Government Shutdown: Adult-Beverage Innovation Hits a Roadblock?

Among the agencies affected by the partial government shutdown is the Alcohol and Tobacco Tax and Trade Bureau (TTB), and sidelining the TTB may well serve to stymie the innovation so important to the adult-beverage industry’s ability to grow in a slow economy. This is dire news as we enter the all-important fourth quarter of what has been another challenging year.

TTB takes applications and issues federal approvals for new distilleries, wineries and breweries to begin operations; it also approves new product formulations and labels. The agency OKs nearly 400 new alcohol product labels daily, ranging from updates to existing labels to labels for new products. In addition, TTB’s website indicates that the agency published permit approvals for 70 alcohol importers, wholesalers, producers, bottlers and blenders in September. All that activity came to a screeching halt last Tuesday with the shutdown.

Our research points to new product introductions and innovation as a driving force in the adult-beverage industry. Nearly 550 introductions have hit the market so far this year (as of the close of the third quarter), according to the New Product Tracker on our online DRINK tool; we recorded more than 730 new spirits, wine and beer products in 2012. That level of “news” generates excitement and continually engages consumers and the trade with spirits, wine and beer.

Domestic beer in particular has benefited from innovation of late. More than 25 craft beers have debuted since January, and the major brewers are betting on line extensions to invigorate mature labels. AB InBev, for example, is looking to its Budweiser Black Crown to bring discerning Millennials into the franchise. Seasonals such as the ever-popular Oktoberfest style are important to the momentum of many craft and super-premium beer brands. Table wine is the category racking up the highest number of new introductions; more than 180 table wines have come to market in the first three quarters of 2013. The flavor evolution in spirits is yielding a rash of new flavored vodkas, liqueurs, whiskeys and tequilas, not to mention various aged and finished expressions of spirits. More than 240 spirits products debuted so far this year.

While suppliers will continue to innovate, the ability to get those new items to market now appears roadblocked indefinitely. Many products scheduled for fall rollout were approved prior to the shutdown, especially those from larger suppliers. Smaller brewers, distillers and wineries may be more affected by the shutdown. Reports of craft brewers concerned about their ability to bring fall and winter seasonals to market are surfacing across the country, as are concerns about the financial impact on breweries still in the startup phase. Wineries and distilleries large and small face similar delays in opening new operations and debuting new products, as well.

The onus is now on all adult-beverage suppliers and wholesalers to focus on generating excitement among consumers and on- and off-premise operators for the holiday season. The shutdown will affect consumer confidence and therefore spending, setting us up for yet another difficult fourth quarter. The holidays, however, still represent a key selling period for this industry. Adult beverages remain an affordable indulgence for most consumers, and generating excitement around the new products and packaging that were approved and will come to market this quarter is important to the industry’s overall momentum. In addition, imbuing established brands with a sense of relevance will keep those labels at the forefront. Restaurant, bar and retail operators will look for more support from supplier and wholesaler partners, and consumers will look for more value whether purchasing drinks or bottles. With the advancement of product innovation halted, delivering on excitement, customer service and value is more important than ever.


Donna Hood Crecca

A veteran of the foodservice industry, Donna Hood Crecca leads the firm’s Convenience Store Practice and is active in its Adult Beverage Practice. She develops research-based insights and recommendations for leading and emerging supplier and operator companies to enhance their go-to-market and product development programs and strategies.

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