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CANADIAN WHISKY.

THE CONTROL STATES REPRESENT ONE OF THE MOST IMPORTANT MARKETS FOR CANDIAN WHISKY AND THIS MARKET WILL CONTINUE TO BENEFIT AS BRANDS DEVELOP NEW WAYS TO EXPAND THEIR CONSUMER FRANCHISES.

Canadian whisky is big business in the control states. Michigan, Washington and Ohio are among the top 10 state markets nationwide in terms of Canadian whisky consumption, followed by Pennsylvania, ranked 11th, and North Carolina, ranked 13th nationally.

On a per capita basis, Wyoming ranks 4th nationally in Canadian whisky consumption, with New Hampshire 5th. Among the major metro markets, Detroit ranks 2nd nationally (just behind Chicago) with Seattle in 5th place ahead of Loa Angeles, Houston and New York.

Yet, in many respects, Canadian whisky is a study in contradictions, contrasts and a quest for a more clearly defined identity.

How can a category that is the third largest among total distilled spirits (vodka and cordials are both bigger), that represents more than 11% of total liquor consumption and that accounts for more volume than Scotch and American blended whiskey combined, have an identity crisis?

While some on- and off-premise retailers may be able to articulate a few of the category's more salient characteristics, it's unlikely that many consumers -- whether or not they are Canadian whisky drinkers -- could describe much in the way of product attributes or imagery. By way of comparison, a twenty-something tequila drinker who has never tasted bourbon would likely be able to name some bourbon brands or associate the product with its Kentucky roots. Or a thirty-something vodka drinker, when asked about Scotch, could probably offer at least some nuggets of knowledge about the product or at least relate some of the category's history and heritage. But ask the average beverage alcohol consumer about Canadian whisky. The answer is likely to take the form of a puzzled look.

"Scotch has its own identity because it's an import and it's from a particular place," explained John Hartrey, manager, Seagram's VO. "But when you get into North American whiskey, consumers are at two ends of the spectrum -- they're either knowledgeable or it's a complete blur. They know it's a whisky but they're not sure of the nuances."

Yet it is the nuances that help set Canadian whisky apart from other whiskies and that hold part of the promise for the category's future fortunes. "Canadian is blended whisky from Canada," stated Brown-Forman's Dan Kelley, brand general manager for Canadian Mist. "It is easier to drink than other whiskies. It is smoother, it mixes well and has a different taste profile than Scotch, Irish or bourbon."

The smooth taste of Canadian whisky, which proponents say is one of its most appealing attributes, may help explain why women make up a greater proportion of consumers of Canadian whisky than they do for either bourbon or Scotch. In addition, the mellow, relatively easy-to-drink taste of Canadian is something that many marketers say will play a role in attracting a new group of younger consumers.

"Canadian whisky does provide an interesting stepping stone for consumers in the new millennium," observed Ed Gaultieri, vice president, marketing, Barton Brands, one of the country's largest suppliers of Canadian whisky. Although many baby boomers are primarily vodka drinkers, or consumers of other white spirits, Gaultieri said, "we're starting to see as they get a little older and have more disposable income that they are also looking for something with more flavor. They're not ready to leap from vodka to bourbon or Scotch all in one fell swoop, but Canadian whisky, which is lighter tasting, provides a stepping stone over the next five to eight years for consumers to say, 'I'm going to give whisky a crack.'"

He added that "we have a product that inherently would allow us to fulfill those consumer needs in the mouth. Now we have to figure out how to satisfy that in the head and that means advertising and event sponsorship to let them know it's as cool to drink Black Velvet as Kettle One vodka."

Figuring out a meaningful and enticing new rationale -- and effective ways to communicate it -- are among the most difficult challenges facing Canadian whisky marketers today. While some of the category's leading brands have been able to maintain a relatively loyal consumer base, many others have devolved into commodity items sold almost solely on the basis of price. The fact is that many longtime Canadian consumers, who came of age during the 1950s and early '60s, are simply not being replaced by younger consumers.

In addition, whatever prestige may at one time have been associated with Canadian's "imported" designation has long since evaporated. Back in the heyday of whiskey consumption in this country, however, the "imported" moniker was one of the ways for Canadian whisky to position itself as a finer and more upscale alternative to blended whiskies produced in the U.S.

"The whole cache of being 'imported' has been lost," said Matt Wiant, vice president of marketing, classic spirits, at Allied Domecq, the supplier of Canadian Club. But more problematic is that, "When I talk to my friends about Canadian whisky it just doesn't mean anything to them. Scotch has a distinct image. Bourbon has a distinct image. But not Canadian whisky."

Part of the problem, he believes, is that much of the imagery that does exist -- "pictures of guys drinking whisky in a bar and slapping high-fives, or going fishing, or going out with their buddies" -- is just "not aspirational for people considering new spirits today." He contrasts some of the stale and cliched Canadian whisky images with what is happening in markets such as Spain and Argentina where "the whisky category is on fire." In those markets, he said, whisky is "fun, mixable and being consumed in fun places. The images being used in other parts of the world are working, but the images here are not driving the segment" with some notable exceptions. The most obvious exception is one of the category's top-sellers, Crown Royal, which really does not market itself as a Canadian whisky per se but rather as an aspirational super premium spirit.

Despite all this, many marketers say the category is ripe for rejuvenation. The consensus is that while the imagery may be a bit tired and a stronger category identity and selling proposition need to be developed, the good news is that Canadian whisky is an excellent product -- relatively light and smooth compared to many other whiskies -- that should logically be embraced by new consumers. Distillers are also developing new expressions, line extensions and ultra-premiums in an effort to help revitalize interest and spur new growth.

Marketers at Jim Beams Brands, for example, which has Windsor Canadian, Lord Calvert and the high-end Tangle Ridge in its portfolio, say, "The Canadian whisky category is positioned for growth, especially with the increase of ultra-premium Canadian whiskies like Tangle Ridge."

With that in mind, here's a roundup of activity among selected leading brands of Canadian whisky:

CANADIAN MIST

The category's #1-selling brand and the best-selling imported whisky among all distilled spirits in the U.S., Canadian Mist, is continuing to ramp up its ad spending and recently introduced a sophisticated new pressure-sensitive label (that appears "painted" on the bottle). Ad spending grew from about $5 million in fiscal 1999 to $7 million in the current fiscal year (which ends in April of 2000), with plans to go to $7.5 million in 2001 and $8 million the following year. "This shows the commitment of Brown-Forman to this brand," says brand general manager Dan Kelley. "They have given us all the resources we need to compete in the marketplace."

The focus of all this spending is a campaign designed to highlight the brand's "smooth, light taste as well as the lifestyle of our target consumers." Positioned as an "easy-drinking, casual and fun whisky," Canadian Mist is generally priced at retail about a dollar or two less then Canadian Club and Seagram's VO and about a dollar more than Black Velvet or Windsor. Canadian Mist also enjoys a strong consumer franchise among African-Americans.

CROWN ROYAL

The #2 Canadian whisky in terms of case volume, and the #1 "foreign bottled" Canadian in the U.S., Crown Royal distances itself from its origins and focuses instead on its appeal as a super premium spirit. "Consumers choose brands not categories." said Neil Gallo, global director, Crown Royal for Seagram Spirits & Wine Group. "Crown Royal is a brand all its own with its own personality and character. We don't believe consumers choose this brand within this category."

Nonetheless, Crown Royal is one of a small handful of whiskies that have shown consistent -- and in Crown Royal's case, remarkable -- growth over the past decade. In a nutshell, the brand's marketing will continue along the same path it has successfully followed to date. "The emphasis would be on increased ad spending," said Gallo, as well as on its extensive direct marketing program with consumers. Crown Royal spent more than $10 million on measured advertising in 1998, according to the authoritative Adams Liquor Handbook, which was more than twice as much as the second-biggest spender, Canadian Mist. In addition, Crown Royal will be looking for new opportunities via the internet. "The internet, over the last three years, has been a real eye-opener," observed Gallo. "Seagram as a whole has embraced the internet [ldots] it will be interesting to see just how much of a businessenabler the internet will become for the wine and spirits industry."

Crown Royal Reserve, at about $30-plus per bottle at retail, is also doing well in the higher-priced segment, Gallo said. "It's going beyond our expectations. From a loyalist coming off the base brand to newcomers to the franchise, it continues to impress consumers with its quality, smoothness and value."

BLACK VELVET

The Black Velvet girl, dreamed up in the late 1950's by executives at Heublein and its ad agency, is back in a big way and with an important but seemingly subtle shift. Barton Brands, which acquired the brand early in 1999 from UDV along with several other Canadian whiskies, has markedly increased spending for one of the industry's oldest and best-known campaigns. Said Barton's Ed Gaultieri, "We're going back to what made the brand great -- the Black Velvet girl -- and we've added in the USP (unique selling proposition): 'Smooth As Velvet.' It's a way of saying it's smoother in a very substantial way."

In addition to increased ad spending, Barton significantly increased its support for the brand during this past holiday season including some hard-hitting point-of-sale. "We've put a strong program and a lot of investment behind Black Velvet and MacNaughton because we wanted to let the trade know we bought these brands not just to maintain them but to expand them," said Gaultieri.

Not coincidentally, the recent acquisitions of various brands moves Barton up to the #2 slot in Canadian whisky volume in the U.S. with about a 22% share of the 15.8 million case category.

SEAGRAM'S VO

Introduced in 1914, Seagram's VO (Joseph Seagram's "Very Own" signature blend created in honor of his son's wedding), is one of the best known brands in the category. Although ad spending has been reduced somewhat in recent years, the brand still has a loyal following "who appreciate the taste and quality of the blend," said Seagram's John Hartrey. "The question for the future is to solidify that franchise and obtain new users among people who may outgrow other categories" such as rum and other white spirits.

This year, Seagram will concentrate on reinforcing its consumer franchise and expanding the successful rollout of VO Gold, which, at last count, was available in 37 states. Among the many efforts supporting the rollout are tasting seminars for distributors and possibly for retailers as well in the future. "The retail reception has been phenomenal in terms of facings and placements on- and off-premise," said Hartrey.

CANADIAN CLUB

One of the most promising new entries in the Canadian whisky category is Canadian Club Sherry Cask. Finished in hand-selected wooden casks that impart some of the distinctive and sweet flavors of Spanish sherry, CC Sherry Cask retails in the upper $20-range (versus the lower teens for the 6-year-old base brand). "Sherry Cask takes Canadian whisky and makes it even more accessible," Allied Domecq's Matt Wiant said. "Everyone who tastes it likes it. Even if they are not whisky drinkers they are pleasantly surprised. I think it will have legs. The key is to get people to try it."

Meanwhile, an intensive effort to reinvigorate the base brand is underway. It's an effort that was worked on during 1999 but that, according to Wiant, didn't go far enough -- "it wasn't 'breakthrough,"' he said. "This company is committed to Canadian Club. It is a huge brand with a loyal base of users and we're committed to finding the right way to reposition it and re-energize it." It's part and parcel of the challenge facing the category as a whole: "We need new ideas. We need a new proposition."

WINDSOR

The sixth best-selling brand in the category nationwide, Windsor Supreme is #1 in several key Canadian whisky markets including Pennsylvania, Wisconsin, Minnesota, North Dakota and Nebraska. It is marketed by Jim Beam Brands and retails for approximately $9.99.

Last month, Windsor began hosting the Fourth Annual Search for the Ultimate Ice Fishing House in Minnesota. Described as a contest that has been incredibly successful" in reaching the brand's consumer, it has also generated a lot of publicity including mentions on ESPN and USA Today.

TANGLE RIDGE

A small brand with big possibilities, Tangle Ridge represents one of the most promising opportunities for Canadian whisky -- the market for "hand-crafted" superpremiums. Introduced in 1996, shipments of Tangle Ridge were up more than 50% in 1999 over the previous year (albeit from a small base). Priced at approximately $19, Tangle Ridge is aimed at the 25- to 44-year-old consumer. The brand is demonstrating particular strength in the New York, Texas, Washington, Wisconsin, North Carolina and the Indiana markets.

Marketed by Jim Beam Brands, the brand will continue to have on- and off-premise point-of-sale support this year. A field marketing program inviting consumers to taste the difference between Tangle Ridge and other whiskies that began last year will continue in 2000.
 LEADING BRANDS OF CANADIAN WHISK
 IN THE CONTROL STATES
 MIXED CASES
BRAND TYPE SUPPLIER 1998
Canadian Mist USB Brown-Forman Beverages 756,125
Balck Velvet USB UDV North America 716,550
Crown Royal FB Seagram Americas 426,955
Canadian Club FB Allied Domecq Spirits, USA 372,554
Windsor Supreme USB Jim Beam Brands 285,223
Seagram's V.O. FB Seagram Americas 281,262
Canadian LTD USB Barton Brands 177,154
Canadian Rich & Rare USB Allied Domecq Spirits, USA 150,542
Mac Naughton FB UDV North America 159,134
Loard Calvert USB Jim Beam Brands 140,038
Total Leading Brands in the Control
States 3,465,537
Others 825,979
Total Canadian in the Control
States 4,291,516
BRAND 1999 [*] % CHANGE
Canadian Mist 715,172 -5.4%
Balck Velvet 709,439 -1.0%
Crown Royal 471,091 10.3%
Canadian Club 364,303 -2.2%
Windsor Supreme 276,339 -3.1%
Seagram's V.O. 275,572 -2.0%
Canadian LTD 183,087 3.3%
Canadian Rich & Rare 155,541 3.3%
Mac Naughton 148,324 -6.8%
Loard Calvert 130,515 -6.8%
Total Leading Brands in the Control
States 3,429,383 -1.0%
Others 804,864 -2.6%
Total Canadian in the Control
States 4,234,247 -1.3%
(*.)Last 12 months data ending 9/30/99
Source: Adams Business Media
Research Database from NABCA data.
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Author:FURLOTTE, NICOLAS
Publication:StateWays
Date:Jan 1, 2000
Words:2604
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