Posted on | October 5, 2012
Written by | Kristen Wolfe Bieler
The bottling line at M.S. Walker’s Somerville, Massachusetts, facility has been working overtime lately. With upgraded bottle fillers, the lines now move faster, pushing the facility towards its maximum capacity of 3 million cases per year.
Last year’s acquisition of 15 brands from Maine-based White Rock Distilleries put M.S. Walker back in the manufacturing game in a more significant way, and for the first time in 80 years, the company has nation-wide ambitions for its brands. “We have a long history and many strong brands in New England,” says CEO, Harvey Allen. “Now we are getting into our covered wagon and going out west—and we are going to see what we can do.”
At a time when many historic manufacturers are closing up shop, M.S. Walker is an anomaly; a hold-out from a time when the American landscape was littered with bottling operations—five in Massachusetts alone. Even M.S. Walker diversified its business over the years, deemphasizing its role as supplier, while building major wholesale operations and brokerage firms throughout the northeast. “We fluctuated between being a bottler in the early days to becoming a very successful wholesaler in New England,” describes Gary Shaw, vice president, national sales. “Today we are unique in the industry; we are a distributor with a bottling operation and we want to more fully utilize all aspects of our business.”
A Full Circle Evolution
Maurice Saul Walker found his way into the spirits business after Repeal in 1933, morphing his several-year old pharmaceutical business into a producer of beverage alcohol. The company’s colorful past (including ties to Cuban dictator, Batista, which ensured the company access to rum and molasses) is a laundry list of ahead-of-its-time endeavors, from launching one of the first vodkas in America—Cossack Vodka back when no one knew what to do with a neutral white spirit—to creating some of the first original flavors. (M.S. Walker’s iced tea-flavored vodka was discontinued decades before it became one of the hottest flavors in the industry.) The company also bottled the first-ever domestic limoncello. “When I joined the business, we were closing out flavored vodkas because they weren’t selling,” says Michael Brody, vice president, director of sales, Spirits. “What’s old is new again, just like fashion.”
When Walker passed away in the late 1940s, his two son-in-laws took over the business, growing M.S. Walker into something akin to a made-to-order custom producer. “In our rickety warehouse, we made whatever people ordered,” describes Allen (Maurice Walker’s grandson). “If someone wanted gin, we made it. If someone wanted flavored brandy, we made that—we have always been particularly skilled with flavors.”
Finding success always meant finding unanswered demand in the marketplace. “To compete against large companies like Seagram’s and Heublein, we had to make things other people didn’t—some of the same specialty items that we still make today,” says Allen. M.S. Walker found niches along the way, growing into one of the largest producers of egg nog in the nation, for example. Working with a local dairy, the company produces an all-natural, dairy-based product, and in recent years, has introduced flavored variations like chocolate and pumpkin. (The egg nog was once based on Old Medford Rum, the oldest spirit brand in the industry—and Paul Revere’s drink of choice—which M.S. Walker owns the rights, but no longer can manufacture because there are no operating New England rum distilleries.)
Yet, it was one of M.S. Walker’s most enduring creations—Allen’s Flavored Brandy—that put the company into the wholesale game. After WWII, the company began distributing in Massachusetts its original flavor, Allen’s Ginger Flavored Brandy, which had broad medicinal applications. (Allen’s Coffee Brandy also became a consumer favorite in Maine. See Champagne of Maine sidebar.)
Today, M.S. Walker is among the three largest distributors in the state, with wholesale businesses in Rhode Island and New Hampshire, and brokerage businesses throughout New England. “We are not the little guy anymore, with a $250 million business in Massachusetts alone,” says Brody. “For many years, we put our bottling business on the back burner, but that has changed now.”
New Portfolio Appeal
Paul Coulombe of Maine-based White Rock Distilleries made front page news when he sold his Three Olives Vodka to Proximo Spirits, and more recently, Pinnacle Vodka to Beam Inc. But many of White Rock’s under-the-radar brands joined the M.S. Walker portfolio late last summer.
“A lot of these brands had been neglected for years, because the company’s focus was on preparing its major brands for a very lucrative sale,” says Allen. The 15 brands that M.S. Walker acquired include one of the top spirits brands in Ohio, the number one selling vodka in Maine, the number two vodka in New Hampshire, and one of the most popular Canadian whiskeys in upstate New York. The company also took over Grand Macnish, a commodity blended Scotch whisky bottled in the U.S.
Now that production on most of these newly acquired brands has switched to M.S. Walker’s 100,000-square foot manufacturing facility in Somerville, the innovation will begin. “Many of the former White Rock brands were straight 80 proof spirits, but today’s market is all about flavors,” says Shaw. “We are talking about brand leaders in various markets that have had no flavor extensions to date—the opportunity is tremendous.”
Consolidation also spells opportunity for companies like M.S. Walker, says Shaw. “As distributors consolidate, you have mid-size wholesalers popping up who don’t carry big national brands; we also see major wholesalers who have lost big brands and they reach out to us because they need new revenue.” Shaw describes doors opening in markets where two wholesalers control 90% of the market—“but the 10% that they don’t control represents major volume.” The influence of craft distillers has also been a boost, says Brody: “Mixologists move the business today and often times, they are looking for regional, less-familiar brands like ours.”
King of the Commodity Game
If there is one thing M.S. Walker understands, it’s the commodity spirits business. “Many of our brands would not be as attractive to large, publically-traded companies who have to focus on higher-margin products,” says Shaw. “The commodity business isn’t as sexy, but when you look at the volume, it’s enormous both on- and off-premise.”
Delivering high quality at low prices has long been M.S. Walker’s stock and trade. “People have been brainwashed across all industries, not just ours, that the more you spend, the better the product will be,” says Allen. “But our spirits are often better than the higher priced spread.” For their value-priced cordial line, M.S. Walker works with six different flavor companies to achieve the best possible tasting line extensions.
Take M.S. Walker’s tequila, Old Mexico, for example. It contains the highest percentage of real agave of any U.S.-bottled tequila—80% versus the standard 51% (U.S.-bottled tequila is not permitted to be 100% agave). “We knew that we couldn’t enter the tequila business with a me-too product; it had to be different and it had to taste great, though it’s priced the same as our competitors,” says Shaw.
The well business is a critical component for the company. “Licensees have two areas of concern,” Shaw continued. “They want to offer the national brands for their image, but they want to stock their well to enhance their bottom line. They fight hard for what is in that well and keeping their costs in check. Our niche is to help them in this area by giving them a very high quality product.”
While it’s statistically correct to say that premium products are making a comeback, says Shaw, the numbers don’t tell the whole story because that segment was hit so hard. The commodity segment might not be posting high growth numbers, but the category is still very relevant. “People continue to look to value more so than ever,” says Shaw. “Consumers turned to value wine and spirits and they really have not left.”
Looking for Holes
“We are similar to a football team,” says Allen. “We look for holes to run through—that is how we score points.” Today, M.S. Walker is innovating beyond the commodity sphere. “The low-margin commodity business hinges on geography,” says Brody. “Once you ship outside your region, you can start to lose money because of freight.”
Targeting the single malt drinker, M.S. Walker has big plans for its newly acquired Grand Macnish. “In between the blended whisky drinker and the high-end single malt drinker there is a big gap,” says Shaw. “There is a market that would like some age and smoothness to their scotch” so the company is introducing several older expressions with cask-specific finishes (the Sherry-finished 15-year old, for example). Though not inexpensive, they are far more competitively priced that comparable products: “We can offer aged product at very reasonable prices as few others are doing that.”
The chocolate wine craze has also bred a flurry of new products, but M.S. Walker sought to bring a spirit-based version which is richer and thicker in texture. In addition to importing wines through its Grapevine Imports division, M.S. Walker develops its own brands, like “Oh… Schist!” Riesling referring to the shale soils in which the grape thrives in Germany.
Where To From Here
M.S. Walker’s new brands have practically doubled their production. “We went from running 400,000 cases of vodka on our lines to 700,000 overnight,” shares Brody. But heavily investing in facility upgrades was the easy part, says Allen. The real challenge now is to “become a marketing company as much as a selling company.”
With many packaging upgrades, a newly hired marketing team and beefed up national sales team, the family-owned business feels ready to do just that. “We previously did business in 42 markets, but we never had any real leverage and now we do,” says Allen. “What happens next is up to us.”
“The Champagne of Maine”: The Allen’s Success Story
Many are surprised to learn that the #1 selling spirit in Maine is not—as in most markets—a vodka. What’s downright extraordinary is that the state’s overwhelming best-seller—at 100,000 cases a year with 14% market share—is a coffee-flavored brandy called Allen’s, which most people outside of Maine have never even heard of. Even the M.S. Walker executive team is unable to fully explain how this happened, chalking it up to a combination of New England’s love of coffee, the uniqueness of the Maine market, and the undeniable quality of the product (nicknamed, “The Champagne of Maine”).
“Allen’s Coffee Brandy is the purest coffee-flavored product on the market,” explains Shaw. “It isn’t weighed down with heavy sugars or vanilla flavoring like so many others.” In the summer, Mainers mix it with milk over ice and in the winter, they pour it in coffee. “Twenty years ago we took over the #1 spot in Maine and we are very proud of the loyalty in that market.” Not content with #1 alone, M.S. Walker now owns the second best-selling spirit in the state too, Orloff Vodka.