Going Drink for Drink with Captain Morgan
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- Lorraine Neal
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1 Going Drink for Drink with Captain Morgan How do Alcoholic Beverage Brands Survive with Increased Competition and Rapidly Changing Consumer Preferences?
2 Sustaining performance in the alcoholic beverage industry is no small challenge. Global, well-known brands that dominate the market are in increasing competition with a growing list of craft and small production houses. Furthermore, high-impact consumer trends are shaping how both groups are innovating the marketplace. The result is an undeniably greater set of choices for consumers now and in the years to come meaning individual brands will face an uphill battle to maintain leadership positions over time. 2
3 Our research in 2014 revealed a number of key trends shaping the industry, two of which stand out as considerations for long-term business strategy for brands of all sizes: Beer outpaced by spirits and wines: Domestic beer is struggling, and Hispanics and women are driving dollars to spirits and wines. At the same time, research also shows that there is higher loyalty to spirits and beer brands than to wine brands. The performance challenge: How do marketers cope with inconsistent decisioning? Millennials and baby boomers account for 2/3 of the drinking population: As more millennials reach the legal drinking age, one can expect profound changes to marketing tactics and product innovation. Millennials seek experiences and are more likely to try new things they are adopting a broad drinking profile, indicative of choices that are increasingly dictated by flavor and occasion. The performance challenge: How do brands innovate selectively but broadly 3
4 In 2015, we have revisited our work from 2014 with a focus on providing insights to address the two performance challenges outlined above. We ve used exemplars from the marketplace to bring to life some of the more interesting solutions that brands have developed to imaginatively deal with these challenges. How do marketers cope with inconsistent decisioning? With off-premise consumption increasing, consumers are likely buying at the store and presented with an ever increasing set of choices. 4
5 Let s look at perhaps the most widely consumed spirit vodka in the context of flavor innovation. While the US vodka market is experiencing flavor fatigue due to the oversaturation of flavored vodka products, there has been a growing adoption of flavors in other categories, specifically whiskey, rum, and gin. Examples of whiskey flavors include Jim Beam s Kentucky Fire and Jack Daniels Tennessee Fire. Looking at the flavored rum category, earlier this year, Captain Morgan released three new infused rum flavors: Captain Morgan Pineapple, Captain Morgan Coconut, and Captain Morgan Grapefruit. While the flavored gin trend is still in its early stage, the search for new tastes and sensations is gaining popularity. The gin category has seen elderflower-, cucumber-, rhubarb-, and Riesling-infused launches, and this could just be the beginning of flavored gin innovation. 5
6 Health and wellness is high on the consumer radar in the alcoholic beverage category. Consumers are expressing a desire for drinks that contain natural ingredients rather than synthetic alternatives, and they are even willing to pay more for alcoholic beverages with natural and organically sourced ingredients. Some suppliers are taking advantage of this trend. As an example, VeeV Spirits kicked off a campaign encouraging consumers to cheat on vodka with VeeV, a spirit featuring all-natural ingredients acai berry, acerola cherry, and prickly pear. In terms of mixers, consumers are increasingly looking for healthier options, which has led to two innovative and unique mixer trends: juicetails and tea cocktails. Consumers are using cold-pressed vegetable and fruit juices combined with tequila, vodka, and rum to make juicetails, a healthier alternative to sugary cocktail mixers. How do brands innovate selectively but broadly? We know that innovation is expensive and takes time. We know that the room for error is small. 6
7 The macro trend of category blurring in the alcoholic beverage market has resulted in a wave of hybrid spirits. Hybrid spirits can create new growth opportunities for brands, allowing them to reposition and attract new drinkers to a category. In addition, by offering flavors consumers are familiar with in a new beverage format, brands will encourage customary cider, beer, and wine drinkers to move into the spirits category. This trend is driven heavily by millennial consumers who are continuously looking for the new, now, next in the alcoholic beverage word, as well as drinks with an experimental edge. As an example, Heineken s Desperados a beer blended with tequila was launched in select markets in 2014 and rolled out nationally in Another example is Red Stag by Jim Beam Hardcore Cider a cider-infused bourbon which was launched in October In line with the general category blurring trend, products are also beginning to get packaging inspiration from other categories within the alcoholic beverage landscape, such as a wine product being released in a bottle shape more often associated with tequila. 7
8 Strongly led by the beer sector, the craft movement has now migrated to the spirits category. The success of craft in the alcoholic beverage category is indicative of drinkers desire for something better, more unique, and meaningful. Millennials are driving the craft movement. They are interested in the origin and the story the why behind the product. Products that reference a deep past and strong heritage address these needs, as they immerse drinkers into the brand and make for a richer alcoholic beverage consumption experience. Consumers are beginning to produce craft cocktails at home, using clean, natural, fresh, and botanical small batch ingredients. 8
9 When brands marry long-range thinking with platform-based innovations that cut across alcoholic beverage categories, the result is a powerful engine for innovation that deals effectively with both the marketing and product development challenges faced by brands in this industry. Big brands will do well to focus on their legacy, their process, and their quality and, tactically, will innovate their marketing for a new generation. Small production houses from craft beer to small-batch spirits will do well to focus on their ingredients, their local community commitment, and tactically, will ensure reach and distribution for greater access and awareness. These are some of the keys to sustaining performance and staying ahead of the curve. 9
10 About ORC International At ORC International, we are leaders in the art of business intelligence. We help you explore, navigate and integrate insights to uncover what truly engages people around the world. With a focus on improving business performance and growth, we combine quality data, smart synthesis and a best in class digital platform to deliver transformative business insights across your customers, employees, markets, and products. Contact Us To learn more about how ORC International could help you uncover more insights, contact us at answers@orcinternational.com ORC International 10
11 About the Authors Siddharth Vaidyanathan Vice President Siddharth Vaidyanathan, Vice President is responsible for the team that delivers our Preferred Access Accelerated Decision Support service. Prior to this, Sid was Project Director with ORC s Consumer team since 2009, with key responsibilities including project management, analysis and communication, and business development. He works with clients on topics such as market opportunity assessments, business stakeholder navigation and mapping, product/service innovation and concept development, value chain and competitive assessments. Sid joined ORC as a Research Analyst in 2008, after working with a national government defense contractor managing their marketing intelligence function. He has an M.A. in Organizational Management from the George Washington University. Jordan Brodsky Senior Research Analyst Jordan.Brodsky@orcinternational.com Jordan Brodsky, Senior Research Analyst, focuses primarily on consumer trends analysis. Her areas of expertise include consumer packaged goods, particularly beverage. Jordan has worked with a multitude of food and alcoholic/non-alcohol beverage clients and enjoys conducting primary and secondary research to uncover key trends to shape clients marketing and branding strategies. Prior to joining ORC, Jordan worked in analytics at Interbrand, a branding agency. Jordan received a BA in Economics from Colgate University. ORC International 11
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