When consumers are enjoying a glass of cucumber water after a massage, purchasing a pint of their favorite Ben & Jerry’s ice cream, or ordering a cocktail at the bar, they’re typically not thinking about how these everyday decisions could be affecting the spirits they find at retail. Nevertheless, Deerfield, Ill.-based Beam Inc. is paying close attention to these actions and using them to create new flavors and line extensions for some of their core brands. Skinnygirl Cucumber Vodka, Red Stag by Jim Beam, EFFEN Cucumber vodka and new ready-to-serve offerings all were inspired by consumer behavior, says Bill Newlands, president of Beam North America.

“If you go out to get a massage, what do they give you afterward? Cucumber water,” Newlands says. “We looked at that and we said, ‘It’s refreshing, it’s light,’ and we now have cucumber vodka in Skinnygirl as a low-calorie option and we have it in EFFEN.”

Similarly, Newlands notes that one of the most popular flavors of Ben & Jerry’s ice cream is Cherry Garcia. Consumers also enjoy cherry pie and cherry-flavored sodas, he adds. As a result, the company stepped outside of its comfort zone and expanded its Jim Beam line of bourbon whiskey in 2009 with the creation of Red Stag by Jim Beam infused with black cherry flavor. Although flavored vodkas have been popular for some time, flavored whiskeys were not.

“When we did that, people thought we were crazy,” Newlands says. “It’s a cherry-infused bourbon, and it’s infused into our core Jim Beam product, so it’s a legitimate bourbon with a cherry flavor added, but it opened up a whole new audience of people.”

Generally, bourbon skews toward male consumers, but Red Stag by Jim Beam has a 50/50 split, he says. Additionally, more than half of the consumers of Red Stag by Jim Beam were not previously bourbon drinkers, so the new product introduction invited new consumers into the category, causing very little cannibalization of its core Jim Beam brand, he adds.

“Interestingly, bourbon, just by its nature, has a little bit of cherry character in it to start with, so you’re accentuating a flavor that to some degree is inherent in the liquid anyway,” Newlands says.

Additionally, he notes that the flavored bourbon also addressed two major industry trends: flavor and flavor intensity. For example, food and beverages that are fairly spicy are hot trends, he says. Beam added Spiced and Honey Tea flavors to the Red Stag by Jim Beam brand in February 2012.

The brand has proven not only that it can be successful within the United States but worldwide as well. “It’s done extraordinarily well in the U.S., but it is also one of the hottest-selling brands in places like New Zealand and Germany, and we’ve taken it all over the world and it’s done well all over the world,” Newlands says.

Next month, the company will release two new ready-to-serve beverages inspired by popular on-premise drinks. Sauza Sparkling Margarita puts a twist on the traditional Margarita by adding carbonation. It will be available in Original Lime, Mango Peach and Wild Berry flavors in a multi-serve, stylish, tall, thin bottle with a twist cap, Newlands says. The other new innovation is the Hornitos Lime Shot, which combines tequila, lime and a touch of salt, mimicking a tequila shot. Whether it’s adding carbonation to a traditional favorite or mixing ingredients for a ready-to-drink shot, Newlands says the key to new product development is meeting a need.

Innovation-centric

Beam expects a quarter of its growth to come from innovation. In fact, the company recently built a 57,000-square-foot, state-of-the-art innovation center in Kentucky. The facility brings together its research and development and quality assurance employees to explore, test, analyze and innovate, Newlands says. It also includes a packaging dimension for package structure and design as well as to help achieve environmentally friendly goals, he adds.

“We have space where you can bring consumers in to do consumer testing and one-on-one discussions and group discussions,” he explains. “It’s an amazing investment from our perspective as a company and wanting to be innovative and to be ahead of consumer trends.”

Beam also stays ahead of industry trends by expanding some of its core whiskey brands. Maker’s Mark has grown double digits for two consecutive decades and continues to increase, Newlands says. In 2010, Beam extended the Maker’s Mark brand with Maker’s 46, which differs from Maker’s Mark in that it is aged for an additional three months in barrels with 10 seared French oak staves. These staves give the bourbon a sophisticated flavor, Newlands says. Like its Maker’s Mark counterpart, Maker’s 46 has performed extraordinarily well in the marketplace, he adds. Similarly, the company launched Jim Beam Devil’s Cut in 2011, which is created using a proprietary process that extracts the liquid trapped inside the wood of the bourbon barrels.

“When the barrel is empty, there’s product left literally in the wood, so we came up with a process to extract some of that liquid — which of course [has a] very intense flavor because it’s sitting in the wood — and blended that with some older Beam to create what we call Devil’s Cut,” Newlands explains. “The angel’s share is what evaporates; the devil’s cut is what’s left in the barrel.”

In 2011, Beam introduced its first single-barrel bourbon, Knob Creek Single Barrel Reserve, and last year it launched Knob Creek Rye whiskey. Last year it also released C by Courvoisier, which is an intense blend of small-batch-produced cognac specially selected from 50 winegrowers in the Fin Bois Cru. It is crafted by the house’s master blender and goes through a double-barrel aging process to produce a smooth, full-bodied taste experience, the company says. All of these product releases feature bigger, richer and bolder flavors, Newlands says.

“Some people are looking for something lighter and perhaps refreshing,” he says. “There’s also a different consumer on the other end of the spectrum that’s looking for big, rich, bold flavor. … We’ve tried to address and look at both of those dimensions as we think about what we do.”

On the lighter side of the spectrum, the company will launch a new whiskey under the Jim Beam brand name called Jacob’s Ghost next month. Jacob’s Ghost is a white whiskey that is aged slightly to impart flavor. It was named after Jacob Beam, the creator of what is known today as Jim Beam bourbon.

“One of the things consumers have said is, ‘Yes, I drink vodka,’ but by its nature, unless it’s flavored, it’s supposed to be tasteless and odorless,” Newlands says. “What white whiskey does is it gives a bit of flavor as a mixable liquid.”

Referencing the ghost of Jacob Beam, the front of the bottle features a hologram graphic of the founder.

The whiskey boom

Beam also recently invested in the fast-growing Irish whiskey category. In early 2012, Beam acquired the Kilbeggan Distilling Co., which includes the Kilbeggan, Connemara, Tyrconnell and Greenore brands, as well as Cooley’s malt and grain distilleries in Dundalk and Kilbeggan, Ireland. Cooley is one of three sources for Irish whiskey and was the category’s only remaining independent producer, the company says. At the end of 2012, Beam added the 2 GINGERS brand of Irish whiskey to its portfolio. This acquisition included two trademarked cocktails called the Big Ginger and the Skinny Ginger.

“Kieran Folliard, founder of 2 GINGERS, had trademarked two signature cocktails, the Big Ginger and the Skinny Ginger, which we think are just great names because ginger ale is a great mixer with whiskey, and more and more people are using it as a simple [drink]: whiskey plus ginger ale,” Newlands says. “It blends very nicely and brings out the flavor of the whiskey pretty nicely, so that was an added plus for us with the 2 GINGERS [acquisition] in that we’ve got these two drink names that have done extremely well together with the Irish whiskey.”

In addition to the mixability of Irish whiskey, Newlands points out that the segment is performing very well worldwide.

“The flavor profile of Irish whiskey is very appealing, and so we saw that as a great opportunity, and the 2 GINGERS brand really gave us a chance to round out,” he explains. “We already made the liquid that went into the product, so it was a chance for us to acquire an additional brand and give us greater breadth in Irish whiskey because we think [it] will be a very good play for us going forward.”

Newlands also notes that bourbon is the fastest-growing category in the spirits segment.

“It’s sippable for those people who like it that way, but it’s also very mixable, and I think that’s a big factor,” he says. “The fact that it’s an American product and made here — it’s the spirit of the country — is also a big help in that area, but the bourbon category really top to bottom is just growing extremely well.”

What women want

As the whiskey category continues to grow, so does Beam. It spun off from Fortune Brands in the fall of 2011, creating Beam Inc., a pure-play spirits company. Today, Beam Inc.’s share price is higher than the combined business’ share price at the time of the spin-off, Newlands notes.

Skinnygirl is one of the brands in Beam’s portfolio helping to drive that growth. In the 18 months after purchasing the Skinnygirl brand, volume sales have increased tenfold, he says.

The Skinnygirl line appeals to women and speaks to several massive consumer trends, including low-calorie, convenience and premiumization, which appealed to Beam.

“We had a brand and a consumer proposition that appealed specifically to women, which by and large spirit companies are not very good at and they don’t focus on it,” Newlands explains. “And we said, ‘We see a major opportunity to speak more directly to women.’ Skinnygirl was a great chance to do that, but what we also recognized is there are 8 million women who drink Margaritas, which was the original product in Skinnygirl; there are 26 million women who drink vodka; and there are 42 million women who drink wine. So in the context of providing convenience, low-calorie, premium image, we saw that as a great chance to meet more of the woman’s needs than simply where we were.”

The Skinnygirl lineup includes Margarita, White Peach Margarita, White Cranberry Cosmo, Piña Colada and Sangria ready-to-serve varieties; Bare Naked Vodka as well as Tangerine, Island Coconut and Cucumber flavored vodkas; and California White Blend, California Red Blend and California Rosé wines. Last summer, the brand launched a new advertising campaign, “Drink Like a Lady,” which also included its first national television campaign.

“We have put it into TV and done it in a vignette form, showing that no matter how you as a woman choose to cocktail — we use cocktail as a verb — we can help you with that,” Newlands says.

Beam also has expanded its Courvoisier brand to attract female consumers. In 2011, it launched Courvoisier Rosé, which blends Courvoisier cognac with premium French red wine grapes. Last fall, the company released Courvoisier Gold, which blends Moscato wine from the South of France with Courvoisier cognac. Both Courvoisier Rosé and Courvoisier Gold were designed to appeal to women. African-American women in particular have expressed their love for Courvoisier Gold, Newlands says.

“Again, it was something that wasn’t existing in the marketplace before we did it, so we’ve done, I think, a pretty good job of being much more targeted in our approach and trying to meet the interests and needs of particular sub-segments of the population,” Newlands says. Although he laughs at the notion of women being considered a sub-segment because they make up more than 40 percent of the consumption in the spirits category, he notes that spirits companies weren’t really talking to women. By putting a focus on women and acquiring the Skinnygirl brand, Beam effectively acquired one of its fastest-growing and most successful brands.

Favorable flavors

The company purchased its fastest-growing premium vodka brand, Pinnacle, from White Rock Distilleries last spring. With more than 30 flavored vodkas in the line, the brand’s most purchased SKU is its unflavored vodka, Newlands says. Pinnacle has performed well in taste tests against the competition, proving it to be an exceptional base liquid, he adds. Adding to that, the brand offers an abundance of indulgent flavors including Whipped, Cookie Dough, Marshmallow, Cake and Pumpkin Pie.

“When we first thought about acquiring [Pinnacle], one of the things we thought is, it’s all the flavors you’ve always loved, and so they’re great flavors and people are enjoying them,” Newlands explains. “It’s a brand that has sophistication and style, but it’s a fairly affordable price, so I think [with] all of that put together, the consumer sees it as a real value, and they see it as something where they get a great return value for their money and they get great flavor in the bottle. So even though the unflavored is the biggest individual product, which we’re happy to see, the flavors have done very well also, led by Whipped. The Whipped product in particular has been spectacular.”

Beam’s high-end vodka brand, EFFEN, showcases more stylish and sophisticated flavors, including Black Cherry, Dutch Raspberry and Cucumber, Newlands says. In 2011, Beam launched Pucker Flavored Vodka, which now includes Sour Apple Sass, Grape Gone Wild, Cherry Tease, Citrus Squeeze, Lemonade Lust and Raspberry Rave flavors. Unlike EFFEN, the Pucker Vodka line features vodkas with more intense flavors.

“Some people like things that are more subtle; some people like things that aren’t, and we provide each of those,” Newlands says.

Flavor also plays an important role in the rum category. In 2008, Beam acquired the Cruzan brand, which includes 17 aged rum varieties, 11 of which are flavored. The rest of the portfolio is made up of a dark rum, a single-barrel rum, a light rum, a spiced rum, a black strap rum and a 151-proof rum. Since the acquisition, Cruzan sales have increased approximately 75 percent, he says.

Beam also secured the Calico Jack rum brand as part of its White Rock Distilleries acquisition. The lineup includes 10 all-natural flavored rums as well as 70-proof and 94-proof spiced varieties.

“We’re very excited about the rum category,” Newlands says. “This is a category we feel is a good opportunity for us, and we plan to invest in it.”

Reaching consumers

Beam also is increasing its investments in the digital space.

“Compared to just a few years ago, we’ve seen a vast increase in the digital interest in our business,” Newlands says. “It wasn’t that long ago that we didn’t do anything in digital, like most people didn’t, but we spend almost a third of our consumer spend today in the digital environment.”

For instance, the company posted a collection of videos for Sauza tequila called “Make it with a Fireman” on YouTube that has received more than 9 million views. The videos feature a fireman and a kitten — because “kittens make everything better” — showing consumers how to make a Margarita with Sauza tequila. Because it is posted online, the video enables the brand to teach consumers how to make a cocktail in a fun and playful way, and it allows consumers to find the video for themselves instead of simply watching a commercial on TV.

“Our whole trend to doing more and more digital and to try to be much more individual-consumer-centric than we used to be is a big trend in our business,” Newlands says.

Furthermore, Beam is spending more on media in general than it has in the past, he says. Today, more than 10 of the company’s brands are on TV in some context, which wasn’t the case just a few years ago, he adds. In 2011, Time magazine even named Jim Beam’s “Bold Choices” advertising campaign as one of the Top 10 TV ads of 2011. The commercial opens to a young Willem Dafoe weighing his options while waiting at a Greyhound bus station in Appleton, Wis.: play it safe or make the bold choice of pursuing an acting career in the Big Apple? The story unfolds with the exploration of alternate lives: Had Dafoe not traveled to New York City, he might have become a factory foreman, a chess champion, an aging punk or even a sumo wrestler. But, as Dafoe notes in the ad, “All choices lead you somewhere. Bold choices take you where you’re supposed to be.”

According to New York-based market research firm Nielsen, Jim Beam’s average dollar sales grew 6.3 percent after the campaign’s launch.

“Our movement to celebrate bold choices and the people who make them has not only resonated with consumers, but it has also driven brand re-appraisal and, ultimately, sales since our campaign launched in February,” said Kevin George, senior vice president and global chief marketing officer for Beam, in a December 2011 statement. “We are proud that the commercial’s creativity and message have helped to generate such positive responses from media, the advertising community and our fans.”

The company also keeps demographics in mind when marketing its brands. For instance, flavored vodkas like Pinnacle typically skew toward the legal drinking age to 35 age range, while Scotch whisky, such as its Laphroaig brand, tends to skew a little older, Newlands says.

“We try to layer our business approaches in particular markets to the consumer trends that are appropriate for those places,” Newlands says.

Its Cruzan brand, which is a Caribbean rum made in the U.S. Virgin Island of St. Croix, is very popular in Florida because of the large Caribbean population there, he adds. San Francisco has a large Asian community that enjoys cognac, so Courvoisier is popular in that area. Tequila is particularly popular in the Southwest and throughout Texas because of the strong Mexican-American heritage in that region. Bourbon, on the other hand, is becoming popular nationwide. The heartland region down the middle of the United States is still slightly overdeveloped for bourbon, but that has decreased in the last 10 years, he says.

“With the interest in bourbon that’s developed, we always joke that it’s available in all the Manhattans: Manhattan, N.Y., Manhattan, Kan., and Manhattan Beach, Calif.,” he says.

Worldwide, Courvoisier cognac and Canadian Club whisky are two of the most-distributed brands, Newlands says. Jim Beam is a top-selling spirit in Australia and does quite well around the world, he adds. Outside of the United States, its Teacher’s Scotch whisky is very popular in India, Brazil, the United Kingdom and some of the developing markets, he says.

With more than 80 brands in its portfolio, Beam organizes its products two different ways in order to make sure that each one is getting the attention it needs. First, the brands are organized into three categories: power brands, rising stars and local jewels. The company recently entered an agreement to sell its fourth category, value creators, and inventory to St. Louis-based Luxco. Power brands put out a million cases or more each year and include the following brands: Jim Beam bourbon, Maker’s Mark bourbon, Pinnacle vodka, Sauza tequila, Courvoisier cognac, Canadian Club whisky and Teacher’s Scotch whisky. Rising stars are brands with strong growth rates that are building for the future, such as Skinnygirl Cocktails, Knob Creek bourbon, Hornitos tequila, Cruzan rum, Laphroaig Scotch whisky and Basil Hayden’s bourbon. Local jewels are brands that are very important in a particular market, such as DeKuyper cordials in the United States, Whisky DYC in Spain and Larios gin in Spain.

“We have those three things, and what that helps us to do is focus our attention on what’s our investment and what’s the profile of growth and expectations we have in those categories,” Newlands explains.

Then, the brands are separated into three category groupings: whiskies, mixables and ventures. The whiskies group includes Irish whiskey, Canadian whiskey, Scotch whisky and bourbon; the mixables group includes spirits such as tequila, rum and liqueurs; and the ventures group represents products of the future, such as Skinnygirl, Pinnacle and Courvoisier, Newlands says.

 In the nine months ending Sept. 30, 2012, Beam’s net sales increased 5 percent compared with the previous year’s time frame. By putting a focus on innovation, catering to its consumers, and giving each of its brands the attention it needs, the company expects continued success. BI