Just the Answer - Max Shapira
Heaven Hill Distilleries is the largest independent distilled spirits producer in the US and is currently enjoying great success in the home market with its premium pre-mixed cocktail brand, Hpnotiq. Heaven Hill's president, Max Shapira, discusses Hpnotiq's progress as it begins to roll out internationally.
How did Heaven Hill come about, and what is the story behind its rise to becoming the US's largest independent distilled spirits producer?
The company was started in 1935, in the middle of the Great Depression, on a shoestring, with no distillery, no brands, no expertise and no knowledge of how much whiskey to make and nothing to sell. The company was formed by my father, his brothers and a couple of partners who had a little expertise in making whiskey.
About two years later, the people with the expertise ran into financial difficulties elsewhere, and requested that our family either buy out their interests or liquidate the whole company. So the family bought them out. The company has been family-owned ever since. We began selling premium Bourbon and American whiskies around Indiana, Kentucky and Tennessee. Our business soon went nationwide, and centred on American whisky.
We continued like this, developing a nice reputation for about 25 to 30 years. I came back into the business in the early-1970s, by which time we had a nationwide network of distributors and customers who were asking us to create new products. Over the next 30 years we have added products to this network, which has now become international and sells our products in around 35 countries around the world.
Today we have products in pretty much every category in the industry from brandy to vodka to Bourbon whiskies and Hpnotiq. We're still big enough to bring resources to whatever's necessary to do for our brands, but we're still small enough to devote attention and effort to everything we do - nothing gets lost. We think we're very well positioned to access some of the opportunities that will develop over the years ahead, such as industry consolidation.
How did Hpnotiq come about, and why do you think it has been so successful in the US?
The product was conceived by two individuals with no industry experience. Hpnotiq was introduced (in the US) about three-and-a-half years ago. One of our regional people saw it in a store and a distributor said it was selling well. It was suggested that they might not have the resources to move the product forward. Five months later we acquired the brand.
It tastes great, it's beautifully packaged - everything about it had to say that we're premium, we're sophisticated, we're stylish. It's made with vodka, tropical fruit juices and Cognac, and it's coloured blue. It is right in the cocktail trend which is experiencing a tremendous resurgence. So with a well-packaged, great-tasting product at a time when cocktails are surging, we have a 'perfect storm' situation. We have a product that meets all the criteria of the marketplace.
Along the way it became attached to the music and entertainment crowd which had a certain degree of influencers - these were thought to be people of taste, style and sophistication. The product became very successful very quickly, so we give it a broad-based media programme in the US and an ambassador programme using these influencers.
You're asking somebody to spend a lot of money on a bottle that they may or may not know how to use when they get home. Despite our media campaigns, we're trying to get as many people as possible to taste this product. That is an important part of the marketing process.
We launched in the UK in September and in Japan in late-summer. We've made a nice initial impact in both of these markets.
How has Hpnotiq performed in the UK since its launch and how are you handling the roll-out?
It's a slow seeding kind of roll-out. The concept is very similar to what we did in the US. What works in the US should work over here as well. The emphasis is on premium, with no cost-cutting. We've put the product in the key style bars, we're not in the off-premise at all. It's a process of finding the right group of on-premise style locations that have influencers who go there. We're not going to every single place we could go with it. This product has got legs.
I'm not going to tell you specifically the targets we set ourselves, but looking at the latest figures we're going to exceed those targets by over 70% in the first year.
How do you intend to handle the binge drinking culture we have in the UK?
The product is almost in the luxury category - that in itself serves to take it away from the group that is more associated with binge drinking. Our target market is a bit older than those associated with binge drinking. It's a cocktail culture as opposed to RTDs that we're focusing on with Hpnotiq - these are long drinks to be consumed in more refined venues. We market our products to limit if not eliminate that problem. The way the drink is consumed and positioned will keep it away from that type of issue.
Having been in the drinks industry for over 30 years, what's your opinion of the spirits business today?
Most industry experts believe consolidation will continue - it probably will, but it will probably surprise people in the direction it's going to go. But consolidation will continue.
From the US perspective, we probably have the best environment for the sale of distilled spirits in the US that we have had in the last 25 years, with more new consumers coming in, the cocktail culture showing no sign of abating, consumers keen to experiment, and distilled spirits taking market share from malt beverages last year. That opens a lot of opportunities for a lot of different products across a broad range of categories.
What future plans do you have for Heaven Hill and Hpnotiq?
We're going to be launching (Hpnotiq) in a number of different areas around the world. We're in the process of launching in New Zealand in partnership with Lion Nathan and we'll launch within the next 60 to 90 days in Australia with Foster's.
Acquisitions are part of our overall strategy. We've been active in that area over the last several years, and let's just say that we'll continue to be active in that area.
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