Interview, Part 1: Breakthru’s Regional Presidents On The Holiday Outlook
October 24, 2023Breakthru Beverage Group is the third-largest spirits and wine wholesaler in the U.S. market with projected 2023 revenues of $8.2 billion.With a footprint of 16 markets, the company has steadily expanded, including this year’s entry into California via the purchase of Wine Warehouse, as well as recent acquisition plays in Missouri with Major Brands and Minnesota with J.J. Taylor. SND executive editor Daniel Marsteller spoke with Breakthru’s regional presidents—Jeremy Tostrup (West), Will Fulghom (East), Cristina Desmond (Central), and Sam David (Canada)—to get an update on progress heading into the holiday selling season.
SND: How are overall conditions in each of your markets? What are you seeing in the on- and off-premise respectively?
Tostrup: 2023 has obviously had some headwinds with premiumization and overall growth, but we’re cautiously optimistic as we go into the holidays that when people are celebrating with their families and getting together with friends we’ll see stronger premiumization return. In the West, there are certain pockets we’re really excited about for the back half of the year, Nevada being one.
Desmond: Specifically in the on-premise, overall we saw restaurant reservations fall towards the end of the summer and into September, and I think that’s a result of our return to post-pandemic international travel as well as coping with inflation. One trend we’ve seen in the on-premise is a shift from major metro on-premise business out to the suburbs, and we’re continuing to see that. Business is definitely growing faster in those suburban areas than we’re seeing in metro. Clearly one driver is hybrid work with individuals less frequently traveling into the cities.
David: We’re also seeing some headwinds in Canada, but ultimately we’re still in growth mode and I think that’s being led by the longer-term premiumization trend, and we expect it to continue through OND.
Fulghom: Overall, what Breakthru is trying to do is make sure we’re the easiest distributor to do business with, and you’ll see that with Breakthru Now, our e-commerce platform, trying to make it easier for our customers going into the holiday season to order with us.
SND: Looking at spirits, how is momentum holding up? Which areas of spirits are you bullish on for the coming months?
Desmond: Clearly the consumer is gravitating toward the spirits category and it’s having a deep impact across our portfolio. So while we are seeing some softness at certain price points, we’re still seeing some really solid growth company-wide on the ultra-premium, super-premium, and luxury categories.
Tostrup: Spirits is the largest portion of our business, so strategically our portfolio strategy has worked, and then if you look at the digital evolution and our ability to help customers find products to leverage the growth in the spirits category, whether that’s in whiskey or Tequila or RTDs, we’re excited about where we sit going forward.
David: Tequila has been the fastest growing category in Canada for a number of years and really been driving a good majority of spirits growth, upwards of 50%. We’re seeing that growth across all price tiers, which I think is important. And on American whiskey we’ve seen some solid growth in both on- and off-premise channels over both the short and the long term. Those are really positive trends as we look to see more incremental premiumization heading into the holidays.
SND: RTDs have seen rapid growth the past few years. Do you see that continuing looking ahead?
Fulghom: I don’t see it slowing down anytime soon. It’s one of our fastest growing segments, with spirits-based RTDs driving most of that growth. We’ve seen a rise in partnerships with brands that have traditionally been non-alcoholic brands entering the space, and that’s also driving some of this volume and people coming into the category.
Tostrup: RTDs have had explosive growth over the last three years. They went from less than a 1% share of the category to larger than gin and rum, and one of the exciting parts is that it’s bringing new consumers into the spirits business. The younger consumers are looking for flavor and convenience. If you look at the number-one selling package and most of the seltzers, it’s the variety pack. And I think we’ll see trade-up. We’re starting to see four-packs retailing at $19.99, $21.99, which you wouldn’t have seen five years ago. While it was dominated by vodka in the beginning, I think we’ll start to see Tequila-based, whiskey-based, and gin-based RTDs more frequently too.
David: We’re seeing some really strong growth numbers in RTDs, and it’s a focus on convenience and innovation that’s key. And we’re seeing growth in the on-premise as well, up in the high teens in terms of growth rates.
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