Breaking into the U.S Liquor Market-Presentation

PRESENTED BY AUDREY FORT!!

BREAKING INTO THE US LIQUOR MARKET!

OUR PANEL!

A.  HOW THE US SHAPED UP INTO THE COUNTRY WHERE 10 % OF AMERICAN DRINKERS (24 M ADULTS OVER AGE 18) CONSUME, ON AVERAGE, 74 ALCOHOLIC DRINKS PER WEEK…!

SALES VOLUME OF THE US SPIRITS INDUSTRY, 2014!

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WORLD ALCOHOL CONSUMPTION!

THE US: A COUNTRY WHERE 10% OF DRINKERS CONSUME 74 ALCOHOLIC DRINKS PER WEEK!!

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INHERITANCE OF A LONG DRINKING HISTORY!

1830: the average American over 15 year old drunk 88 bottles of whiskey every year = 3 times as much as a 20th century person drinks!

!“Many Americans began their day with

an "eye-opener" of brandy and bitters, following it up with a healthy-sized Rum Flip, a couple of Gin Slings at lunch, a Sherry Cobbler in the afternoon with extra rations of Mint Julep or Hot Whiskey”  !

!Dave Wondrich!

THE GOLDEN YEARS OF PRE-PROHIBITION!

By 1899, there were 300 000 saloons in the US for 74.5 M inhabitants = 1 saloon per 248 people.!

THE GOLDEN YEARS OF PRE-PROHIBITION!

1851, June 2 - The first prohibition law is passed in Maine (Portland counts 10 000 people, 200 licensed liquor dealers and 400 unlicensed ones). !

!1855 - 13 states have enacted prohibition legislation.!!1862 - Government starts charging retailers a 20$ license fee and manufacturers

0,20$ per gallon of distilled spirit and 1$ for every keg of beer to subsidize the war expenses. Within a few years, 1/3 of the government budget would come from taxing alcohol.!

TEMPERANCE MOVEMENTS!

1881  - Kansas is the first state to have prohibition in its state constitution.!

!1913 - 16th amendment ratified allowing the federal government

to impose income tax, not relying anymore on alcohol taxes. !

1915 - Almost half of the states are dry!!1917  - The US Senate passes the Volstead Act on December 18th, one of the

significant steps to the passage of the 18th amendment.!

PRE-PROHIBITION!

1917  - The US enter WW1. Hysteria against Germany. The War Time ban on selling grain to breweries is passed. Disaster for the German American brewers: 1000 down to 500.!!!October 28, 1919 - The Volstead Act passes the US Congress and establishes the enforcement of prohibition.!

January 16, 1920 - The 18th amendment is ratified by 36 states and goes into effect on the federal level, outlawing alcohol and “putting an end to drunkenness, crime, mental illness and poverty”.!“SECTION 1. After one year from the ratification of this article the

manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited.”!

PRE-PROHIBITION!

The 5th largest industry in the county is now illegal. !

Distribution completely disrupted !!!Some 180,000 saloons closed their doors, as well as unexpectedly hotel bars, fancy

restaurants, nightclubs and cabarets followed by restaurants and hotels !For every legitimate bar that closed during Prohibition, 6 speakeasies opened in its

place (NYC 32000 at least, 1 for 230 inhabitants)!!Mid 1920: the US are the biggest importer of cocktail shakers in the world!!Organized crime replaced legal methods of distribution!

THE DARK AGES OF PROHIBITION!

THE DARK AGES OF PROHIBITION!New consumption habits:!!- new cookbooks, sauces without wine, non alcoholic highballs and mint juleps in newspapers, use of the "chemical" red cocktail cherry as a non-alcoholic version of the brandy-soaked cherries used previously…!!!!!!!!!!!!- Wine and port in classy speakeasies! -Alcohol consumption divided by 3 (1/2 population stopped drinking…)!!- Fear to be caught: getting a quick fix!- Thirst for alcohol increased (… but other ½ population drunk more)!

THE DARK AGES OF PROHIBITION!Consequences on the industry:!!!- Brewers ended up making soft drinks, cheese, and sold malt extracts!!- Californian wine growing business increased from 9 to 375$ a ton of grapes!!- Craft fermentation and distillation disappeared:!over 8,000 U.S. distilleries [cumulative] b/t 1890s-pre WWI, after WWII: only 8.!507 distilleries, 1,217 breweries closed and 700 000 stills were ceased btw 1920 & 1926!!- Bootleg alcohol: whiskey, moonshine, !yak yak bourbon, jackass brandy… !Imported gin, whiskey, champagne!!- Dramatic consequence on the gin industry! in the US!

1932  - On August 11th,  Herbert Hoover gave an acceptance speech  for the Republican presidential nomination for president in which he discussed the ills of prohibition and the need for its end.!

March 23, 1933  - Franklin D. Roosevelt  signs the Cullen-Harrison Act which legalizes the manufacture and sale of certain alcohols. !

Dec 5, 1933 - Prohibition is repealed by the 21st Amendment.!1966 - There were no state laws banning alcohol anymore.!

THE DARK AGES OF PROHIBITION!

Trade trends !!- Collective, national lobotomy for the

US mixology!- Brain drain into soda fountains!- Craze for the Tiki drinks in the 1940’s!- Premixes and powdered mixes!- Slow incorporation of European

ingredients!- Irish whiskey market killed in the US!- Rum starts!- Stimulated cocktail culture in nearby countries!

POST-PROHIBITION!

Consumer behaviours!!- Women drinking into bars!- Got Americans really, really into drinking

distilled liquors!- Created the first wave of drinking-to-get-

drunk culture of imbibing!- 1950’s: vodka becomes the spirit of choice!- Sweeter, less complex preference in

cocktails (rise of bourbon)!!!

POST-PROHIBITION!

B.  HOW THE US SHAPED INTO NOT ONE COUNTRY, BUT 50 STATES!

PRE-PROHIBITION AMERICA!

POST PROHIBITION DISTILLED SPIRITS TAXES: YEAR OF ADOPTION BY STATE!

STATE SPIRITS EXCISE TAX RATES (USD per gallon)!

STATE ALCOHOL LAWS!

STATE ALCOHOL LAWS!So

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CONSUMPTION!

C.  ENTERING THE US LIQUOR MARKET!

THE 3-TIER SYSTEM!

With the exception of control states…!

THE 3-TIER SYSTEM!

US Office?!Park Street/MHW, Self

Import?!Formula/

COLA! Distribution ! Sales/Marketing!

STEP BY STEP!

50 mL, 100 mL, 200 mL, 375 mL, 750 mL, 1 L, and 1.75 L!(27 CFR 5.47)!

ACCEPTABLE SIZES FOR BOTTLES OF SPIRITS IN THE US!

Current Information from TTB:

Avg. Processing Time for Distilled Spirit Applications: 33 days

Fed. Basic Permit

Formula Approval

Certificate of Label Approval

State Registrations

REGISTRATION!

TTB – Labeling

Address Brand Name

Health Warning

LABEL!

TTB – Labeling

Class/Type Description: Vodka – Other Flavored

LABEL!

TTB – Labeling

Net Contents/

Size Country of

Origin

Alcohol Content

LABEL!

I. Who is your in-state distributor and do they operate in your preferred other markets? !! More Markets = More From The Distributor (Marketing Funds, Manpower, etc.)!

!II. Agreement(s) with Distributor(s): Watch for termination penalties and franchise markets!!III. Be sure you have the time/manpower to be in the market. Remember, distributors are just “trucks”!!!!

WHAT IS THE FIRST STEP TO MOVE OUT OF STATE?!

Retailer Advertising Specialties

Consumer Advertising Specialties

Signs/Point of Sale

Consumer Tastings/Retailer

Samples Product Displays Contests/

Sweepstakes

���Exceptions – Things You Can Often Provide

Subject to State Rules

MARKETING TOOLS!

1. Sponsorships must be of a legitimate unlicensed third party’s activities and NEVER a licensee but for very few exceptions (e.g. MSG).! !2. Sponsorships must not be used as a pass-through to conduct illegal activities (e.g. slotting fee).! !3. You are paying for legitimate advertising, signage, marketing benefits.! !4. ALWAYS review state rules !(e.g. In CA and TX, subject to various exceptions—e.g. arenas— brands may not sponsor an event at a licensed premises).! !!!

SPONSORSHIP!

!The issue: Is it a service, thing of value to a retailer? !

Any Exceptions? !Can the brand pour samples/conduct a sampling in the state?! !

CAN A BRAND AMBASSADOR DO A “BAR TAKEOVER”?!

The TTB requires that product and advertiser identification appear on all alcohol advertisements. The product mandatory should be legible (no font size requirement) and appear at the bottom of all advertisements, which includes everything that promotes the product. !!Please drink responsibly. Smirnoff No. 21 Vodka. Distilled from grain. 40% Alc/Vol. © 2013 The Smirnoff Co, Norwalk, CT. !!When an advertisement refers generally to a line of products--such as the full line--- the only mandatory information required is the name and address of the responsible advertiser. For only one product, it should be the full mandatory. !

SOCIAL MEDIA!

A: NO. But why?!

Is this OK?!“Check out my good friend Joe’s Bar, he has our X brand vodka on the menu!”!

SOCIAL MEDIA!

Is this OK to give free goods (liquor or swags) in the US?!

FREE GOODS!

KEGGING/INFUSING!

Is this OK to organize a cocktail competition in the US?!

COCKTAIL COMPETITION!

PRESENTED BY AUDREY FORT!!

BREAKING INTO THE US LIQUOR MARKET!