Are craft spirits friend or foe to big drinks companies? - Analysis
Industry experts have said it is unfair to compare craft spirits to craft beer
Last night, the Davids and Goliaths of the spirits category gathered at the Worshipful Company of Distillers' City Debate in London to discuss whether the craft segment is a friend of global brands. On the panel, Brown-Forman's chief brands & strategy officer, Lawson Whiting, and Chivas Bros CEO Laurent Lacassagne sat alongside UK craft distiller John McCarthy from Adnams and David Smith, founder of Craft Distilling Expo. Also present was Nomura analyst Ian Shackleton to provide an overview.
While the overall atmosphere pointed to "friend", the concept did give rise to some interesting ideas: Is it fair to compare craft spirits to craft beer? How has marketing changed? Is craft to blame for big players' underperformance?
The panel spoke largely about the US market, where the concept of craft is well-established. On the beer comparison, Shackleton said it was unfair to judge like for like.
"Any of you who have been to the US know how homogeneous beer has become," said Shackleton, citing Miller Lite and Coors Light as examples. "Clearly, craft beer is a revolt against a product that has become too same-y. I think craft spirits are different," he continued. "When you look at craft beer, there's definitely this feeling in the US that it needs to be small. With craft spirits, the definition really should be about authenticity, heritage and craftsmanship."
Brown-Forman's Whiting said the beer business in the US is "being revolutionised". He believes there are "a lot of big producers that are feeling a lot of pain". This does not apply in spirits, however. "Spirits brands already have a lot of craft characteristics," he said. "The big brewers... lost their way and their beers became boring. Spirits just aren't boring quite like beer is," said Whiting drawing a laugh from the audience.
The Brown-Forman exec was also keen to point out that craft's buzzwords have been around for years. He said the 1957 brand plan for Jack Daniel's was "authenticity, heritage and craftsmanship".
"Brands will continue to be built over a long period of time," he said. "I don't think there's a revolution in terms of marketing here." But, he conceded: "I do think these craft brands have shaken everybody up a little bit."
Shackleton concurred: "What is changing is the level of innovation in the US," he said. "In 2015, the biggest number of innovations came in Scotch. It does actually remind you a little bit that Scotch ... probably was the original craft product."
The analyst also pointed out that the major companies own a lot of craft brands themselves - and are developing (or buying) more. At Diageo, for example, Shackleton said the company counts brands such as Talisker, Cardhu and Don Julio as craft.
"When you look at some of the big global brands in this industry," Shackleton said, "they have actually moved quite materially into craft extensions." He gave the example of Brown-Forman's Jack Daniels Single Barrel, as well as Pernod Ricard's Jameson Caskmates. Away from whisk(e)y, he said: "[Diageo's] Tanqueray has also got these line extensions into craft... with Old Tom and Bloomsbury."
Chivas CEO Laurent Lacassagne admitted that the craft movement has helped bring innovation to the industry. "In a way, it has awoken the spirits industry, which was very conservative and is [now] much more innovative," he said. Craft Distilling Expo's Smith noted that because craft operations are independently operated, they are able to take more risks in terms of innovation.
And, innovation hasn't just come on the product side, according to Smith. He said consumer interest in product provenance has prompted a raft of investment in visitor facilities. He pointed to Bombay Sapphire's facility in Hampshire as well as Beefeater's visitor centre in London.
Overall, though, Shackleton said craft spirits are not necessarily to blame for big companies losing share in the US. "It's more about companies possibly not investing enough in innovation, about companies not focusing enough marketing on their core brands," he said. "Perhaps some of those brand identities have lost their way, rather than a direct threat from craft."
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