Lifestyle is ‘key’ when marketing US spirits

With the US positioned as one of the most influential and fast-moving spirits markets in the world, driven by a hip millennial audience, Claire Dodd analyses the spirits trends that are currently taking the country by storm.

America is a region where drinks trends are as diverse as the ethnic and cultural make-up

“Alcohol is a lifestyle industry,” says Spiros Malandrakis, senior industry analyst for Euromonitor International. “It’s not about flavours at the end of the day. It’s about music, it’s about movies, the Mad Men effect. It’s what people aspire to or dream about. Sometimes these things can easily be lost when just looking at dry figures.”

If ever there was a market more apt for such a lofty, dreamy, fantastical but also very true analysis, this is it. America – manufacturer of dreams, purveyor of the aspirational lifestyle – is a region where drinks trends are as diverse as the ethnic and cultural make-up; as nuanced as the individual state laws that govern consumption and production. And crucially, it is where consumers – and consumer trends – can be as fickle as Hollywood.

It’s this potent mix that has resulted in the US being the hotbed of global spirits innovation in recent years. But of course, not everything that gets thrown at the wall sticks. For every mega-trend, there’s a counter-trend. What flies in New York’s trendy Bushwick isn’t what’s being sipped in the rural bars of Nebraska.

So where are we up to in 2016? Is craft still on the rise or is it time to ban the ‘C’ word? Are categories such as Cognac still riding the hip-hop wave? And have we finally reached flavour fatigue?
Despite post-recessionary pressures, the US spirits market has fared pretty well. Whereas some European markets have battened down the hatches, with declines experienced across Asian markets and plateauing economic growth in Australasia, the US has held firm. Figures from Euromonitor show that US spirits as a whole are predicted to grow by 9% from 2015 to 2020.

“Millennials [people aged 21-34] are the largest age cohort in American history and are driving industry trends and fuelling prospects for the continued growth of spirits in the US,” says James Thompson, chief marketing and innovation officer for Diageo North America.

Attracting their attention has become the end-game for most mainstream producers. And that, as Malandrakis says, has become all about targeting lifestyles. As consumers continue to choose to drink less but ‘better’, that means innovations in both formats and product strength.

Wine leads the way

It’s an area that the wine industry is currently stealing a march on, leaving spirits somewhat behind. Canned wines such as Underwood that take edgy design cues from craft beer; the new male millennial-focused canned rosé brand The Drop from Mangrove Estates; and music label Interscope Records’ recent partnership with ElectricSky Wine on individually sealed stackable cups for festivals all show that wine is adapting to consumer lifestyles in the US much more nimbly than spirits.

It’s not something that has gone unnoticed by Diageo, which has identified occasions – rather than specific categories – as a key focus. Thompson adds: “Today’s consumers – especially millennials – choose different drinks depending on whether they’re at a casual family barbecue, at brunch with a spouse, or at a nightclub with friends. They don’t think in terms of categories – they choose the brand and the serve.”

To this end, in February Diageo launched a product that marked something of a radical step-change for its erstwhile ‘party’ and experiential nightlife-led vodka mainstay brand, amid the continued slow-down of the vodka category. Smirnoff Sourced is a three-strong range of gluten-free flavoured vodka made from real fruit juice, rather than high-fructose corn syrup.

Kate Pomeroy, VP of innovation and consumer insights at Pernod Ricard USA, explains further: “Moderate millennials who subscribe to healthier lifestyles are looking to make the better choice when it comes to drinking. To many consumers, health is closely equated with freshness. [We’re seeing] the incorporation of fresh or local ingredients (garden-to-glass). Seasonal also communicates freshness/locality of ingredients. And consumers are looking for lower abv options, light spritzes, etc., to better balance their consumption.”

Sweetness and light

A desire for lighter products is something that Chester Brandes, managing director of the newly created Americas division of Bulldog Gin, hopes to appeal to. The new division has been created as Brandes, former CEO of Imperial Brands, Inc (Groupe Belvédère), says the gin is “on the precipice of really exploding in the North American market”, despite an overall slump in US gin sales, though craft gins are a fertile area of NPD. Bulldog, however, is chasing major mainstream success. Approachability is key.

“Bulldog is a vodka drinker’s gin in terms of the smoothness of the product,” he says. “It’s 40% abv, as opposed to the competitors’ 47% plus, and the botanicals are not overpowering. It’s very mixable, but also very easy to consume. Some bartenders would say that’s a negative. But with consumer’s current tastes, I think we can turn it into a plus.”

Smirnoff Sourced is a three-strong range of gluten-free flavoured vodka made from real fruit juice

Have we reached flavour fatigue? Well, no. The decline in cross-category dessert flavour innovations has given-way to a surge of ‘natural’, often herb or vegetable-driven launches, such as Besado’s herbal tequila range, Svedka’s Cumber Lime vodka, and the ever-innovative Tamworth Distilling’s Art in the Age seasonal vegetable vodka range. They may be loved by bartenders, but will they become mainstream? Probably not.

But that’s not to say the bold, entry-level flavours that revolutionised whisky (think: Red Stag), bringing in younger consumers, have gone. While premiumisation is the talk of the town, not all consumers want to trade up. Defying the critics, Diageo’s Crown Royal Regal Apple, launched in November 2014, is the first spirit brand to sell more than one million cases in its first year. Flavours are clearly here to stay.

Whisky itself appears to be following several mega-trends. Mainstream brands are going ‘premium’; offering consumers a place to trade-up within brands, and avoiding the problem of dwindling stocks by replacing age statements with ageing processes and different finishes – see Buffalo Trace’s infrared-treated barrels, while twice-aged (in barrels of different char-levels) Jim Beam Double Oak launches this Autumn.

Educate and expand

Scotch brands are also looking to steal Bourbon’s thunder through education, removing any ‘unapproachability’ issues. Beam Suntory’s latest campaign for Laphroaig, ‘Opinions Welcome’, asks consumers to describe its taste and smell. One example is: “A big, peaty, slap in the face. Perfect.”

Bacardi also believes Scotch is hot right now. Jim Moseley, vice-president of Dewar’s, Cazadores, and insights for Bacardi in North America, says: “We’ve recently released five single malts – Aberfeldy, Aultmore, Craigellachie, The Deveron and Royal Brackla – that we’ve used for many years in the making of Dewar’s, but never made available to the public, until recently.”

The prestige attached to imported whiskies is also resulting in some hybrid releases. Collaborative launch Jura Brooklyn Single Malt saw New York craft food and drink producers select the blend for the Scotch. Expect more to follow.

Aspirational branding

But what about some of the most obvious star performers in the US market? Hip-hop culture, the influence of the growing Hispanic population and an all- encompassing search for ‘authenticity’ are just some of the US’s other major market drivers. Accordingly, ultra-premium Tequilas and mezcals are tipped to grow 16.5% by 2020, while the celebrity-backed brandy and Cognac category, which continues to be name-checked in songs by the likes of Jay-Z, is set to grow by 14%, according to Euromonitor.

So while US consumers continue to be in explorative mode, seeking out niche expressions and being willing to spend more on premium products, categories are becoming less important. Drinks companies looking for growth now have to target an occasion, a moment, a demographic. As Malandrakis says, lifestyle is key.