordial” which has moved beyond the bourbon category. “The potential for American Honey is greater than just flavored bourbon usage. The slightly lower proof allows for the flavor of the natural honey to come through in the spirit,” she notes.

Wahl has seen the same thing with Evan Williams’ Honey Reserve: “Honey crosses over—at tastings, it is what the men are drinking, even some of the tried- and true bourbon drinkers, which has been a great surprise for us. It’s a subtle flavor so the bourbon really comes through, and if you’re a bourbon drinker, that’s what you want. When they taste it, they don’t perceive us as straying too far from real bourbon.”

Winning Over the Traditional Whisky Drinker
Two flavored bourbons you just might find on a deer hunt, however, are White Tail and Bird Dog. A caramel-infused and blackberry-infused bourbon respectively, they are both 80-proof and packaged with wildlife and nature imagery. They are aiming for that place where whiskey enthusiast and hunter/outdoorsman/wildlife conservationist intersect, says a spokesperson for Western Spirits, which owns the brands. Retailing between $17.99 and $19.99, Whitetail and Bird Dog have been in development since 2007, and are just now achieving nationwide distribution. The company reports early success in traditional bourbon markets—Texas, Kentucky, Mississippi—and some less likely places such as New England and New York City. Unlike many other flavored bourbon suppliers, Western Spirits isn’t pushing the mixology angle, but instead encouraging consumers to drink them neat.

In fact, as more and more brands enter the flavored whiskey arena, the trend seems to be a direct appeal to the traditional whiskey drinker. Which only makes sense given the nature of the base spirit, says Dean Phillips, CEO of Phillips Distilling Company, whose father kickstarted the premium flavored vodka craze with Belvedere and Chopin: “Whiskey is an authentic category. The whiskey drinker looks for authenticity and heritage; categories like vodka are much sexier.”

Phillips is convinced the spice category has the most viability, and is intent on going after the spiced rum market, rather than just winning over whiskey drinkers with the masculine Revel Stoke, Phillips’ spiced Canadian whisky. “Whiskey is a badge of honor, and even when it’s flavored it will never be as accessible as vodka or rum,” Phillips says. Still, it can be softer, smoother and more flavorful, which is what he has tried to do with Revel Stoke. “The idea of infusing whiskey is not a new idea. I was inspired by the Rock & Rye liqueurs—the citrus and rock candy-infused whiskies created in the 1930s.”

Another distinctly masculine entry is Jeremiah Weed. The brand originated as a 100-proof liqueur and for the last three decades has been the shot of choice for American fighter jet pilots. In the Jeremiah Weed family there is also a traditional bourbon, and as of last year, a Cherry Mash version. “We were looking for a way into the fast-growing flavored bourbon market yet we haven’t aggressively promoted it,” says Yvonne Briese, marketing director and brand director for North American whiskies, Diageo.

Why does Jeremiah Weed Cherry Mash keep a low-profile? “The truth about brown spirits is that they are not easy liquids to drink,” Briese explains. “It isn’t like vodka which can be easily launched—you can’t just shove it out there and make people like it. We have a sweet tea vodka under our Jeremiah Weed label, which is more of a universal offering, but our flavored varieties appeal to traditional bourbon drinkers, and they are mostly men.”

Interestingly, both Phillips Distilling Company and Diageo have more accessible plays: Phillips Union Cherry and Phillips Union Vanilla are blends of Canadian whisky and bourbon and clock in at a much lower proof than Revel Stoke with a more liqueur-like profile. Phillips promotes them as perfect mixers with cola and targets a younger audience. “They aren’t aimed at female drinkers necessarily, but anyone who consumes flavored vodka,” he describes.

Diageo’s Seagram’s 7 Dark Honey, which launched last fall, will soon be followed by Stone Cherry early next year; both are at the opposite end of the flavored whiskey spectrum from Jeremiah Weed. “Seagram’s has tremendous equity—it’s a 2.5 million case brand with one of the highest levels of distribution throughout the country—and one of the reasons it’s so popular is because it is so mixable and mild,” says Briese. Dark Honey follows suit, with a lower proof and price point which makes it an easier-to-drink spirit for a different drinker. Briese maintains that “surprisingly, it has not attracted mostly women. It is a very social drink, consumed typically with cola in high-energy bars by a young demographic.” Whether one will experiment with flavored whiskey depends on where they are in their evolution as a consumer, says Briese, and it does require a degree of open-mindedness.

Breaking Out of Bourbon Season
Creating opportunities for usage in warm weather months is another big opportunity since bourbon is typically seen as a cold weather beverage first. Scott Newitt, co-founder of the Firefly brand, is doing just that. Firefly was the first sweet tea vodka to hit the market in 2008 (there are now about 15 others). The recently released Firefly Sweet Tea Bourbon uses the same South Carolina-grown tea leaves and Louisiana sugarcane with a base of Buffalo Trace Bourbon (Newitt partnered with Buffalo Trace Distillery owner, Sazerac Company, in 2009).

The combination of sweet tea and bourbon—“two Southern traditions”—gives Firefly Sweet Tea Bourbon unique summertime appeal. So far Newitt has observed that in cooler months the brand enjoys a younger demographic as many of the traditional bourbon drinkers return to their tried-and-true brands, but as the weather warms he sees people of all ages, since it’s a summertime bourbon alternative. With its comparatively low 60-proof, it doesn’t need anything “except perhaps a bit of soda and some mint.” And unlike Firefly’s Sweet Tea Vodka, which Newitt believes has a 65% female demographic, it is men who have adopted his bourbon: “We really went after the bourbon drinker with this product, and although it’s still early, I believe in five years it will be our top-selling product.”

Southern Comfort managed to capture a greater piece of the warm weather consumption without even trying. One of the brand’s biggest spikes in history happened with SoCo Lime—a shot of Southern Comfort with lime juice—which was developed organically in bars throughout the country around 2001 and 2002. “SoCo Lime was the first shooter in the category, and it’s great year-round with a freshness that makes it perfect in summer months,” says DerOhannessian. This year the company launched SoCo Lime in a bottle.

Generating Sell-Through
Which brands work and which ones don’t has everything to do with how much support they receive in the marketplace, rather than the size of the supplier behind it, say retailers. It’s harder for newcomers without an established brand to leverage, according to Liquor Barn’s Williams. But Revel Stoke’s launch surprised him: Combining on-premise activation with in-store displays and lots of tastings, the product sold out in a day “which blew me away” he adds. He advises others to do the same: “It is critical to have a real go-to-market plan with these flavored products, because the category is so new. Marry your on-premise activation to in-store promotions and you will create awareness.”

The on-premise is also using flavored whiskeys to leverage sales. In Chicago, Scott Horwich, Faith & Whiskey GM, sees flavored whiskey as a great way to appeal Millennials: “As I am only 26, I definitely would also say I’ve noticed flavored whiskey is a great way to reach those between 21-25 who aren’t established in terms of what spirit they tend to buy. Red Stag has gotten a big push with the Kid Rock tour, but honestly, it’s just a good product so it’s easy to suggest to customers.” Says Andrea Thompson, beverage manager of Rockbottom Restaurants, “Flavored whiskey is a trend here to stay. With the recent trends towards consumers becoming more knowledgeable and interested in flavors, mixology, food pairings and combining ingredients, I believe flavored liquors will stay around.” Thompson has seen the majority of her flavored whiskey sales in specialty cocktails, and a recent promotion with Jim Beam might help explain the interest. “We put together an incredibly successful Red Stag sampling program,” she says. “Ten of our Rock Bottom Restaurants selected two-hour time periods – during happy hour, football games and other busy times – to have promotion teams come in to the restaurant and have guests sample Red Stag. In addition to samples, we featured three specialty cocktails which all showed the versatility of flavored bourbon.”

And, of course, there is a reason why Red Stag was the most successful new product launch in the whiskey category in the last five years. Beam was tireless in its efforts to support it; and teamed up with celebrity Kid Rock as Horwich notes, simultaneously running innovative programming to fully leverage the partnership, explains Munro. After sponsoring his 2009 “Rock N’ Rebels” Tour, Beam offered consumers a special edition gift carton of Jim Beam and Red Stag that gave access to exclusive downloads of Kid Rock songs. “This partnership marked the first time a major record company has given a spirits company rights to launch and distribute an exclusive CD from an A-list rock star, and it’s been a massive success thus far,” says Munro.

If anything defines today’s consumer, it is a willingness to try new things, but “try” is the operative word. “People grab their comfort brand that they know they will love, and pick up a 50ml of something new they want to sample—we are flying through those,” says Liquor Barn’s Williams. Heaven Hill relies heavily on them, in addition to aggressive rebates that encourage people to pick up a bottle.

Finding the Right Home
The dilemma many retailers are facing? Where to shelve them. Next to the base brand in the whiskey section? In the liqueur section? Or a stand-alone flavored whiskey shelf with all brands together? (Some retailers report that when they are split up, they don’t do as well.) Of course, suppliers vote for all three, but for retailers with limited space, that’s out of the question.

The flavored vodka model—placing them next to base brand—is favored by some suppliers, but it depends on the brand since the target consumer for many of these flavored whiskies wouldn’t be shopping in the whiskey section. “We want Jeremiah Weed shelved with the bourbons, because our consumers are mostly male whiskey drinkers, we believe,” says Briese. But with the Seagram’s 7 Crown flavors, she prefers retailers place them in the liqueur section, alongside Southern Comfort and Jägermeister. Another area where these can have a lot of success is in the cold box.

For Evan Williams, it boils down to geography: In less bourbon-centric regions, the flavors do better when shelved in the liqueur section, but in bourbon territory—Texas, Georgia, South Carolina, New York—placing them with the bourbons is most effective. And there is truth to the “halo” effect, with line extensions giving the base brand a lift when placed side by side.

Passing Trend or Here to Stay?
“I thought it might be like some of the other flavor crazes that came and went, but it’s not fading,” says Williams. “I am convinced there will be a permanent category for the products that are truly high quality. It might be niche now, but in a few years it could be a real category. After all, it took flavored vodka and rum longer than this to get off the ground.”

Yet there is unanimous agreement that flavored whiskies are something different entirely. According to Newitt, the nature of whiskey limits what flavor permutations will work: “You won’t see grapefruit or bubblegum; I would say bourbon is limited to honey, tea and a small handful of fruits.” Besides, the whiskey world is still tradition-bound compared with other categories, so the category will never move beyond a few base flavors.

Aside from providing an alternative to whiskey as a thriving subcategory, flavored whiskies may also pave the way for the trade-up, every supplier’s best case scenario. “Our goal is to keep consumers within our brand franchise,” reports Wahl. “Consumers who are experimenting with the flavors as an introduction to the bourbon category may trade up to our Single Barrel or our 1783, which gives us staying power. We don’t see any of these as mutually exclusive or cannibalistic.”

Just like wine drinkers who start with sweet Riesling and move to Cabernet, flavored bourbons can catch drinkers earlier, believes Newitt: “Bourbon drinkers have been adult drinking age for an average of three years before they try bourbon because it’s a more challenging taste profile. These products could change that.”

Even the original flavored bourbon is providing trade-up options. Southern Comfort now makes a Reserve six-year-old bourbon at 100-proof with limited availability, and DerOhannessian is proud to say its flavor doesn’t need any masking.


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