Posted on | February 1, 2012
Written by | BevNetwork
The Beverage Network sat down with Brown-Forman’s Mike Keyes, to discuss the longevity of flavored whiskey, the changing dynamics of social responsibility and opportunities in the crowded vodka category.
The Beverage Network: With your long experience in working in the whiskey business, what untapped potential do you see?
Mike Keyes: Whiskey has grown enormously, yet it still gets far less proportional shelf space than vodka. I think many retailers feel that they have to stock every flavor of vodka—even though over 80% of vodka sold is unflavored. Why is it that every new vodka flavor deserves shelf space whether it sells or not, but whiskey has to scratch, claw and fight for it? We’ve got to change the way the industry views whiskey.
TBN: Interestingly though, whiskey, too, is seeing a flavor explosion.
MK: Right now, whiskey is one of the most innovative areas in all of beverage alcohol. We’re having tremendous success with a new product from Jack Daniel’s called Tennessee Honey. Remarkably, all flavored whiskies began to perform better when Jack Daniel’s entered this market—it shows that big brands can boost an entire category like a rising tide that lifts all boats. There is also a lot of other fascinating innovation in the whiskey world—white whiskey, for example—but the jury is still out. Flavored whiskey is real: It’s happening in significant volumes.
TBN: Were you worried that
Jack Daniel’s Tennessee Honey would hurt the base brand?
MK: We were confident that Tennessee Honey would sell, but yes, we were concerned that it could cannibalize the parent brand. The opposite has happened: Honey has helped our brand equity—sales of the base brand have continued to grow.
It’s also made it more accessible. Jack Daniel’s has always been blessed with a broad range of demographics—we joke that our consumers are anywhere from LDA (Legal Drinking Age) to DND (“Damn Near Dead”) and they range from “Bikers to Bankers.” We were concerned that Tennessee Honey could detract from Jack Daniel’s masculine image, but it has merely broadened the franchise to include not only more core consumers but female consumers, African-Americans and Hispanics.
TBN: You could rightly argue that Southern Comfort was the original flavored whiskey—how do you explain its phenomenal success?
MK: Southern Comfort has been so successful largely because of its accessibility to new consumers. When I worked in the Scotch business people always talked about acquiring the taste for Scotch. I don’t know that most consumers have the patience to acquire a taste for anything anymore, and I don’t know if they have to. Southern Comfort Lime, which came out a few years ago, was one of the most successful product launches in our history, and the brand family is well over one million cases.
TBN: “Accessible” isn’t a word we would use to describe the brand’s most recent line extension, Fiery Pepper. Who is the consumer for this product?
MK: Southern Comfort was born in New Orleans and Tabasco is another Louisiana native, so combining the two seemed like a natural affiliation. The flavor profile is very interesting, and while it’s not intended for everyone (people have a love/hate relationship with Tabasco) some consumers are going to really gravitate to the hot, spicy flavor. It’s what we call a challenge product—having a shot of this at a bar becomes a ritual. From a retailer perspective, the co-branding of Southern Comfort and Tabasco makes a powerful union.
TBN: There is a lot of innovation at the luxury end of bourbon as well.
MK: Absolutely Boutique whiskies are getting the same attention that single malt Scotches were getting a few years ago. We just released the Woodford Reserve Masters Collection, which is a co-pack featuring dual rye offerings—one that has been matured in a new charred cask and one matured in an aged cask. Additionally Woodford Reserve will soon release its first permanent line extension with Double Oaked, an ultra-premium bourbon which has been twice barreled in white oak, creating an exciting new taste profile. Brown-Forman is the only spirits company that makes all their own barrels; it allows us to experiment with toasting and charring.
On New Products
TBN: How can retailers balance new product trial with established best-sellers given shelf space limitations?
MK: Retailers have new products coming their way daily and it’s overwhelming. In determining which to stock, I would look first for uniqueness: If it’s a new brand, does it have a reason for being? Of course, while every new Brown-Forman product may not hit a home run, we always start with the premise that each brand has a unique selling proposition. Next, I would look at equity: What is the power of the brand that the new product is an extension of?
TBN: You are currently launching two new vodka brands—where do you do see opportunity in this crowded category?
MK: Chambord Vodka was released last year and we’ve had some great success with it in the African-American market, particularly with women. We’ve also had some success with it in the GLBT community. On-premise retailers have understood the brand proposition a bit better than the general off-premise market. In March, we will also be debuting Little Black Dress Vodka, an extension of the popular wine brand, which resonated incredibly well with female consumers.
TBN: What are the ingredients for a successful new product introduction in the marketplace?
MK: When you come out with a new product, the best thing you can do is pick a few markets and concentrate your efforts. It’s very easy to lose your focus and your ability to put resources behind a brand if you launch in too many markets at once. In the future, while you will see some national launches from us (brands like Southern Comfort Fiery Pepper and Tennessee Honey), you will also see many more regional launches. I think we’re going to be more focused and more disciplined with the non-national, more regional, introductions.
On The Industry
TBN: We’re starting to see more spirits advertising on TV. How do you think this will impact the industry?
MK: The wine, spirits and beer industries treat social responsibility so differently. Beer is protective of its status as “every man’s drink” and the wine industry is protective of its relationship with food. The spirits industry wrestled for a very long time with its identity. For years, spirits suppliers had a gentlemen’s agreement to stay away from television advertising, while beer and wine went on heavy. That really hurt the spirits industry—spirits became known as “hard liquor” and was regarded in the public mind as more of a social problem. Over the last decade, spirits suppliers are getting on television and leading responsibility initiatives which has really helped normalize spirits to a great degree. I would argue that the most responsible companies in our industry right now are spirits companies.
TBN: What do you see ahead for tequila, another category Brown- Forman has a large stake in?
MK: Tequila is kind of like the new vodka—a very competitive, dynamic and growing category. The growth of the Hispanic American population will continue to fuel it. We are well positioned with El Jimador, the #1 premium tequila in Mexico, and Herradura, the #1 super-premium tequila in Mexico, as well as our popular priced Pepe Lopez brand. Tequila is different from other spirits brands; it is more like wine in that the agave crop experiences gluts and shortages like grapes do, which leads to pricing roller coasters. If I was a retailer, I would be looking at which brands can go through these cycles and give me the best opportunity for long-term
TBN: There is a lot of debate about whether luxury is coming back. What do you see happening?
MK: We believe strongly in the luxury business. Most people don’t realize that Brown-Forman is the most premium spirits company in America—85% of our products are over $15. On-premise is a very important place for us so if that business isn’t vibrant, we hurt in a larger way than other competitors. Yet some of our greatest successes in this time period have come from our most expensive brands. Woodford Reserve hasn’t missed a single year of double-digit growth and Sonoma-Cutrer—which is the #1 white tablecloth Chardonnay in America—continues to grow. If you have a product with a unique offering that fills a niche, I still think it’s a very exciting segment.