What’s In The Bottle?
Spirits drinkers have been delving deeper into the specific ingredients of their favorite products, but that’s only the beginning. They’re now seeking to learn more about the provenance of those ingredients, how they’re made, and how they’re processed. Grains, botanicals, and other elements are all coming under greater scrutiny, motivating producers to up their game and shift their marketing.
Malbec never went away, of course, but it had a few rough years after injudicious overshipping by Argentine bulk players. Now the popularity of quality Malbec is seeing a resurgence of interest, led by high-end players like Catena, Guarachi, and others.
Yes, and it’s no longer small potatoes. The state’s winemakers have been at it for a number of years, and are now showing some progress in the marketplace. The Snake River Valley AVA, which Idaho shares with Oregon, is home to more than 50 winemakers. Plantings are dominated by red Rhône varietals like Syrah, Grenache, Mourvèdre, and Cinsault, as well as white Rhône varietals including Viognier, Grenache Blanc, and Roussanne. Most Idaho wineries are centered around Garden City, which is just across the river from Boise. The vineyards aren’t far off, at less than an hour’s drive away. Big names include Ste. Chapelle, Williamson, Sawtooth, Split Rail, Telaya, and Vigilant.
West Coast Labor Squeeze
With wineries in California, Oregon, and Washington finding it increasingly difficult to get sufficient labor, automated harvesting technology and robotics will play increasingly important roles in the vineyard. High-tech harvest machines—essentially robots in the vineyard—are already establishing a major presence. The technology is expensive, but many vintners may soon have little choice but to go with this alternative.
Cannabis In Overdrive
Led by the prospect of marijuana reform legislation at the federal level and increasing activity in states like New York and New Jersey, the commercial cannabis movement will accelerate rapidly, with well-placed Canadian companies ready to export to the United States. The Wine & Spirits Wholesalers of America (WSWA) is already on record as being in favor of legalization—and it’s gearing up to do business in the sector when the time comes. At the supplier and distributor levels, many of the major players have taken stakes in Canadian companies and thus already have skin in the game. Things will be moving much more quickly in 2019 than could have been imagined a few years ago.
Self-Service At The Bar
Though currently more of a novelty item than anything else, self-serve bar technology is starting to move into the mainstream. Just like fast food outlets and other on-premise operations, bars are now able to move the simplest serves, such as beer or wine, in a much more rapid fashion thanks to automation.
Smoke Is Everywhere
Expressions from Islay have long been favorites in the Scotch whisky space, and the smoky American whiskey scene has been graced with the likes of High West Campfire, Westland Peated, Whiskey Del Bac Dorado, Balcones Brimstone, and Corsair Triple Smoke. While those craft pioneers have laid the groundwork, smoky flavors will now become a bigger part of the mainstream, permeating the cocktail scene while also becoming the flavor of choice among craft and even mainstream whiskies.
Craft Goes Mainstream
In a major shift from just a few years ago, an increasing number of craft brands have moved to create national footprints. Now players like High West, Westland, and Stranahan’s will start to develop a far more nationwide presence. Meanwhile, up-and-coming producers like Moët Hennessy-owned Woodinville Whiskey will establish strong regional presences—in Western states in Woodinville’s case—as craft spirits begin to take a much bigger share of the market.
Some Wine With That Food Order?
Right now Drizly and other beverage alcohol delivery services are doing well, but companies like Seamless and Caviar will join forces to create a more integrated food and beverage alcohol delivery platform. This will create another sales channel for drinks—particularly for wine and beer, but also for spirits.
Wine Turns To Beer
Now more than ever, winemakers who want to sell through the three-tier system are being shut out by consolidation at the distribution tier. Increasingly, they’re turning to beer wholesalers to bring their products to market. The beer side—looking for increased revenue in the face of sliding sales for mainstream domestic beers—has been happy to accommodate them, and distributors are forming separate wine and spirits units to handle the new business. The trend will grow as the market expands.
Hollywood Labels Galore
The proliferation of wines, beers, and spirits affiliated with popular television and movies will not abate. Instead, there will be a redoubling of novelty labels as more studios and actors’ estates realize the potential for profits in beverage alcohol. From Game of Thrones to Star Trek, Elvis Presley to Humphrey Bogart, every popular entertainment franchise is up for grabs.
Rise Of The Boutique Distributor
With consolidation making it increasingly difficult for smaller wine and spirits brands to gain access to the marketplace, a new crop of boutique distributors, building portfolios of high-end and craft spirits, beers, and wines, is beginning to make its presence felt. These players will find a growing role in the market. Some existing companies will up their game, while others haven’t even been founded yet.
Supportive legislation has made it easy for brewpubs to operate in many states and municipalities; as a result, the culture of the local watering hole has experienced a renaissance over the last few years. That trend will continue, cushioning on-premise beer sales against the category’s ongoing decline as consumers choose to drink locally—often within walking distance of their homes. Craft breweries finding it difficult to compete on the shelf will also opt to add brewpubs to their businesses, generating income without the need for distribution.
Craft Spirits Rationalization
For the last two decades, craft distillers have been on an upward trajectory—and that’s not going to stop anytime soon. But, much like in craft beer, the category will experience some painful hiccups as seemingly successful distillers call it quits due to mounting debt, ineffective sales and distribution, or an inability to exploit their full capacity profitably. Death’s Door Spirits in Middleton, Wisconsin shocked many in the industry when it announced it was filing for Chapter 11 bankruptcy in November 2018; despite an eight-year partnership with Serrallés USA, a 200,000-case capacity, and nearly nationwide distribution—not to mention a sterling brand reputation—the company had never sold more than 34,000 cases and had over $5 million in debt. There will be other casualties as the craft industry matures.
Many scratched their heads when Grey Goose VX launched, blending its vodka with a small amount of Cognac. But category-crossing products will re-emerge as a hot trend, especially as curious millennials seek more opportunities to explore and discover. Think whisk(e)y blended with port, as in Basil Hayden’s Dark rye, and gin blended with wine. The movement will extend beyond simply combining two distinct products; cider-makers and brewers will experiment with co-fermenting grapes or other fruit with their apples and grains.
Craft Spirits Buyouts Evolve
The last few years have seen big spirits companies snapping up craft distilleries, with Rémy Cointreau acquiring Westland Distillery, Pernod Ricard taking a majority stake in Smooth Ambler Spirits Co., William Grant & Sons fully acquiring Tuthilltown Spirits and the Hudson whiskey brand, Moët Hennessy buying Woodinville Whiskey Co., and Constellation paying out for High West Distillery while making smaller investments in Nelson’s Green Brier Distillery and Catoctin Creek Distillery. Those investments may be indicative of a new strategy for spirits players: Rather than paying for full-on acquisitions (High West reportedly went for $160 million), companies will seek to make strategic investments instead. Through its Distill Ventures unit, Diageo recently invested in the Westward whiskey brand from House Spirits Distillery, while Edrington Group similarly took a stake in Wyoming Whiskey. The terms of these deals haven’t been disclosed, but the craft players are retaining creative control—likely with the option to sell a larger stake or be acquired outright in the future. As competition heats up and consumers become more discerning about craft spirits, the days of the full buyout may be over.
More Throwback Labels
Rebooting popular franchises has been a winning strategy for Hollywood, and the beverage alcohol industry is looking to tap into the same success. It started with Pabst Blue Ribbon, of course, and other “retro” beers like Hamm’s and Genessee have followed suit. MillerCoors brought back Zima, and E. & J. Gallo recently revived Thunderbird—this time with a lineup of Chardonnay, Cabernet Sauvignon, and a red blend, each priced at $10 a 750-ml. Retired Four Roses master distiller Jim Rutledge is relaunching the Cream of Kentucky Bourbon label. Many other brands are ripe for a renaissance among a millennial audience that has had no exposure to their past. Could we see Mateus, Blue Nun, or Fleischmann’s make a comeback?
Going Low-Alcohol, Going No-Alcohol
Cocktails that are low-proof or even non-alcoholic have already gained a following around the country, and 2019 will likely see this mini-trend blossom into a bigger consumer movement. There’s opportunity for both spirits marketers and non-alcoholic beverage purveyors.
Small Distillers Look To Asia
The U.S.-European tariff war will continue as both sides hold out for concessions. Distillers of all sizes will remain caught in the crosshairs, but the smaller companies—especially those who had built strong reputations in the UK and Europe over the last several years—will find it impossible to absorb a prolonged assault. Instead, they’ll focus their efforts on the Asian market, developing relationships in Hong Kong and other Chinese cities, as well as Japan, Taiwan, and Singapore.
All About Bitter
It’s no secret that bitter flavors have made a resounding return to the bar, and are now far more in line with the average consumer palate. As a result, brands and liqueurs that had fallen to the wayside will reap major benefits moving forward: Consider Suze, an aperitif made from French and Swiss gentian roots that dates back to the late 1800s, which was out of popular use for a long while and is just now getting a fresh look from bartenders across the country. Aside from the big names, craft distilleries will also look to add bitters to their lineup—Berkshire Mountain Distillers in Sheffield, Massachusetts and St. Agrestis in Brooklyn, New York are among those seeing more on-premise action and bartender advocacy thanks to a wide variety of bitters flavors.
The popularity of the Spritz cocktail has ascended in recent years, thanks to the efforts of brands like Campari and Aperol, enthusiastic bartenders, and consumers embracing the low-abv cocktail movement. There’s been a halo effect on other wine-based cocktails, and now wine coolers are coming back into fashion. This isn’t your mom’s Bartles & Jaymes—these are trendy products made with premium ingredients, and often branded with the name of a respected winery. As cans continue their march to conquer the shelf and consumers look for portable and eco-friendly packaging, canned spritzers and wine coolers will proliferate.
Make-your-own-drinks will become a bigger component on the mixology scene as bar owners take an approach that’s both educational and promotional. Allowing customers to participate in cocktail-making will generate new business in the on-premise and provide bar-goers with hands-on learning experiences that are also enjoyable—while lifting the veil a bit on the mixology scene.
It’s no secret that cannabis products are heating up fast—even those, like cannabidiol (CBD), that contain no psychoactive ingredients. CBD has recently become a trendy additive in cocktails and even some beverage alcohol brands, as consumers are eager to experiment with its effects while enjoying a familiar drink. That curiosity will continue, but it will be met with backlash. Some states may opt to limit or ban its use with beverage alcohol, citing unknown health effects. California, which had a budding CBD cocktail movement, recently passed legislation prohibiting the sale of beverage alcohol with added CBD on-premise, as well as the manufacturing of CBD beverage alcohol products. The growing pains won’t be resolved until the Food and Drug Administration issues guidance on the use of CBD in conjunction with beverage alcohol.
Craft Goes Private Label
Craft players, beset by consolidation in their businesses and needing new routes to market, will team up with major retailers to produce more private-label craft spirits brands. While this move could dilute craft’s hard-fought image of quality and independence, it may become a necessity as smaller distillers face narrowing market access and rising overheads.
The Kentucky Bourbon Trail has been a big hit, and others are now emulating the Bluegrass State. Prime candidates for success are out west, where Colorado’s own craft spirits trail is developing, and the southwest, where craft spirits are showing a real sense of provenance. Virginia and New England are also stirring on the tourism front. All of these places will be posing new options—and competition—in the whiskey tourism game.
Rosy hues have transcended rosé wine, seeping into cider, spirits, and liqueurs as marketers tap further into consumers’ proclivity for all things pink. In 2019, more spirits marketers will follow in the footsteps of brands like Beefeater—which introduced Beefeater Pink, a pink gin infused with natural strawberry flavors, citrus, and juniper botanicals—and Malfy, whose baby pink Gin Rosa is distilled with Sicilian pink grapefruit. More craft cider makers, too, will add rosé-flavored expressions to their lineups, as major labels like Strongbow and Angry Orchard have done before them, in an effort to tempt wine drinkers into the hard cider sphere.
Irish Pot Still Proliferates
As Irish whiskies find more solid footing on the global stage, single pot still offerings in particular will give the country a more competitive edge against its Scottish, American, and Japanese counterparts in both the on- and off-premise segments. Made with a mixed mash of malted and unmalted barley, single pot still whiskies have spicier, more peppery flavors than those found in blended expressions, which have long been a hallmark of Irish whiskey thanks to category leader Jameson. Expect to see more single pot still whiskey on the shelves this year. By releasing new single pot still expressions of their own, Pernod Ricard’s Powers brand and craft producer Dingle Distillery are among those that have kicked off what’s sure to be an onslaught of these uniquely Irish whiskies.
The Dark Side of Rosé
While the acidic, pale pink rosés of Provence continue to generate the most buzz for the ever-popular rosé category, more darkly colored, structured rosés from Spain, Italy, and beyond are coming into the spotlight. Slowly but surely, consumers who were once enticed only by salmon-pink sippers will expand their rosé repertoire to include these deep-pink wines, as marketers educate consumers and disavow them of a common misconception: the deeper the hue, the sweeter the wine. Look out for dark pink rosés from such regions as Southern France’s Tavel, Spain’s Rioja, and California’s Napa Valley on wine lists and retail shelves, especially as rosé further establishes itself as a year-round offering.
Rise Of The American Izakaya
Over the past several years, Japanese-influenced cocktail bars have popped up in cities with strong mixology cultures, garnering acclaim for their high-quality, minimalist drinks and superb attention to detail along the way. As such bars continue proliferating in the likes of New York City—where such notable newcomers as Katana Kitten, helmed by mixologist Masahiro Urushido, and The Hidden Pearl debuted last summer—they’ll also become more commonplace across the U.S. and reach a set of consumers that transcends the cosmopolitan cocktail aficionado. These bars will be buoyed by the ongoing appreciation for Japanese whiskies and the Highball cocktail.
This year, the wine and spirits industry may see a number of major regulatory changes, thanks to an upcoming Supreme Court case and recent activity from the Alcohol and Tobacco Tax and Trade Bureau (TTB). At press time, the Supreme Court was set to hear the case of Tennessee Wine & Spirits Retailers Association v. Blair on January 16, thus deciding whether the 21st Amendment allows states to enact a residency requirement for alcohol retailers and wholesalers, which prevents out-of-state players from obtaining licenses if the owner or company has not resided in the state for a certain amount of time. While it’s tough to say whether the Court will rule in favor of Blair, the end result, if wide enough in scope, will no doubt pave the way for clearer laws on interstate shipping. Elsewhere, in the wake of several high-profile labeling incidents, the TTB has taken a closer look at its current regulations for advertising, and is moving to update and clarify those sometime later this year. Once these new rules are in place, it’s likely that marketers and producers will take greater care in adhering to guidelines, or else risk further igniting the TTB’s ire and getting slapped with hefty fines.
Collaborative Craft Distillers?
As the craft brewing industry has matured, many successful players have sold to larger companies. But others have opted to band together as partners, such as Southern Tier and Victory with Artisanal Brewing Ventures—which recently acquired Brooklyn, New York-based Sixpoint Brewery—and the Oskar Blues-led Canarchy Craft Brewery Collective. Could craft distillers mimic that model, forming partnerships and pooling resources to reach a wider audience while maintaining their independence? It’s certainly a possibility, as fewer large spirits companies seem willing to invest heavily in craft brands. But the benefits of craft brewers collaborating—heftier purchasing power, increased production capacity, improved freshness, and lower shipping costs due to better market proximity—don’t always translate into the spirits realm, so the model may fail to apply.