I recently read and shared an article in Forbes by Patrick Hanlon called, “Why Brands Must Evolve” that is so spot on that it has led to a number of interesting conversations in the past week with some of my clients and partners who own brands in beer, wine and spirits. As one who spends a lot of time thinking about new brands, as well as igniting established brands in new ways, Patrick’s thoughts really resonated with me. I don’t think there is a better industry than beverage to illustrate his points about what is going on with brands. Brand proliferation is happening across the board making “breaking through the clutter” ever more difficult. At the same time, the reason this is happening if fundamentally that there is demand for new brands. As I wrote in “RE: Is Craft Beer In A Bubble”, there is a big and growing market for new brands in beer, but also in wine and spirits. Not everyone will succeed and in fact many new brands will fail. To the big brand manager, the fundamental challenge has also never been so big – how do you keep a loyal following when your following gets gigantic. I think about an Iconic brand like Patron Tequila. I was a distributor for Patron as it passed between different sales companies and was a very difficult sell. Five years from the time it launched, Patron was doing about 55,000 cases. Now that is a nice little brand, but nothing would have screamed, “This brand is on fire!” Then, it did catch on fire and became the very symbol of luxury. Check out Patron case sales for the first 10 years:
Patron is an amazing brand and continues to outsell all of the other super premium tequilas (and frankly all other spirits brands at $40/750ml bottle and higher). They have a huge and loyal following. However, as brand manager for Patron today, the things one has to do to market the brand are quite different than in the early years. How does one keep the “cool” factor going when you are the largest brand in your category. There are dozens of new entrants who are going after their market and have the advantage of being smaller (think Avion, Casamigos, Don Julio) and bringing a new “cool” factor to the market. Clearly there are many that succeed at this but being true to your brand and your audience while changing things up can be quite difficult. Absolut Vodka was THE luxury brand of the late 1980s and early 1990s. It was the “it” brand among the “it” crowd.
Pernod Ricard paid over $8 billion to acquire the brand a few years back. How does Pernod now manage a giant brand that was formerly the top luxury vodka in a market with such massive proliferation of brands that the high-end vodka category has experienced. I’m told there are 800 vodkas in the Beverage Media New York book. Pernod recently announced a new bottle. Absolut is one of those brands that defined itself by its bottle. Changing the bottle is a big move even in subtle ways. Adding the big A is a pretty big move. Large companies don’t usually make big moves, but staying relevant in a crowded market sometimes requires big moves. Pepsico made an even bigger move a few years back with their Gatorade brand. I thought at the time, it was fairly risky, but it appears to have paid off (does anyone know details?).
Patrick’s article certainly cites a number of great examples of big brands that have managed to evolve over time and keep or even build on their past successes. “…the challenge for brands has evolved from creating awareness to creating meaning.” How do you keep creating meaning at scale like Nike, Apple and Disney have successfully done. They each connect to their consumers and continually create meaning.
The wine market has evolved so dramatically, that I have to look up many of the brands on the grocery shelf today and I have been involved in selling $100s of millions of wine over the years. Why? New brand proliferation to attract the millennial consumers.
Take a look at the top 10 domestic “Hot Brands” put out by Marvin Shanken’s Impact Databank:
- Black Box
- Bota Box
- Liberty Creek
- 14 hands
- Barefoot Refresh
- Gnarly Head
Four of these are Gallo Brands, but none say Gallo. All have interesting, contemporary labels. To succeed in this hyper-competitive market, every brand must have a number of things. Great branding is vital, without it your brand is lost and has no chance. Great liquid that fits the taste of your target market is key, without it they won’t buy a second time. Distribution is essential, a brand cannot become relevant if consumers can’t find it. But how does a brand build a real following of consumers who care? That is, how do we create meaning? That is the question every new brand team needs to answer.
To quote Patrick again: “We want the added value of believing in something. The added value of belonging to something: being a part of something that hard-wires us to a larger community of “people like me””
Seth Godin in his fantastic book “Tribes” articulates this concept well.
“Seth Godin argues the Internet has ended mass marketing and revived a human social unit from the distant past: tribes. Founded on shared ideas and values, tribes give ordinary people the power to lead and make big change. He urges us to do so.” Brands have to figure out how to reach their tribes and how to engage with them. Notice, I did not say create their tribes. This is an important distinction. I believe tribes are discovered not created. Brands who overtly try to create one typically struggle. If a following is not organic, today’s savvy consumers sense it. I think brands can make themselves relevant and worthy of a following and then as that following begins to show signs of life can play a role in fostering and accelerating it.
I’d love to hear your stories of brands you think are doing this right.
On this Memorial Day weekend I am thinking about all those who have paid the ultimate sacrifice in defense of Freedom. The world we live in is a dangerous one, fraught with men with evil intentions. But for the sacrifice of a brave few, those men would have their way on all. We can see it in places near and far, from the evil men who brutally tortured and killed a YPO family in Washington DC (Savvas Savopoulos) to the evil being inflicted on whole countries in the Middle East. Left unchecked evil prevails. We live in a the greatest country, a place where an individual, no matter if they were born into poverty and extreme disadvantage can do and be anything they set out to achieve. A country where the world’s people, seek out more than any other, to take refuge from evil, to build a better life for their family, to live free. We are all privileged and I give thanks to those who have made it possible.
This poem, by General Douglas MacArthur, commander of the Allied Forces in the Pacific during the great struggle against evil in World War II, has hung on my wall for 26 years. I can think of no better message to all of my children (sons and daughters) than that contained herein.
“Build me a son, who will be strong enough to know when he is weak, brave enough to face himself when he is afraid, one who will be proud and unbending in honest defeat, and humble and gentle in victory.
Build me a son whose wishes will not take the place of deeds; a son who will know Thee-and that to know himself is the foundation stone of knowledge.
Lead him, I pray, not in the path of ease and comfort, but under the stress and spur of difficulties and challenge. Here let him learn to stand up in the storm; here let him learn compassion for those who fail.
Build me a son whose heart will be clear, whose goal will be high; a son who will master himself before he seeks to master other men; one who will reach into the future, yet never forget the past.
After all these things are his, add, I pray, enough of sense of humor, so that he may always be serious, yet never take himself too seriously. Give him humility, so that he may always remember the simplicity of true greatness, the open mind of true wisdom, and the meekness of true strength. Then, I, his father, will dare to whisper, ‘I have not lived in vain.’”
– General Douglas MacArthur
As we all enjoy the holiday weekend, including the many who come to town for the Indy 500 Sunday, let’s all take a moment and reflect on these words. Happy Memorial Day Weekend.
May 23, 2015
Savvas Savopoulos YPO Member
The Wallin Children May 2015
Fortune Magazine published a story by Chris Morris May 14th that is getting a bit of attention, posing the thoughtful question: Is craft beer in a bubble?. The New York Times published Craft Beer Is Booming, but Brewers See Crossroads asking the same question on February 4th. I am now getting this question quite frequently from my friends both inside and outside the industry. I’m in Chicago at the National Restaurant Association Show #NRASHOW and this was a hot topic last night over cocktails.
It is particularly relevant given the amount of new outside money (many of my YPO and friends from other industries are investing in local breweries and increasingly distilleries.) I read the statistic that there is a new brewery opening on average every day in the US this year. In Fortune, they increase this by end of year to every 12 hours. This statistic is a bit alarming on face value, but let us dig a little deeper. To answer the question, one must answer two others:
1. Market Growth: Where is the market going – meaning is the growth in craft share going to continue and to what level?
2. New Capacity: Given the market assumptions from #1, can the size of the market absorb the growth in total capacity?
Market Growth: First, a little perspective: In craft beer boom 1.0 (circa mid 1990s), Chris Miller correctly points out there was a slow down in late 1997 and then flat to low growth for more than a decade before the current much larger boom. My company at the time was actively investing in and building multiple craft beer brands both on the distribution front in Chicago (Goose Island, Sierra Nevada, Pete’s, Bells) as well as regionally/nationally (Goose Island, Rogue). Fortunately, we also had a healthy import business (Grolsch, Staropramen, Tennant’s) that continued to boom during the slowdown. At the start of the current boom, we helped Flat12 start-up in Indianapolis and acquired Napa Smith Brewery in 2009 (sold in late 2012). There is very little comparison this time around from the 1990s. The degree of craft beer penetration into the beer market is fundamentally different. It is much deeper and wider, and is touching every market in some way. That said, the current level of craft sales as a percentage of the beer market is still quite small nationally (11% of volume according to the Brewers Association) vs in select highly developed craft beer markets (Portland, Seattle, San Francisco, Denver). That number has roughly doubled in the past 5 years. I predict craft beer sales will double again and exceed 22% of the US beer market by 2020. This mean approximately 22 million barrels of new craft sales on top of the existing 22 million.
(NOTE: one aside/caveat: craft beer is narrowly defined as independent brewers excluding cross ownership by larger companies in the alcohol industry. This is more political than it is any reality with consumers. Therefore the current share is actually a bit larger than 11%, adding in brands from companies like Goose Island and Craft Brewers Alliance (ABI). My 22% number includes craft taken over by larger brewers).
New Capacity: This is where the “new brewery every 12 hours” statistic is not the most relevant one. The important question is how much new capacity is actually being added to existing breweries combined with new breweries? 95% of the new breweries (and existing breweries) are more like restaurant businesses with a touch of manufacturing, than they are breweries. They will never sell any meaningful volume outside their four walls of the tasting room. There is nothing wrong with a local brewpub being a go-to stop for local people and there is clearly a market for this form of on-premise account. The real question is how much capacity are the production breweries adding and how many of the start-ups actually believe they are going to sell beer outside their four walls. This is where the true competitive dynamic in the marketplace will come into play. Most new breweries that intend to go to market through distribution and retail will fail. This is not because they have bad beer (some might but will die quickly) but rather they cannot make their brand relevant to the consumer in such a crowded field. This lack of differentiation and branding will prevent them from having any meaningful distribution and retail penetration.
The lack of experience in running a full service brewery with a restaurant, attached to a major manufacturing operation, attached to a distribution business, attached to a consumer marketing company will be the downfall of many. Here at the NRA, the 1000’s of operators can attest to the competitive nature of the restaurant aspect alone. There are a lot of smart investors in restaurant companies that have leadership teams with deep experience fighting hard for their share of the consumers’ purchasing dollars. Breweries that want to scale must both run a brew pub that competes with them and figure out how to sell in their beer to a limited number of tap handles available.
My conclusion as of today: The market can absorb many more breweries and capacity than exists today. The ones that remain focused on serving their local clientele will have the best chance of success. The ones that enter the fray of production and distribution will enter one of the most competitive and tough businesses that exist. Those that do not bring an experienced team, significant capital, creative and compelling branding and distribution to the table will fail. There is a bubble of inexperienced entrepreneurs combined with inexperienced investors who are entering the market. I look forward to the shake-out and the opportunities it will create for those prepared. In the meantime, I love capitalism at work and entrepreneurial spirit the craft beer market is demonstrating for all to see.
Hot Tech Topics to Include: Explosive Growth of Mobile Apps, Home Alcohol Delivery, Next Gen Cloud Commerce, Security Breach Impact, Central Role of Big Data in Marketing
(NAPA, Calif.) – Wine Industry Technology Symposium (WITS) has announced the keynote speaker line-up for the 11th annual event set for June 25-26, 2015 at the Napa Valley Marriott in Napa, California. An action-packed series of keynotes, as well as focused round tables and in-depth breakout sessions, will cover a wide range of tech-related topics critical to the wine industry today including: mobile e-commerce, data breach and security, breakthrough marketing, supply chain innovation, leading edge hospitality systems, new on-premise kegs and product tracking.
“After more than a decade of great conferences, the Wine Industry Technology Symposium has grown and evolved along with the rapid evolution of tech integration in the wine business. This year’s high-impact keynote presentations reflect the dramatic changes in the wine business driven by the millennial generation of consumers and step changes in technology enabling new business models!” said J. Smoke Wallin, founder and co-chairman of WITS.
“Our 2015 program reflects the insight and direction inspired by the Winery Chief Information Officer (CIO) Forum which WITS has hosted for many years,” said Lesley Berglund, co-chairman of WITS and co-founder and chairman of the Wine Industry Sales Education (WISE) Academy.
The Keynote Lineup Includes:
- What’s In Store, 2016: Game Changers – Laurie Rains, VP Retail Consulting and Analytics Group, Nielsen
- Social Media & Legal Regulations – John Hinman, Rebecca Stamey-White & John Edwards – Partners, Hinman & Carmichael
- Are You Ready for the Future? Exploring Futurist Technology & Its Impact on Wine– Dr. Liz Thach, Professor of Wine Business & Management, Sonoma State University & Joe Rosenberg, Strategic Partner Manager, Emerging Business Development, Google
- Art of the Possible – Unlocking Digital for the Wine Industry – Bob Pearson, President & Chief Innovation Officer / W2O Group & Paul Mabray, Group Director / W2O Group
- The Pinterest for Wine? – Linking Wine Discovery With Purchases – Brad Rosen, CEO, DRYNC
- Observations & Predictions: Dynamic Food & Beverage Trends – Michael Pavone, President & CEO, quench
- Clarity in the Cloud – Inderjit Bains, Cloud Consulting Director, Oracle
- Digital First: Why Marketers are Shifting to Data-Driven Advertising – Max Kalehoff, Chief Marketing Officer, SocialCode
- How the Power of Information can Override Emotional Decision Making in Price and Promotion – Clay Wallin, Director of Sales, Vistaar
- Bringing Together the Three-Tier System Into One Sales and Educational Funnel – Brian Rosen, Managing Director, Rosen Retail for Adult Beverage
- How Technology Is Influencing and Winning Over Wine Consumers – Joshua Saunders, Founder & CEO, Uncorkd
- Security Trends: Data Protection – It’s all about the Data – Richard Rice, Sr. Security Architect, WaveStrong
Registration is now open with early bird pricing available only through Friday, May 29, 2015. Attendees can view the entire two-day program and register at www.wineindustrytechnologysymposium.com.
The Wine Industry Technology Symposium® (WITS) is the focal point for thought leadership in the strategic and tactical use of technology in the global wine industry. WITS was created in 2005 by a group of wine industry and technology professionals to advance innovation and to address the unique information technology and service needs of the wine industry. The 11th annual WITS will be held June 25 – 26, 2015 in Napa, California. To learn more, join WITS on Youtube, Twitter, Facebook, and LinkedIn
For more information, contact Kathy Archer of the Wine Industry Symposium Group at 707-666-2525 or firstname.lastname@example.org. For sponsorship and registration, contact Waunice Orchid of the Wine Industry Symposium Group at 707-666-2525 or email@example.com.
I had the opportunity to participate in Entrepreneurship @ Cornell last week. Besides it being enjoyable to get back to campus after a 15-year hiatus, I left feeling inspired by the people I met. This included my fellow speakers, attendees, the faculty and most importantly the Cornell students. Anyone worried about the state of America today and the next generation of leaders need only spend a week like mine to gain a renewed sense of optimism. More than anything, the drive to create new enterprises to solve new and old problems with innovative approaches and the sense that “no one can stop me” I got from so many individuals was gratifying. Cornell seems to be doing a better job than most university systems in coordinating across the various schools to support and encourage entrepreneurship. As Director of Entrepreneurship @ Cornell, Zach Shulman said, “I have 13 bosses. I report to all 13 Deans and they all support our activities.” The ability to cut across schools as diverse as Agricultural, Business, Hotel, Engineering, Industrial & Labor Relations, Law and support would be entrepreneurs regardless of their chosen field is powerful.
Jay Walker ‘77, a keynote and founder of Priceline.com and Walker Digital put the entrepreneurial bug in perspective by calling it a “disease”. Do you have it? If you do, you can’t get rid of it. He also made a great point that you don’t build a company with a group of people who ALL have the disease. That would not be successful. You need a team that can build processes, and get things done. That certainly fits my experience. As I said to some of the classes, we are glorifying the entrepreneur this week and it is a great thing. However, one does not build a business with all entrepreneurs. One builds a business with a team of people with complimentary skills and ability to execute. Every visionary who can articulate the future and see what no one else sees, needs someone pulling back asking the questions: that sounds great, but how do we DO that? What needs to be in place to make it work? What about these problems? One must have a balance and the how do you actually do what is being proposed way of thinking is critical.
Jay went on to identify 10 ‘superforces’ – Jay Walker shares 10 ‘superforces’ of the business future. At the opening night banquet, the superstar Mayor of Ithaca, Svante Myrick addressed the group. Mayor Myrick is truly a remarkable leader. He called all entrepreneurs the “annoying” people without whom, nothing would change. When I commented to Jay Walker that I’d like to see Mayor Myrick in higher office, he said something with which I immediately agreed… “We need fresh leadership doing good things at the local level. Let him do that now.” In the excitement for how good I think he is and his potential on a larger stage, its easy to forget that we need a whole bunch of Svante Myricks doing exactly what he is doing locally in this country. The Mayor and I got into a little twitter exchange after his talk above.
Leading into the celebration, I had the privilege of participating on the CHR Technology Entrepreneurship Roundtable at the Cornell Hotel School. This roundtable was of the highest caliber and I really enjoyed learning from and debating the latest developments in hospitality and how technology is affecting everyone’s businesses. There are several people I met through the roundtable with whom I will remain friends far into the future. I presented the case for why today is better than any other time for new brands to reach their audience, which led the group to a discussion of the asynchronistic nature of startup/new brands vs large established brands. This applies to hotels and to beverage brands. The bottom line is using today’s technology, a new brand can communicate with its core following or “Tribe” directly, something that in the past was nearly impossible or cost prohibitive to do. Larger established brands have a much harder time competing at that level and by their very definition, cannot micro market as easily.
I also really enjoyed sharing stories of our entrepreneurial journey on the CEN panel on Friday with Panelists:
Jamey Edwards ’96, MBA ’03, CEO, Emergent Medical Associates
Carl Forsythe MBA ’82, President & CEO, Globe Composite Solutions
Smoke Wallin ‘88, CEO, Taliera
Jamey and Carl both brought great perspectives as we took turns telling stories and engaging with the audience.
The Pillsbury Institute for Hospitality Entrepreneurship hosted two panel/socials that promoted a group of entrepreneurs interacting with students. Both of these were a lot of fun as I enjoyed the panels and students!
Finally, I’ve had a half dozen follow up calls and discussions with student entrepreneurs since last week. These folks are pushing ahead with their various new ventures and represent the future of our country. I am pleased that I can play a small role in giving them input/guidance on their respective journeys.