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Interview With Skyy Spirits Chairman and CEO Gerry Ruvo

May 12, 2011

Campari’s U.S. unit Skyy Spirits comprises around 22% of total company sales, making the U.S. the second-biggest market for Campari after Italy. With Campari today releasing its results for the first quarter of 2011, Shanken News Daily checked in with Skyy Spirits chairman and ceo Gerry Ruvo to see how the year is shaping up for Skyy’s portfolio.

SND: How are conditions in the spirits market changing as we come into the summer selling period?

RUVO: We’re seeing the market improve somewhat. The off-premise, as you know, has been pretty strong over the past couple of years. When we entered this recession, the off-premise really picked up as people started entertaining more at home. The on-premise went in a different direction, but it seems to be coming back. We’re definitely seeing improvement at the national chains and casual-themed restaurants. As the weather improves, we’re seeing increased business at the corner pubs and restaurants as well. What we haven’t seen yet is recovery at the white tablecloth level. The restaurants have filled up again, but people have cut out things like appetizers and expensive bottles of wine. But the off-premise is still rather healthy.

SND: Vodka is a battleground right now. How are you approaching the situation this year?

RUVO: A lot of people are trying to build equity on price, particularly in vodka. But that’s not happening at our end. We’re trying to build Skyy on above-the-line spending, which we’ve kicked in again. But some competitors, including some of the big players, are trying to do it on price.

SND: Are you seeing that mainly at retail, or in the on-premise as well?

RUVO: Retail is the area where you see it most clearly. The on-premise is harder to gauge, but it may be occurring in the restaurant area as well.

SND: Amid the tough competition, how is Skyy doing?

RUVO: Skyy’s running up low single digits. Our core business is pretty much on plan, and we’re getting a huge boost from our Infusions, which totally changed our approach to the flavor category in 2008. Now we’ve turned more of our attention to our core brand. Millennials, who have tremendous purchasing power, know quite a bit about Skyy, but we haven’t been talking to them enough on the core brand. That’s frankly because we’ve been so focused on our Infusions. So we’re dialing it up for the core brand this year, continuing the Skyy Sexy campaign we began last fall, which is causing a lot of people to talk about Skyy vodka again. We’re not going to play the pricing game. We’re staying exactly where we are on price, and we’re coming in heavy above the line with that campaign. A portion of the effort will focus on the Infusions.

SND: Which flavors are driving growth within your Infusions portfolio?

RUVO: Citrus is our biggest seller, and Pineapple (launched in 2009) is our number-two flavor. Ginger is not as big volume-wise, but it’s doing very well and gaining favor with mixologists and bartenders who love to create with it. We’ve gone gangbusters early this year with both our Blood Orange and our new Dragon Fruit. So that business is growing by double-digits, and we think we’ve really differentiated ourselves in the whole flavor area with our Infusions.

SND: Beyond vodka, where are you seeing opportunities for the Skyy Spirits portfolio?

RUVO: We have an emerging Tequila business. Cabo Wabo is running at almost 30% over last year. We repackaged it two years ago, and most of the old inventory is now through the market. So we’re doing extremely well in that area. We also relaunched the Espolón brand in the U.S. last year (acquired via Campari’s purchase of San Nicolas Distillery in 2009). It’s 100% blue agave and retails at around $25 a bottle across the U.S. So we’ve got a two-pronged attack in Tequila with Espolón at $20-$25 and Cabo at around $35 a bottle. The Tequila business in general is on the upswing again.

SND: Will Wild Turkey get renewed attention, and marketing spend, this year?

RUVO: We’re unleashing the Turkey again in 2011. We’ve repackaged 101 and changed the proof on the former 80 to an 81, with a significant change in the liquid that really delivers on the Wild Turkey proposition. We’ve had the brand for about two years, and we’ve worked hard to get the campaign to a level we’re comfortable with. No one has spent on Wild Turkey for 20-plus years, but we’ll be pushing hard with a great campaign that will break very soon. In the flavor segment, the brand’s American Honey liqueur extension has been a game-changer. There have been a lot of competitors coming into the flavored Bourbon category, but we think we still have the strongest proposition. We’re seeing high double-digit growth there.

SND: How about the flagship Campari brand?

RUVO: Campari is a 3-million-case brand worldwide. We’re seeing some incredible growth in the U.S.—much of it coming from mixologists using it in the Negroni, which has been magic for the brand. We’re seeing double-digit growth on Campari, where previously we’ve seen single-digit growth in America. I think U.S. consumers are rediscovering taste as they move to more whisk(e)y products and products with more flavor. Another liqueur in the portfolio that’s getting more attention is Midori. We brought Kim Kardashian in for its new “Stand Out” campaign, and we’re getting a lot of young LDA females talking about a brand that hasn’t been all that visible for years. In whiskies, along with agency brands like the Auchentoshan and Glenrothes malts, both of which are hot products right now, we’ve reintroduced the Glen Grant single malt range to the U.S. at a premium price point, with 10- and 16-year-old variants. They’re small brands but growing, and they’re particularly popular with new consumers to the single malt category.

Skyy Spirits – Leading Brands
(thousands of nine-liter case depletions)
Percent Change
Brand Type 2008 2009 2010 2008-2009 2009-2010
Skyy1 Vodka 2,485 2,655 2,700 6.8% 1.7%
Wild Turkey Bourbon 570 550 550 -3.5% 0.0%
Carolans Irish Cream Liqueur 325 339 342 4.3% 0.9%
Wild Turkey American Honey Liqueur 85 130 179 52.9% 37.7%
Cutty Sark Scotch Whisky 164 160 155 -2.4% -3.1%
Frangelico2 Liqueur 137 130 110 -5.1% -15.4%
X-Rated Fusion Liqueur 88 104 95 18.2% -8.7%
Midori Liqueur 125 105 90 -16.0% -14.3%
Flor de Cana Rum 66 79 80 19.7% 1.3%
Cabo Wabo Tequila 64 56 65 -12.5% 16.1%
Campari Liqueur 52 48 50 -7.7% 4.2%
Espolón Tequila 25 ++
Total Leading Brands 4,161 4,356 4,441 4.7% 2.0%
1Includes flavors.
2Acquired from William Grant & Sons in 2010. 

Source: IMPACT DATABANK

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