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Mike Duggan came over from Diageo North America early last year to become CEO of Minneapolis-based United States Distilled Products Co. (USDP), including its subsidiary Phillips Distilling Co. Phillips had gone through five consecutive generations of Phillips family leadership, most recently with Dean Phillips, who remains chairman. Duggan has been given free rein to push the envelope in terms of new products and strategies, and to combat recent downward sales trends at Phillips. The company’s biggest brand, UV vodka, which rocketed to well over a million cases after launching in the early 2000s, has struggled lately, falling by 5.7% last year to 1.25 million cases. SND’s Lee Murphy recently interviewed Duggan at the Phillips headquarters in downtown Minneapolis.
SND: Sales have been falling at Phillips Distilling Co. What’s the update?
Duggan: When I arrived in early 2015, our sales were down by 10%, sometimes more. We weren’t headed in the right direction. But over the past year, our sales have improved every month, and today we’re down just 2% year-on-year. We hope to soon be in positive territory as we continue to invest. One problem is that a third of our sales are in vodka, a category that has struggled.
SND: When you arrived, a once-promising brand, Canadian whisky label Revel Stoke, also was struggling. How have you turned it around?
Duggan: Two years, ago the company was ready to discontinue Revel Stoke. Now it’s among the fastest-growing flavored whiskies in the United States. We’ve rolled out new flavors—Roasted Apple and Pineapple—and Pumpkin Spice is out this fall. We’ve also launched a root beer-flavored Revel Stoke.
SND: Phillips discontinued its spiced Irish whiskey entrant, Feckin. Are you still interested in the category?
Duggan: We’ve returned to the market with Hell-Cat Maggie, an Irish whiskey retailing at $20-$25 a 750-ml. in most markets. We import the whiskey from Ireland and bottle it here. It’s growing fast and shipping to all 50 states.
SND: You also import the Cabrito Tequila brand, which retails at around $22 to $24.
Duggan: Cabrito is one of the most popular Tequila brands in Mexico. It’s rising here, and we’re expecting more. We’re the importer for both the U.S. and Canada.
SND: How is Prairie vodka doing?
Duggan: Prairie was launched in 2008 as the first farm-crafted organic vodka to be distributed nationally. We’re the distillers, and we know every farmer who supplies our grains. Prairie is up 63% in the latest IRI sales data, and our Prairie gin is up 89%. It’s a priority brand for us.
SND: What’s new in other categories?
Duggan: We just signed an exclusive marketing and distribution deal with rum brand La Hechicera, which is made by a family-owned company in Colombia. It features a 12- to 22-year-old Solera retailing at $44.99 a 750-ml. We’re working on two other new partnerships that we hope to wrap up soon.
| Phillips Distilling Co. - Leading Brands (thousands of nine-liter case depletions) | ||||||
| Brand | Type | 2012 | 2013 | 2014 | 2015 | Percent Change 2014-2015 |
|---|---|---|---|---|---|---|
| UV* | Vodka | 1,610 | 1,610 | 1,325 | 1,250 | -5.7% |
| Phillips Vodka | Vodka | 425 | 395 | 380 | 375 | -1.3 |
| Phillips Cordials | Liqueur | 185 | 182 | 175 | 170 | -2.9 |
| Prairie Organic | Vodka | 24 | 39 | 80 | 120 | 50.0 |
| Revel Stoke | Canadian Whisky | 22 | 23 | 30 | 35 | 16.7 |
| Total Leading Brands | 2,266 | 2,249 | 1,990 | 1,950 | -2.0% | |
*includes RTDs Source: IMPACT DATABANK | ||||||
Jackson Family Wines has bolstered its Oregon presence with the acquisition of Willamette Valley’s Willakenzie Estate. Known for single-vineyard Pinot Noir and Pinot Gris, Willakenzie has 125 planted acres in the Yamhill-Carlton and Dundee Hills areas. The deal includes the brand, winery, hospitality center and vineyards. A price wasn’t disclosed.
Concurrently, Jackson Family has announced plans to build a new small-lot winery in McMinnville, Oregon, dedicated to producing Pinot Noir, Chardonnay and Pinot Gris. Construction began in August, and the facility is expected to be operational by the 2017 harvest. In addition to the newly added Willakenzie, Jackson Family’s Oregon portfolio includes Zena Crown Vineyard, Gran Moraine and Penner-Ash. The company’s La Crema and Siduri brands also offer Willamette Valley wines.
In other company news, JFW has named Charlotte Selles vice president, marketing. Previously marketing director for Paul Hobbs Winery, Selles will oversee JFW’s international portfolio, including Chateau Lassègue, Chateau Vignot and Bellevue-Seillan from France; Tenuta di Arceno and Tenuta L’Illuminata from Italy; RockBare and Yangarra Estate from Australia; Catalina Sounds from New Zealand; Sonoma’s Vérité; and Chile’s Alcance. She will report to Gayle Bartscherer, JFW’s senior vice president, international marketing and business development.
•Under current law, a wine labeled with an appellation—whether it’s Napa Valley, Finger Lakes or Rocky Knob—must be made with fruit primarily from that appellation (at least 75% in some areas, 85% in others) and be “fully finished” within that state or a neighboring one. But there is an exemption: If you’re an out-of-state winemaker in, say, New York, and make a wine from at least 85% Napa Valley AVA fruit that you purchased and transported to New York, you can call it Napa Valley on the label as long as you only sell it in New York. Proposal 160, now being considered by the Alcohol and Tobacco Tax and Trade Bureau (TTB), looks to end the exemption. Wine Spectator explores the issue with both supporters and opponents of the pending proposal.
•Beam Suntory is introducing a new Strawberry flavor extension under the Pinnacle vodka brand, which is also getting a franchise-wide packaging makeover. Beam Suntory says Pinnacle’s redesign has a less cluttered look with an updated mountain logo, but maintains the brand’s “playful spirit.” The new Pinnacle Strawberry is 70 proof and retails at about $13 a 750-ml. After a dessert flavor-fueled upswing catapulted Pinnacle to the 2.76 million case mark in 2013, the brand has seen single-digit annual declines, decreasing 2.1% to 2.6 million cases last year, according to Impact Databank. In the year-to-date through August, Pinnacle renewed its progress in control states, growing 2.7%.
•Michael David Winery is extending its fast-growing Freakshow brand with a new red blend this fall. Freakshow Red, which is hitting major markets around the country, is a blend of Syrah, Petite Sirah and Souzao. The newcomer is line priced with the existing Freakshow Cabernet at about $20 a bottle. Freakshow, an Impact “Hot Prospect,” doubled in size to nearly 90,000 cases in the U.S. last year.
•St. Louis-based contract brewer Brew Hub is expanding its Lakeland, Florida brewery for the third time since 2014. Slated to be complete by March, the project will grow the brewery’s annual capacity from 100,000 barrels to 130,000 barrels, as well as add fermenters and a pasteurizer, which will allow Brew Hub to produce and package cider. Brew Hub plans to open four additional breweries over the next few years, with a second Chesterfield, Missouri-based facility slated to open in 2017. Meanwhile, Brew Hub has inked its first international partnership, linking with South Korea’s The Booth Brewing Co. to produce Kieuk Session IPA and Kukmin IPA for export at its Lakeland site.
•Gatlinburg, Tennessee’s Sugarlands Distilling Company is introducing Maple Bacon Moonshine this fall. The 35%-abv offering is intended for use in cocktails or the shot occasion. Sugarlands’ other moonshines include Appalachian Apple Pie, Blockader’s Blackberry, Butterscotch Gold and Old Fashioned Lemonade, among others. The company says its distillery in downtown Gatlinburg has received about 1 million visitors annually since distillation began in 2014.
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