TOP-25 BRANDS KEEPING PACE?
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Consumers continue to gravitate towards spirits for reasons that include the increasingly popular “cocktail culture,” price-to-value ratio of spirits offerings, and the emergence of local, craft spirits producers. As craft brands continue to proliferate, there is now more competition than ever in the spirits industry. While the industry has long been dominated by a number of very large suppliers, they have recently been feeling the effects of changing consumer preferences. In an effort to quantify these effects, industry data relating to the top 25 spirits brands was collected and analyzed. Utilizing the aforementioned IMPACT Databank report for calendar year 2018, it was noted that the top 25 brands by case volume accounted for about 42 percent of total distilled spirits case sales for the year. This is a significant amount considering there are thousands of brands in the marketplace. The year-over-year growth rate for these brands by case volume in 2018 was 2.0 percent. The growth rate across the entire distilled spirits industry for the same period was 1.9 percent. Based on these figures, it appears that the top-25 brands are performing better than the overall industry. While that may be the case in aggregate, further analysis reveals that one brand in particular is driving growth amongst this group. Tito’s Vodka, independently owned and now the second-largest spirits brand in the industry, grew at an astronomical rate of 22.0 percent over 11.3% last year. For comparison sake, the largest brand (Smirnoff) declined by 0.7 percent, the third largest brand (Bacardi) declined by 2.5 percent FIGURE 4 Case Volume Growth of and the fourth largest brand (Captain Distilled Spirits Brands 6.9% Morgan) declined by 2.7 percent. The (2017-2018) only other brand in the top five that grew was Jack Daniel’s at a 4.9% meager 0.3 1.9% Source: percent. Impact Databank Removing Tito’s from the top 25, which leaves a 0.3% well-known collection of brands owned exclusively by the industry’s largest suppliers, reveals that the group only grew by 0.6 percent for the year. Of those -3.0% remaining brands, only eight grew faster 0.6% than the overall spirits industry rate of 1.9 percent. Said another way, 16 of the top 25 spirits brands either experienced a decline in annual sales or grew at a rate slower than the overall industry. As can Total Top-25 be expected, the largest suppliers have Distilled Brands felt the negative impact of these trends Spirits (without Tito’s) and one solution has been to regain market share by investing in numerous brands to help propel future portfolio growth. As consumers preferences continue to evolve, these trends may be a new reality which should lead to additional acquisitions into the foreseeable future.
The list of spirits industry transactions over the last several years is interesting for numerous reasons. There are large and mid-tier suppliers making deals, private equity firms deploying capital, the world’s largest beverage alcohol company — AB InBev — getting involved, and deals taking place across all spirits categories. The amount of deals isn’t surprising based on the reasons previously discussed, but an intriguing aspect to these deals is the amount of “smaller” transactions being made by a select group of the industry’s largest suppliers. Diageo, the largest spirits company by volume, has been at the forefront of these types of deals over the last several years. Leveraging their investment arm, Distill Ventures, the company has invested in small international whiskey brands Starward Whisky and Stauning Whisky. Additionally, they invested in Westward Whiskey, a Portland-based American single malt whiskey producer. A former Distill investment, luxury vermouth brand Belsazar, “graduated” from the venture unit last year and is now majority owned by Diageo. Rounding out smaller deals, Diageo announced last year the acquisition of the luxury mezcal brand Pierde Almas. Similar 47.0% to Diageo, Pernod Ricard has been very active in making investments in promising brands across 41.8% different spirits categories. In 2016, the company took 39.6% a majority position in the high-end, limited production German gin brand Monkey35.1% 47 as well as the craft bourbon producer Smooth Ambler. The following year they invested in the emerging mezcal brand Del Maguey. The trend continued this year with the company taking stakes in two additional domestic whiskey brands — Rabbit Hole and Firestone & Robertson. The last large supplier that has been very active in 15.3% 15.0% placing bets on emerging brands is Constellation. Under the guidance of their investment arm, Constellation Ventures, the Company has made numerous investments since 2017. These investments include Catoctin Creek -5.2% +4.5% +0.3% Distilling, Vivify Beverages, Austin Cocktails, Copper & Kings, Real McCoy, Black Button Distilling, Mezcal El Silencio, Montanya Distillers, Spirits and Durham Distillery. Beer Wine These investments run the gamut of spirits categories and are all positioned as luxury-priced, craft offerings. These companies, seeking to offset declines in their “legacy” brands and adjust to emerging categories, may prove wise for placing bets across a number of very small brands. Over the last few years there have been numerous high-profile acquisitions of larger, high-growth RNDC “craft” brands with case volumes exceeding 25,00013.6%
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