Shanken's Impact Newsletter January 1-15, 2019

THE U.S. SPIRITS MARKET HAS CLOSED the books on a successful 2018, in which the category delivered another year of positive growth, driven by solid performances for many of the industry’s largest brands. Overall, the U.S. spirits category grew an estimated 2% to 231.9 million 9-liter cases last year, according to Impact Databank. While the craft and specialty segments have delivered notable contributions, it was again the top 25 spirits brands by volume that led the industry’s growth, combining for a 2.5% increase to 104.6 million cases to account for 45% of the market, up from a 43% share in 2015. Over the past three years, the U.S. spirits market has expanded by a total of 14 mil-lion cases, with the top 25 rising by an aggregate 10.6 million cases.…

WHILE CONSUMER TRENDS HAVE SHOWN RISING interest in smaller brands across a host of product categories in re-cent years—as evidenced by the boom in craft distilling—the spirits industry continues to derive the lion’s share of its growth from its largest players. In 2018, the total U.S. spirits category advanced by 2%, adding about 4.3 million cases, according to Impact Databank. The top 25 spirits brands accounted for nearly 84% of that increase, under-scoring their appeal for consumers even as the craft segment continues to expand its share of the category. Standout brands like Jameson and Tito’s continue to churn out impressive gains, but they’re not the only ones providing momentum for the business. Longtime leaders like Crown Royal, Patrón, Jim Beam, and Ketel One all grew at rates of 4%…

LAST MONTH, ACTIVIST INVESTMENT fund Elliott Management Corp. took aim at the management of Pernod Ricard, in which it holds a 2.5% stake, urging the world’s second-largest spirits marketer to take steps to shed non-core assets and seek new perspectives on the business with the goal of expanding operating margins. Pernod responded with a statement of its own, acknowledging discussions with Elliott but defending its recent performance. In its statement, Pernod noted that its organic sales and operating profit growth ramped up significantly in its fiscal year ended in June—to 6% and 6.3% respectively—with both measures above the medium-term guidance the company issued in 2015. The French drinks giant also highlighted the diversification of its portfolio, both in terms of categories and markets, adding that innovation has accounted for about…

WITH THE WINE MARKET CONTINU-ing to premiumize, Terlato Wines is targeting the luxury on-premise segment with its growing Cru Collection portfolio. Spearheaded by vice chair-man John Terlato, the Cru Collection has a total of 24 producers and is focused on Burgundy, but also includes high-end offerings from Spain, Austria, and other regions. The portfolio finished last year at around 20,000 cases, with an average retail price of $100 a 750-ml. and most of the volume drawn from the on-trade. “We see continued movement to-ward premiumization, and we feel we’re well-positioned to take advantage of that trend,” Terlato says. At the high end of the market, Terlato says Cru wines like Ramonet, Roumier, Château de la Tour Clos-Vougeot, Niellon, Damoy, Groffier, and Château de Meursault are well-established among Burgundy consumers and…

ALTRIA, THE PARENT COMPANY OF Ste. Michelle Wine Estates and Marlboro, has entered the cannabis category with a $1.8 billion investment in Canadian producer Cronos Group. The investment will give Altria a 45% stake in Cronos at C$16.25 per share. Altria will name four directors to Cronos’ board, which will expand from five to seven members, and will have the right to increase its stake to 55% over the next four years at a price of C$19 per share. The initial purchase price represents a 16.2% premium compared to the cannabis company’s stock price at closing on December 6 on the Toronto Stock Exchange. Altria’s move will help bolster Cronos’ position in the market and give the startup access to regulatory, marketing, and government expertise as it navigates the fledgling…

AT MORE THAN 20 MILLION CASES, E.&J. Gallo’s Barefoot franchise trails only The Wine Group’s Franzia in the U.S. market in volume terms, according to Impact Databank, but Gallo believes the brand’s best days are still ahead. To maintain Barefoot’s momentum, the wine giant continues to innovate with the goal of extending into new consumption occasions. Among the offshoots driving gains for Barefoot, E.&J. Gallo CMO Steph-anie Gallo says that its canned Spritzers are rising fast. Retailing at $3 a 250-ml. can or $9 a four-pack, the canned Spritzer range has a low abv of 5.5% and comes in Moscato, Rosé, Summer Red, Crisp White, and Red Sangria. “Barefoot as a whole has maintained positive growth, due in large part to the explosive growth of Barefoot Spritzer in cans as…