What’s Next For The Drinks Business?

Michael Anstendig

A person pouring cocktails through a strainer.

At the Global Drinks Forum in Berlin this month, movers and shakers in the spirits industry discussed the future of the business. Photo via iStock/Jodi Jacobson.

The cocktail scene received an intellectual jolt on Monday, October 10, 2016, as the Global Drinks Forum debuted in Berlin. The brainchild of Andy Bishop, a 20-year industry veteran behind the London Bar Show and Theme Magazine, it presented leading bartenders, spirits brand leaders and market researchers from around the globe to discuss the drinks business’s future. Held as a lead-in to Bar Convent Berlin, a leading European bar and beverage trade fair, the daylong conference addressed sustainability, politics, trade marketing, gender, influencers vs. celebrities, small vs. large brands, authenticity and millennials. Here are a few highlights from the event.

Trade marketing’s past and future

“It’s crazy how much money is being funneled into trade marketing. Is it sustainable? Is there ROI?” asked Simon Ford, CEO of The 86 Co. He charted its humble beginnings and Absolut’s breakthrough of enlisting Dale DeGroff and Dick Bradsell to teach real bartending skills. “The relationship between brands and bartenders moved things forward. The brand embodies values and sharing ideas beyond continents. It was powerful and effective.”

This, however, ultimately escalated into globetrotting brand ambassadors, cocktail competitions, distillery trips, extravagant entertaining bills and even bar listing fees. Absolut pulled away from trade marketing and paid a steep price — bartenders stopped stocking it. “Brands need to talk to both bartenders and consumers, because bartenders talk to consumers,” urged Ford.

The future of trade marketing, according to Ford, lies in “more consumer interactions from both the bartender on behalf of the brand and the brand itself.” He cited Dandelyan‘s pop-up at Virgin Atlantic’s London Heathrow Clubhouse, which brought state-of-the-art cocktails to a major airport.

Opinion leaders as brand builders

“Billboards don’t work anymore. Billboards equal awareness. What’s more important is the recommendation from someone you trust,” said Jacob Briars, global advocacy director of Bacardi, who focused on influencers. “If you can make your story compelling and true, consumers will share it for you. Social media has set everyone up as a storyteller and a broadcaster.”

Downplaying celebrity, Briars noted, “You can be famous, but it’s not enough. Even Trump couldn’t sell his own steaks.” Briars emphasized that authenticity is essential, contrasting a credible spirits promotion with the rakish Jude Law to one with David Beckham, associated with teetotaling, which was less so.

Think beyond pink: women, spirits & cocktails

“In 1895, only 1% of bartenders were women, now 60% are,” observed Ann Tuennerman, founder of Tales of the Cocktail. That said, women are under-represented in fine dining establishments versus family-friendly restaurants. Tuennerman called on bar owners to “go beyond their usual networks, their same channels” when hiring. She argued for multiple tracks for career development so that anyone from a barback to a cocktail server can aspire to become a bartender.

“We are now in the ‘Sheconomy.’ Women decide 85% of purchases, which is $20 trillion worldwide,” Tuennerman noted. She reproached products that pander to women, cautioning, “Don’t just paint it pink.” Acknowledging that differences do exist, she observed that “women pick drinks on flavor profile, whereas men on the spirit in the drink. Women are also more invested in the story of the spirit. However, women are not a niche group with a single answer.”

The sustainability imperative

“Bartenders are fed up with the rapid purchase cycle: buy, use, discard, repeat. The new generation wants products with longevity and purpose,” observed Alex Kratena, founder of P(OUR) and London’s Artesian bar alum. He lauded Saltwater Brewery’s innovating eco-friendly, edible six-pack rings, in lieu of plastic. He predicted a whole new economy emerging from “trash,” for example, sneakers made from discarded plastic.

Noting transportation’s carbon footprint and expense, he predicted, “People will buy and source locally. You won’t be able to afford imported.” As for elaborate packaging and add-ons, these costs and are not sustainable long-term. “Forced creativity will change the industry in unimaginable ways,” said Kratena. “If you are reacting to what’s going on in the bar scene, you are following up. Those who act will thrive.”

Early adopters: don’t be afraid to get political, and embrace simplicity

“Mass-market influencers demand that brands share their values,” said Will Rowe, founder and CEO of Protein, a global audience agency, as he presented the findings of their Global Early Adopters’ Drinks Report. He cited campaigns from Ilegal Mezcal, Tecate Beer and Stella Artois with overt political stands on Trump, U.S.-Mexico relations and water quality, respectively. This tech-savvy group “feels overwhelmed by limitless waves of information.” In response, they are attracted to simple, classic cocktails with little fuss, as well as sessionable beers made with minimal ingredients.

Authenticity is paramount

“Consumers want new things, but more than taste and flavor, they want authenticity,” said Iván Saldaña Oyarzábal, co-founder and CIO of Casa Lumbre Mexico, producer of Ancho Reyes Chili Liqueur and Montelobos Mezcal. This spans raw materials, the producers and the place of origin. He emphasized the importance of consumers being part of a community, not just a transaction.

Millennials and alcohol

Millennials are the “most health-obsessed ever,” said Jonathan Forsyth, global drinks analyst at Mintel, a market research firm. As for alcohol, they still indulge, but in moderation. He noted their receptiveness to sessionable beers, lower ABV spirits and even non-alcoholic wine, beer and spirits. He added that “for Millennials, natural is synonymous with healthy” and a product that claims to be made more naturally can leverage the health halo.

Small spirits brands’ “unfair” advantages

“The public’s love affair with big brands is over,” observed Dan Gasper, co-founder of Distill Ventures, which provides support to entrepreneurs. He observed how large companies, like Volkswagen, lost the public’s trust. Small, founder-led brands, in contrast, are rising, empowered by digital connectivity and discovery, resulting in their siphoning $18 billion from the big boys in the last 10 years. Gasper outlined the “unfair” advantages that they enjoy: having an interesting story to tell, the ability to involve consumers in their journey, openness to real collaborations, freedom to experiment and create products that are fun and memorable.

The fragmented U.S. spirits market

“Larger brands and suppliers are struggling to grow and maintain marketshare,” said Dr. Harald Kohlmann, founder and CEO of Miami’s Park Street, a consultancy focused on beverage alcohol brands. He described the fragmented U.S. market, which resulted from an entrepreneurial wave and multiple marketing and communications channels. In the past, it was big ad spends. “Now, you can effectively target. It becomes affordable for small players. You go to a particular zip code and you can compete with big brands.” That said, he noted that brands of any size can still succeed.

Can a 320-year-old company compete?

“If you have the same strategy as everyone, you will lose,” warned Mark de Witte, CEO of DeKuyper. Discussing the challenges and opportunities facing the 320-year-old family company and its repositioning efforts, he observed, “You need a different strategy and an understanding of what gives you the right to win with consumers and bartenders.” He also cautioned, “The big threat is success, which can make people lazy.”

Luxury brands come down to earth

“The luxury brand model is very different than the premium brand,” said John Moreira, director of Fever-Tree, who tracked the growth of the luxury consumer from 140 million in 2000 to 300 million in 2008. He observed how consumers were traditionally a top focus for luxury brands. However, in today’s more democratized economy, they will have to approach the wider world and compete with premium brands that are already consumer-focused.

Reimagining drinking

Ending the day on a provocative note, Aidan Keane, CEO of Keane, whose company designs bars, clubs, hotels and experiences, reasoned that bars have essentially remained static, leaving the industry ripe for disruption. Citing Nike’s Niketown, “It was a sport shop and didn’t care about sport. It was a temple of athleticism, art, fashion and design. Take the apparel away and replace with drink. Imagine something immersive, a Bacarditown or Budweiserville.” He ended with a call to action, “Stop thinking about minutia. Stop being the ingredient. Create a brilliant experience, create a destination.”