April 12, 2016 | By Shanken News Daily
The third-largest spirits player nationally, Beam Suntory saw its U.S. volume climb by an estimated 1% to 21.7 million nine-liter cases in 2015, according to Impact Databank. Among its top brands, Jim Beam grew 3% to 4.3 million cases, while Sauza rose 4% to 2.2 million cases and Maker’s Mark advanced 6% to 1.4 million cases. Upscale whiskies Knob Creek, Basil Hayden’s and Laphroaig all increased by double-digits, while Pinnacle vodka declined slightly. Consumer goods veteran Tim Hassett was named president, North America, at Beam Suntory in 2014—the same year as Suntory’s $16 billion acquisition of Beam Inc.—and last year added responsibility for South America. SND senior editor Daniel Marsteller recently met with Hassett to look at Beam Suntory’s U.S. roadmap.
SND: Two years after the Suntory acquisition, what is the state of Beam’s U.S. business?
Hassett: The story for Beam Suntory right now is momentum. A couple of years ago we were lagging the market. We’ve now adjusted our strategy with a focus around three categories—Bourbon, Tequila and vodka—and we’re outperforming the market with our cornerstone brands.
SND: What initiatives are in store for Beam Suntory’s key brands?
Hassett: We have a macro-premiumization strategy across the portfolio. Jim Beam had a great year last year, driven by Jim Beam White, as well as the most successful launch in the brand’s history, Jim Beam Apple. We’re getting ready to restage the Jim Beam portfolio, marking the biggest product effort we’ve had on Jim Beam in years. On Maker’s Mark, we have ambitious goals and you’ll see continued fortification of our core “Red Top,” but also an accelerated premiumization effort. There will also be additional expressions of Maker’s, building from the Maker’s 46 foundation.
SND: How are the Tequila and vodka brands faring?
Hassett: Our fastest-growing Tequila brand is Hornitos, which is outpacing the category by two-to-one, with a lot of upside ahead. One of the innovations contributing to Hornitos’ growth is Black Barrel, which is aged in Bourbon barrels. In vodka, we have a great affiliation with 50 Cent on Effen that’s been in place for about 18 months, and we doubled that business last year. Effen is in the $18-$20 space, compared with Pinnacle, which is around $13-$15. About half of Pinnacle’s business is in the flavor and confections segment. For Effen, over 70% is in the core base vodka, with Black Cherry and Cucumber being the big satellite flavors.
SND: What are your thoughts on wholesaler consolidation and its ramifications for Beam Suntory’s route to market?
Hassett: While it’s transformational from a wholesaler perspective, we take a broad lens on our route-to-market model. We’ve spent a lot of energy becoming not only more consumer-centric but more customer-centric. I don’t want to minimize (the impact of consolidation). There is the risk of dilution. With some of these customers, the book is pretty full. But right now we’re pleased with our alignment. Southern is by far our biggest partner. Not only in 2015, but starting off in 2016, our business with Southern has been fantastic. They’re very much aligned with our premiumization strategy, and that’s driving a lot of our collective growth together.
In the second part of our interview with Tim Hassett, the Beam Suntory Americas president discusses the group’s heightened focus on the metro on-premise channel, as well as opportunities in Scotch and Japanese whisky.
SND: In the first part of this interview, you referenced a “macro premiumization” strategy for the Beam Suntory portfolio. What kinds of venues and consumer groups are you specifically targeting?
Hassett: It’s a competitive marketplace. Not only is the U.S. the biggest market in the world, but the macroeconomic and consumer tailwinds are more favorable than most markets. One of the things making this marketplace so attractive is the Millennial momentum. We’re focused against that consumer target. We also have a very city-centric focus. All the trends really start in the top 20 markets, which will represent 80% of the growth over the next five to 10 years. We’ve made a lot of adjustments to our route-to-market, putting feet on the street in the top 20 metro areas. And we’re concentrating on the on-premise opportunity. Historically, Beam has been more of an off-premise-focused company. But especially because of the richness of our whisk(e)y portfolio we see massive opportunities on-premise.
SND: Interest in Japanese whisky has been rising lately. How do you plan to leverage Suntory’s strong position in that category, with the Yamazaki, Hibiki and Hakushu brands?
Hassett: We sell every drop of Japanese whisky that we make. The long-range view is that we want to establish Japanese whisky as the next big global category. We’re being very deliberate in how we build it. The on-premise is our initial focus. We’ll have some more news around Japanese whisky in the back half of this year.
SND: Where else do you see untapped opportunities for Beam Suntory?
Hassett: We’ve got amazing assets in the Scotch category, particularly in single malts (including Laphroaig, Bowmore, Ardmore and other brands), so we think that’s a really fertile place to play. From a geography standpoint, we’re underdeveloped in Latin America, and we believe that region holds a lot of promise for us.