Light spirits—vodka and rum—have had a long run. Now, with the nation thirsting for classic cocktails such as Manhattans and old-fashioneds, brown booze is booming. Bourbon maker Beam Inc. is benefiting.
With Beam’s recent acquisition of Kilbeggan Irish whiskey, the Deerfield-based legacy of Fortune Brands Inc. has a whiskey portfolio of 27 brands, matching London-based Diageo PLC, the world’s largest spirits producer, and is more than twice as big as Louisville, Ky.-based Brown-Forman Corp. In the fast-growing bourbon category, which includes Tennessee whiskey, Beam counts 10 brands, including Maker’s Mark, versus eight at Brown-Forman and just two at Diageo.
Beam, second to Brown-Forman in U.S. whiskey sales, controlled 20.1 percent of the bourbon market in 2011, up from 19.8 percent in 2010, according to Technomic Inc., a Chicago restaurant and food consultancy.
The issue is predicting how drinking habits will change. “You’re always at risk if you’re riding a trend and it goes away,” Technomic analyst David Henkes says. “But our sense, in the next couple of years at least, is that the trend will continue.”
Beam CEO Matthew Shattock, 50, who joined the company in 2009 from the United Kingdom’s Cadbury PLC, says the distiller’s future depends increasingly on new products. “We’re agile,” he told analysts at a conference in early September. “We’re entrepreneurial.”
Red Stag shows the payoff of trend-riding innovation. Sales of the black-cherry-flavored whiskey have increased more than 30 percent annually since it was introduced in 2009 to compete with flavored vodkas. That outpaces even Maker’s Mark, whose sales rose 29 percent in the first half of this year from a year earlier. (Beam also has had a smash with its ready-to-serve, low-calorie Skinnygirl drink line; its sales more than quintupled last year.)
Red Stag is winning over the Skinnygirl crowd, too. While women consume 20 percent of traditional bourbon, they account for 40 percent of flavored-bourbon sales, according to Beam.
The company’s newest product, Jacob’s Ghost, which has been in the works for two years, will launch in January. The liquor replicates founding father Jacob Beam’s unaged “white whiskey,” which Beam executives hope also will appeal to the same market not entirely sold on bourbon—vodka drinkers and women.
“Many consumers have rediscovered bourbon, and the development of both flavored bourbons and offerings in the super-premium category continue to pique their interest,” says David Ozgo, chief economist at the Distilled Spirits Council of the United States, a Washington-based trade association.
Plenty of advertising helps. Beam has boosted its marketing outlays by double-digit percentages in each of the past three years, to $358.7 million in 2011. It plans another double-digit hike this year, to 16.5 percent of revenue.
Thanks mostly to growing sales in the U.S., Mr. Shattock says Beam’s earnings per share should rise more than 10 percent this year. Annual sales are on track to increase 8 percent, to roughly $2.45 billion.
Beam emerged as a pure-play spirits company with 3,300 employees last October after Fortune Brands split in three, spinning off Fortune Brands Home & Security Business Inc., also based in Deerfield, and selling its Acushnet golf unit.
Its stock, which as Fortune Brands had lagged its liquor- industry peers and the Dow Jones food and beverage index, is up 12 percent this year. But rivals still are doing better. Brown-Forman has gained 20 percent, while Diageo is up 30 percent and Constellation Brands Inc. has surged 58 percent.
“As you talk about innovation—staying ahead of the curve, taking advantage of trends and not only reacting to them, but staying ahead of them—Beam has done a good job of this,” Technomic’s Mr. Henkes says.