Beverage Handbook

Liquor Handbook 2015

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Liquor Handbook 2015 48 The Markets for Distilled Spirits The renaissance occurring in the American whiskey category shows no signs of slowing down as today's consumers have only become more interested in this category rich with heritage and tradition. There are three factors contributing to the growth of straight and bourbon whiskies: innovation, premiumization and authenticity. Today's products offer consumers unique production with a variety of different styles and types of whiskey. But today's consumers are also interested in learning about the stories and people behind the brands they consume. Consumers are looking to be a part of something deeply rooted in this country's culture and American whiskey fits the bill. What's impressive is that the suppliers are taking it a step further by releasing a plethora of incredibly high-quality products that are keeping consumers enthralled with the category. With demand at an all-time high, production must be increased to meet that demand. When Heaven Hill announced it was expanding its Bernheim Distillery in 2013, it was only the beginning of expansion projects by key suppliers in the American whiskey and bourbon industry. Beam Suntory, Buffalo Trace, Diageo and Wild Turkey all announced investment plans of their own last year. Beam announced that it will be building a new state-of-the-art distribution center in Franklin County while Maker's Mark announced a $70 million expansion plan with new barrel warehouses. Sazerac's Buffalo Trace broke ground on a new 83,000-square-foot warehouse center in April 2014. Sazerac plans to add a 223,000-square-foot distribution center at Glenmore Distillery, and the company also plans to purchase additional equipment at the Barton 1792 Distillery to increase production capacity. Diageo began 2014 with an announcement that it will develop the visitor center at the Louisville's Stitzer-Weiler Distillery to showcase the company's Bulleit brand and its new craft whiskey portfolio. Diageo also intends to build a distillery in Shelby County with the goal of having the distillery operational by late 2016. After investing $50 million in distillery expansion that doubled production, Wild Turkey unveiled a $43 million packaging facility and opened a new visitor center. In addition, Brown-Forman is investing up to $45 million in its Old Forester distillery in downtown Louisville with expectations of an opening in the fall of 2016. More recently, Japan's Kirin Brewing Company is planning a $55 million expansion for its Four Roses facilities. Plans include $11.2 million in construction and $23 million for equipment such as new stills for the distillery in Anderson County. Kirin also plans to spend $21 million at Four Roses' Cox's Creek property in Bullitt County to build new warehouses. From a numbers standpoint, the straight whiskey category increased 6.4% to total 18.8 million 9-liter cases in 2014. Straight whiskeys now hold an 8.9% share of the distilled spirits industry. The category has been trending up over the past few years especially considering its percent share in 2010 was 1.5 percentage points lower at 7.3%. The category, which consists of bourbon and Tennessee whiskeys, added 1.1 million cases to the industry last year. Jack Daniel's, the category's leader with a 26.1% share of the category, turned around its 0.3% decrease from two years ago by posting a 1.7% increase to bring its total to 4.9 million 9-liter cases. The Jim Beam family of brands, which includes line extensions, achieved a 22.3% share in 2014 through a 5.4% increase to 4.2 million 9-liter cases. The third leading brand, Evan Williams, reached its second consecutive year of double-digit growth last year by increasing 13% to 1.9 million 9-liter cases and taking a 9.9% share of the category. Both the Jim Beam family of brands and Evan Williams contributed 215,000 9-liter cases to the market. Rounding out the top five, Maker's Mark (7.1%) added 88,000 cases and Bulleit Bourbon (41.1%) added 185,000 cases to the market. These top five brands collectively held a 68.8% share of the category and averaged a 6.5% growth rate by adding 786,000 9-liter cases. After posting an impressive 10.1% increase in 2013, Wild Turkey, the sixth leading brand, posted flat results in 2014 and stayed at 590,000 9-liter cases. Early Times continued its year-over-year decrease by losing 4.8% of its volume in 2014 to end the year with 531,000 9-liter cases. Old Crow and Ten High, the seventh and eight leading brands, posted mixed results with Old Crow increasing by 5.4% and Ten High remaining flat. The Jim Beam Small Batch Bourbon Collection, which is comprised of Knob Creek, Booker's, Basil Hayden's and Baker's, grew 35% last year to reach a combined 420,000 9-liter cases. The largest brand of the collection, Knob Creek, increased 25.4% to total 290,000 9-liter cases. In total, these top 10 brands held an 82% share of the category and increased 6.2% on average. Among these leaders, only one posted a decline, two brands were flat and the remaining seven increased their volumes. Other brands that fared well last year, increasing by more than 20,000 9-liter cases, included Gentleman Jack (25k), Woodford Reserve (55k), Buffalo Trace (27k), Bird Dog (53k), Angel's Envy (22k), and Larceny a brand that achieved 30,000 9-liter cases in its first year of national distribution. In summation, these brands added 212,000 9-liter cases to the category in 2014. Brands such as Eagle Rare, Blanton's, Jefferson's, Four Roses and Woodford Reserve Double Oaked are all adding to the ongoing fascination today's consumers have with bourbon whiskey. From an advertising standpoint, straight whiskeys preferred the broadcast medium as they allocated 76.5% of their spend to that platform. Magazines were next with a 21.5% share of spend. Overall, straights increased their spend by 17.6% last year to total $74.4 million. At the brand level, Jim Beam spent the most with 26.2% of the category's spend and focused primarily on broadcast. Jack Daniel's was second with a 19.4% share of category spend, and it also focused on the broadcast medium. Rounding out the top three was Maker's Mark with a 12.3% share of the category's spend. Maker's Mark focused on broadcast but also allocated a good portion to the magazine medium as well. Going further down the line, Evan Williams, Gentleman Jack, Wild Turkey, Woodford Reserve, Knob Creek and Evan Williams' flavored reserves each spent more than a million dollars in advertising last year. n AmericAn StrAight WhiSkey

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