Wave Of New Spirits Brands Rocks Status Quo

The usually slow-turning cogs of the spirits business are spinning faster than normal these days, and it's making many well-known brands queasy.

There are three factors triggering this movement. First, the recession is causing the customary trade-down from high-priced brands to value brands, shrinking bar tabs and persuading consumers to reach down one shelf from their regular brand at retail. Second, there is a wave of new spirits brands, from absinthe to whiskey, particularly at the top of each category. And, third, is the evolution of a more involved and discriminating drinker who is a close relative of the long-established wine snob.

The advent of nearly 200 micro-distilleries is the source of this wave and it foretells a reshuffling of the status quo over the next few years.

Micro-distillers approach the business with a high degree of craft, using alembic pot stills, hand bottling, small batches, secret formulas, ingredients from local farmers, and typically have an obsessive master distiller who in many cases is raising the bar very high and blowing the minds of spirits aficionados. This artisanal style exposes the vulnerabilities of some of the most well-known spirits brands in the world.



Micro-distilled brands are very different from the mega-brands that have outgrown their roots to rely on mass-production, giant factories, artificial flavoring, and computer-guided production and distribution. Certainly, mass-market brands have many fans and wield a lot of clout, but these new artisanal spirits are going to shake things up.

This was clearly on display at a recent rum tasting: the mega-brands were there, with their buxom tasting girls, neon signs and, of course, the guy in the Captain Morgan's costume. And while they dominate shelf space and can afford to run major promotional campaigns, they were not the main attraction. No, the crowds were drawn to the master distiller making aged rum in Tennessee the same way his great-grandfather did it in 1850, and to the dozens of other entrepreneurial micro-distillers with unique styles and a wealth of genuine passion and character.

When a discriminating drinker hears the history of hundreds of distilleries across New England before rum production went to the Caribbean, and meets the master distiller himself autographing a bottle of his own creation, and learns the difference between mass-produced corporate brands and a hand-crafted artisanal rum, well, posing for a picture with a pirate impersonator isn't very appealing any more. And for those who can taste the superiority of a rum aged in charred oak and made with table-grade molasses instead of sugar cane juice, going back to factory-produced rum is hard to swallow.

The most interesting thing about this wave of craft brands is that they are creating a new top end of the category at a time when a significant amount of trade-down is occurring. This is what has the mega brands on edge: well-established brands are now vulnerable on two fronts. They don't have the authenticity factor of the micro-distillers and so some consumers are being lured away by craft. And those looking to trade down in price are finding that what they give up in a familiar name isn't worth the price any more and a value brand serves their purposes very well.

Drinkers are discovering that if you look behind the rows of familiar brands, or ask the bartender for something new, there is a whole world of subtleties, taste profiles, interesting stories, and that there is satisfaction in this discovery process. Hence: whiskey snobs, tequila snobs, and gin snobs, who have met the master distiller, know what his copper pot still looks like, and can talk to him on Facebook about the next bottling of private stock.

What does this add up to over the next few years?

I believe many mega-brands are at risk and, when the economy improves, many drinkers will not revert to their former top-shelf brands. There are many first-rate options now and the top of each category will be fragmented by many superb new brands. Early adopters and aficionados will be promiscuous with their brand choices. Bartenders will become more like sommeliers and steer drinkers toward inspired spirits choices. Restaurants will have a Whiskey List to go along with the Wine List.

Brands caught in the middle, neither craft nor value, will struggle and the battle for shelf space and the back bar will intensify. It won't be easy for micro-distillers to overcome the trade clout of the mega-brands. There's finite space in the distributor's truck, and big companies have been known to crush upstarts that encroach on their territory.

But I believe these upstarts have an ace in the hole: the most knowledgeable and influential consumers and bartenders are rooting for micro-distillers.

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