The Paradox of Growth

Growth is good, right? From marketers of adult beverage brands to wholesalers and operators of retail stores, restaurants and bars, everyone involved in this industry is looking for growth opportunities. Everyone wants their brand to be the “next big thing”—the one that’s delivering the big numbers.

Small-batch, hand-crafted and local are all the rage today, and many a spirits, wine and beer brand is enjoying increased popularity because of those attributes. However, is there a point in a brand’s growth trajectory at which it can no longer lay claim to the very characteristics on which it was built? At what volume does a brand lose the cachet of being “small”?

Such is the challenge already facing a number of craft beers and boutique wine and spirits brands. To satisfy growing consumer demand, several small producers have aligned themselves with larger entities. Two that come to mind are Tuthilltown Spirits and Goose Island Brewery. Tuthilltown was acquired by William Grant & Sons in 2010; the supplier now handles marketing and global distribution of the Hudson portfolio of whiskeys, while Tuthilltown continues to be operated by its founding distillers. Whiskey fans applauded the move—William Grant is recognized for its deep roots in whiskey production. The brand grew 33.3 percent in U.S. volume in 2012 to 4,000 9-liter cases.

The news that Chicago’s Goose Island would be acquired by AB InBev in 2011 kicked off debate among craft beer aficionados about whether the brewer’s products would stay true to form or be “commoditized.” Thanks to the increased production and distribution capacity afforded by the new ownership, Goose Island’s popular Honkers Ale and 312 Urban Wheat beers achieved national distribution last year. That aspect of the relationship has enabled the Goose Island brewers to focus on specialty beers, such as Bourbon County Stout, which were somewhat neglected prior to the acquisition because the brewers were struggling to fulfill demand for the flagship brands.

Goose Island and its fans seem satisfied with the arrangement, as it makes the core brands readily available nationally and allows the brewers to churn out interesting seasonal, specialty and limited-edition brews. The possible downside of joining the AB InBev organization is that the Craft Brewers Association now no longer considers Goose Island to be a craft brewer, even though the brewery produces far less than craft leaders Boston Beer and Yuengling. But does it really matter to consumers whether the brand is officially a “craft” beer? Maybe not: Goose Island’s volume grew an estimated 31% in 2012.

A spirits brand facing the paradox of growth is Tito’s Handmade Vodka, which reached 850,000 9-liter cases in 2012, making it the 13th largest domestic vodka by volume. With that volume, it is well outside the range of the Distilled Spirits Council of the United States (DISCUS) definition of a craft spirit (limit of 40,000 cases annually). Even with that volume, however, founder Tito Beveridge continues to spread the story of the brand’s origins in Austin, TX (earning the 2001 Double Gold Medal at the San Francisco World Spirits Competition didn’t hurt, either). In 1996, Beveridge obtained the state’s first distillery license, cobbled together a crude pot still and started using local corn and water from local aquifers to distill his vodka. The story around Tito’s Handmade continues to drive the brand’s success despite its volume and expanded production facility, which remains on the original site in Austin.

Another brand that has successfully ridden the local/craft perception to high-volume success is Blue Moon. Launched in 1995 in Golden, CO, by a group within what was then Coors Brewing, the brand introduced the white Belgian-style wheat ale to the U.S. masses. The story of Keith Villa’s creation of the brew is part of the brand’s identity, and Blue Moon’s look, feel and flavor profile give it craft cachet. That approach has earned it the ire of some craft brewers, who charge MillerCoors’ Tenth and Blake division, where Blue Moon now resides, with misleading the public into thinking Blue Moon is a craft beer. But consumers gravitate to the brand, not seeming to care where or by whom it’s brewed. Blue Moon hit 24.8 million cases in 2012 and continues to grow.

That points to the notion that although the story of a brand’s humble beginnings is important, it isn’t the only thing contributing to the momentum of smaller brands gone big. We’re now seeing several micro-brands trying to navigate growth while holding onto their roots. Properly managing the transition to big-volume labels will ensure the success of these brands, even if they’re no longer handcrafted, per se.

Important steps to consider:

  • Create the infrastructure necessary to do big volume, whether via actual investment or through partnership with or acquisition by a larger organization.
  • Commit to and communicate the brand’s DNA—what makes it different, unique and valuable to the consumer—as well as the founding company’s values and vision. Be sure to truly understand what elements of the brand are connecting with consumers; sometimes it’s not what you think. Once that’s clarified, ensure that all parties involved in the brand’s growth understand and support those elements.
  • Protect the brand DNA by partnering with retail outlets that align with the brand’s positioning. Think carefully about the impact on consumer perception if the brand shows up on warehouse club shelves or in bars where the bartender might lack the skills to show the product in its best light.
  • Stay relevant to the core consumer. Consumer engagement is likely what jump-started the brand in its early days (lacking marketing budgets, most boutique brands are very active on social media). Keep those raving fans involved in the brand’s growth by inviting their input on limited-time or seasonal offerings and other developments. They’ll provide fresh ideas and also sound the alarm if the program strays from the vital elements of the brand. In addition, they’ll prove invaluable ambassadors, bringing newcomers to the fold.

We know from our research that today’s consumers, especially Millennials, are very interested in the “story” behind beverage brands—the origins, production processes, ingredients and colorful characters involved. It seems that’s the cost of entry in today’s adult beverage market. Beyond those elements, flavor and quality come to the fore, and ongoing engagement efforts are crucial. As more spirits, wine and beer brands look to go from niche to national, the key is to continue to be something to someone, not everything to everyone.

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Donna Hood Crecca

Donna Hood Crecca is Senior Director of Technomic Inc.’s Adult Beverage Resource Group. She has covered adult beverage in both the on-premise and retail markets for nearly two decades, most recently as Publisher and Editorial Director of Nightclub & Bar.

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