Crown Cellars II

1. Rotorino Crown Cellars II Trade Research Debrief 21 October 2016

2. Contents Report flow Background: commercial need, research objectives, sample The bar perspective – on themselves, spirits and suppliers The answer to the primary question: “Can Crown Cellars become a credible supplier of spirits to the premium bar on trade?” The details behind the reasons why this can happen for Crown Cellars… or Distilled Focus on the brochure and supporting comm’s Conclusion: what might the future look like?

3. Study context • Background • “Crown Cellars has developed significantly since its launch in 2012… [but] for more spirits-focused outlets, Crown Cellars is perceived as primarily a wine supplier rather than having the same level of range, focus and expertise in the spirits category” The brief • The business need • “Build the same credibility for CUK as a supplier and business partner in the spirits category that it enjoys for wine through its Crown Cellars division. • Launch significantly broader spirits portfolio in January 2017. • Grow spirits category penetration, particularly in premium urban outlets.”The brief • Background

4. Research objectives – from the brief 1/2 • Background • To understand target customer preference on the presentation of supplier’s spirits offers • Does communication of a spirits category offer jointly with a wine offer enhance, detract or make no impact on communication of a spirits offer • What are the pro’s & cons of a combined wines & spirits offer from a customer perspective • What is considered the norm within the competitive supplier set – combined or separate offers • To understand whether • Target customers are aware of either Carlsberg UK or Crown Cellars as a spirits supplier and if yes, what are their perceptions of us • The Crown Cellars brand as presented today is perceived as equally credible and appealing as a supplier & partner for both wines and spirts categories • If not, to understand whether it would be possible to evolve Crown Cellars to meet the needs of customers looking for a spirits specialist or whether more credibility would be derived through • a separate but related brand e.g. Distilled [from Crown Cellars] • a totally separate brand e.g. Distilled • To understand customer views on what makes a great spirits supplier

5. Research objectives – from the brief 2/2 • Background • To understand the expectations of customers seeking a spirits specialist in terms of • Range • Service & support (training, delivery, drinks listing, events) • Sales knowledge & expertise – what level is expected • Communication (brochure, website, Twitter, any other media we’re currently missing) • Trade presence – which publications & events do these customers read/attend i.e. would expect to see a spirits supplier in/at (and how important is this profile) • What would these customers expect us to be doing that we are currently not? • To understand the relevance of other categories to the spirits offer

6. Sample – who did we interview • Background • Target – achieved: 13 face to face depth interviews • Spirits serious bars / higher than average spirits volumes • Middle market to premium – not top end prestige and not basic mainstream • Non-CUK customers • Independent/small multiple • London, Leeds & Edinburgh

7. LEEDS Blind Tyger Maven The Hedonist Project Black Swan Maven MOJO North Bar MOJO

8. EDINBURGH Tiger lily Bar Tonic Bar Tonic Tigerlily Bar Tonic Tiger lily Voodoo Room Voodoo Room Voodoo Room Crera Hotels

9. LONDON Rotorino Rotorino The Marylebone Rotorino Rotorino Harrild & Sons MLG Bird of Smithfield Bird of Smithfield MLG Bird of Smithfield Harrild & Sons The Marylebone Harrild & Sons

10. Their ethos: quality, accessibility, commerciality “Spirits is where the money is. Full stop. Cocktails are important in this bar, and effectively it’s a glorified cocktail bar. You can make a cocktail for £1 and sell it for £10. I don’t like to muck around with too much fancy stuff – just do your solid cocktails well” “I’ve always been told to serve without prejudice. If someone wants something then that’s what they want. I’ve always had a slight issue with people who say they want to educate people. There’s a time and a place, and we don’t upsell” Rotorino Rotorino The Marylebone Rotorino Rotorino Harrild & Sons MLG Bird of Smithfield MLG Bird of Smithfield Harrild & Sons The Marylebone Harrild & Sons

11. Crown Cellars II The bar perspective – on the themselves, spirits and suppliers

12. The people we interviewed are ‘premium winners’, but still looking for a great deal and a sound commercial basis to any partnership • Successful and scaled • These operators run very successful businesses in many cases • They are independently wealthy and commercially smart • They are very proud of their businesses – successful, and maintaining of high standards • Drinks serious • They take brands seriously – yes • They know they need a certain level of brand in premium status terms • But they are pragmatic • Brands have to hit GP targets • The outlet managers are more specific brand = specific drink sensitive – but ultimately they don’t make big decisions! • The bar perspective – on themselves, spirits and suppliers • Looking for deals above all else • The pragmatist will seek a deal whenever they can • This will spread over a number of suppliers • There are a few who get a good deal and a great (almost) one stop shop service – one invoice and one rep – which becomes a trade off. These are a bit smaller and more likely single siters in this sample • Fun, vibrant, intelligent and bang up-to-date • This is a serious category in a commercial sense – but the tone of it should be fun and vibrant and intelligent • Not dense, dry and wordy • Tonally they like things to be bright, open, alive, moving – quirky even – from a comm’spov Some differences exist within this by quality of account, more premium to more mainstream, and owners (super deal led) vs. buyers (more brand sensitive) – but this is broadly a ‘mono-sample’

13. The arrangements: how do they set themselves up with suppliers? • The majority have 2-3 suppliers – other than for beer • These sub-divide • The bar perspective – on themselves, spirits and suppliers PRIMARY Almost a one stop shop Broad and deep range Speed rail and back bar – good, better, best Can be between 50-90% of supply share Low rep contact very often – main contact is by telesales (25% order online) Matthew Clark, LWC, Venus occasionally in Leeds SPECIALIST Wine and spirits only Supply hard to finds and gap fillers Can be good for new to market brands Much higher rep contact usually and higher expectations of knowledge E.g. Amathus, Venus, Hotsauce, Inverarity Morton, Gordon & McPhail, Coe’s, Speciality Also a back up one off supplier used when all else fails – caught short

14. How the suppliers rate • Pro’s and con’s to each type • The bar perspective – on themselves, spirits and suppliers PRIMARY Scale brings cost saving potential Good deals to be had, retro’s especially and on going offers Other support: cap-ex, menus etc. But: Less flexible Can be less personal – certainly less knowledgeable / specialist as people “We would not get the personal touch form LWC” Belief that the ‘mainstream’ scale suppliers are getting better – range improvements especially SPECIALIST Good service and personal touch But without impersonal sense from scale When the deal is good they hit a sweet spot: E.g. Amathus in Bird of Smithfield “She’s not just a sales rep… she has an interest in distilling, she’s passionate, they treat her really well – and they cut me some slack when we had some problems. The personal relationship and that affinity is crucial” Evidence that some of these are growing and doing very well: Venus and IM especially

15. What does success look like? Who’s best in class and why? • Matthew Clark provide some good examples • “I don’t need to see them that often – not as much at the brand guys – once or twice a year to dipstick how we are getting on” (… that’s talking about the main deal) • “We’ve used Matthew Clark for so long they are part of the furniture – Jess is always there to help us out” • “They supported us at inception with cash and fridges, and the deal we struck was over the odds for our volume sales as we were seen as an influential bar in Leeds” • Although relationships can vary between accounts which directly impacts on levels of satisfaction and rating of them as a supplier. The role of the individual is key • The bar perspective – on themselves, spirits and suppliers

16. What does success look like? Who’s best in class and why? • Amathus are also doing a great job in our sample • “Amathus are 100%…” • It’s all about relationships • They give you ‘red hot’ service • They stuck with us when times were hard and we fell 6 months behind • Real loyalty – they scratch our back • They’re great with new intro’s and samples • They do good promotions – volume linked offers based on what we can sell • They sort out incentives for our staff – tickets and hospitality, not too formal, with general manager incentives on top – they implement stuff from the brand owners • They provide the link with the brand owners where we want it – training • I only deal with one person and she’s great • A good supplier is someone who looks into things for you, instead of giving us just a plain ‘no’ • (And generally…) next day delivery is a must in order to be a great supplier – the later the cut off point the better. Everyone is about 12 or 1 pm – but I’ve heard Liberty Wine has just started extending theirs to 9pm the day before. It’s not a deal breaker, but it’s very nice to have” • The bar perspective – on themselves, spirits and suppliers

17. The difference between wine and spirits: the commercial perspective • The bar perspective – on themselves, spirits and suppliers “It’s more important for a wine supplier to understand your business than a spirits supplier, the average Joe on the street could stock my bar and do a half decent job of it – but not for wine”

18. Where’s the knowledge coming from for the trade? Where do they hone this perspective on the industry and category? • The bar perspective – on themselves, spirits and suppliers • Influence sources • ‘External’ / proactive • Trade press and shows • Imbibe is by far the most quoted source of literature and trade show exposure • Class and Spirit also mentioned • ‘Internal’ / reactive • Brand ambassadors – important source of info for new brands – “the softer stuff really” • WoM – bar tenders and trade talk to others a lot, and customers in the know • Social media – esp. Instagram and Facebook • Visiting other bars – certain bars lead the way in trends and they all usually know their place in the hierarchy… leaders and followers:“I tend to get the ideas for my range from other bars. Just generally being in the business for a long time as well” • Supplier led emails and mail shots – more used for offers and new products than cutting edge trend info

19. Crown Cellars II “Can Crown Cellars become a credible supplier of spirits to the premium bar on trade?”

20. “Can Crown Cellars become a credible supplier of spirits to the premium bar on trade?” The answer is ‘yes’. • The answer to the primary question 4 main reasons CUK brings good clout, scale and buying power That means good terms and discounts CUK has a range of spirits available that will meet 90% of the ranging needs of 90% of these bars CUK is a national composite wholesaler – one order, one delivery, one invoice, one rep and one deal CUK has done Crafted – a solid precedent and fine example of what it can achieve

21. “Can Crown Cellars become a credible supplier of spirits to the premium bar on trade?” What might get in the way of success? • The answer to the primary question 3 main challenges CUK is regarded as a brand of beer that is not relevant to them – awareness of wholesaler status or of Crown Cellars is very limited in this sample CUK can lack requisite kudos in this category – a green fleeced rep / green dray / mainstream range is not going to be suitable: this positions CUK but does not exclude them What would the unique CUK hook be? Why should they change – what assets or incentives can be exploited beyond price and logistics fulfilment?

22. Examples of ‘hooks’ exploited elsewhere • The answer to the primary question High flexibility and quick response, low volume drops, national coverage can be important though rarely quoted as such Access to Conviviality / Bibendum specialism and kudos for wine supply Big brand appeal Applied with wholesaler flexibility Champions League and Heineken Cup assets

23. Crown Cellars II The details behind the reasons why this can happen for Crown Cellars… or “Distilled”

24. CUK brings good clout, scale and buying power. That means good potential terms and discounts to the customer • CUK is thought of as a major brewer and that brings certain benefits of scale • Awareness of Crown Cellars, as a wholesaler, of Crafted is not there in this sample – brings no baggage but neither any benefits • Scale positions CUK as a mainstream supplier • Akin to Mathew Clark, LWC • Not Venus, Amathus • More specialist, more knowledgeable, more responsive • Creates an expectation of • Deals via great buying power • Attractive terms • Good range depth and breadth • The details behind the reasons why this can happen for Crown Cellars… or Distilled “I didn’t even know they did Spirits – they do a lot of really nice beers” “I know the beers but I didn’t know they did an offer like this. I didn’t know they distributed” “It’s brand new information to me. I’m positively surprised – I’m guessing they would supply a lot”

25. CUK has a range of spirits available that will meet 90% of the ranging needs of 90% of these bars • The details behind the reasons why this can happen for Crown Cellars… or Distilled • There may have once been an expectation that larger wholesalers had limited premium spirits ranges – not anymore • Matthew Clark / LWC have vastly improved offers in recent times • The CUK lists – brochure and suggestions on the stimulus 2017 range spreadsheet – meet the needs of these bars in most if not all cases – it’s impressive “LWC have always had a good range at an increasingly better price” “It centralises everything that you’re dealing with. The presentation makes everything a no brainer. If you can get everything from one place then why not?”

26. CUK offers a one stop shop composite wholesaler – one invoice, one person to deal with • The details behind the reasons why this can happen for Crown Cellars… or Distilled • This is a big benefit to many operators – one rep, one drop, one invoice, at least in theory • The ‘chopping and changing’ to save a few pence idea is usually rejected – differences in terms, delivery time upheaval etc. • A one stop supplier has to offer • A competitive “price” – the deal • A consistent and set delivery schedule • A full range • A solid and professional rep that meets usual business needs – responsive, listens, keeps promises, easy to do business with, honesty, business development ideas etc. “We want a one stop shop with suppliers. And I want to get the best price” “Next day delivery is a must in order to be a great supplier” “If I could get everything from one supplier then I would” “A great rep helps for sure. They need the ability to deal with things when they go wrong”

27. CUK has done Crafted – a solid precedent and fine example of what it can achieve • The details behind the reasons why this can happen for Crown Cellars… or Distilled • This is a genuine feather in CUK’s cap • Spontaneously remarkable, impressive, well laid out – a real step of progress and excellent achievement • Any spirits brochure should learn from this as a role model “I would always lead with a picture – the visual is massively important” “There’s some great brands in here. The brochure looks proper. I’m surprised by the amount of things they do” “The little moment with the brands are great – to tell you the story behind it”

28. Meeting the challenges CUK is regarded as a brand of beer that is not relevant to them – awareness of wholesaler status is non existent in this sample CUK can lack requisite kudos in this category – a green fleeced rep / green dray is not going to be suitable: this positions CUK but does not exclude them What would the unique CUK hook be? Why should they change – what assets or incentives can be exploited beyond price and logistics fulfilment? • The answer to the primary question Create Distilled, from Carlsberg UK Build from scratch and distance from wine – learn from Crafted Work to CUK strengths as a national and composite wholesaler: “I don’t expect my main spirits supplier to be expert in spirits – I do a deal with them and then work with the brands” ?

29. What might CUK offer to go beyond the rest and disrupt the market? • The answer to the primary question Facilitation. Better access to brand owners and spirits partnerships White Label. Unbranded spirits to drive cost down in the speed rail and promote in bar infusions Rewards. Hospitality opportunities and incentives Blue Sky…?

30. The answer to the primary question Service expectations – what should the rep be capable of? “I would expect them to know all of the spirits. Not to the point where they can tell you quantities of corn in a drink or things like that, but I’d expect them to know their range” “The guys on the end of the phone need to know what they’re selling, the range that is, the brand guys know the brands inside out though” “I’d like them to know the difference between dropping off at Oriole and dropping off at mine. They need to understand the bar’s offer”

31. Crown Cellars II Focus on the brochure and supporting comm’s

32. Context: use of trade media • Use of brochures and website for info gathering is limited by most of the people we interviewed, so interest in literature was often limited and superficial • Why? • They are established • “I’m a bit beyond all this stuff now to be honest, not to be rude! I just don’t use it” • “Simply because of what we do here, I just don’t have an interest in half the products in here” • They are experienced • “This looks like it’s more for start ups and people who don’t really know what to do” • “We wouldn’t hire anyone who didn’t know how to do this stuff already” • They like dealing face to face – and they get it because these are senior people in successful businesses, at very least purchasing / ops directors or owners • “I don’t really use websites either, they are ok but just in the background” • “I would never read a blurb. It’s been a while since anything surprised me – and when people have new things they want to show them to you anyway. Reps and brand ambassadors are still useful for things like that” • Focus on the brochure and supporting comm’s

33. Context: use of social media • Use of social media platforms is dominated by Facebook and Instagram, LinkedIn • What for? • Focus on the brochure and supporting comm’s Publicity Posting images of things they’re proud of / want to promote about themselves “Ill pop up photos of training sessions we’ve run with suppliers or of new drinks” Following Watching important people and learning “I use Facebook for the Edinburgh bar tender exchange forum” “I follow Rich Woods, the cocktail guy”

34. First impressions of the brochure / website. “It’s all about wine.”The premise of the brief is entirely correct. • Focus on the brochure and supporting comm’s

35. The tone and assumed target is quality mainstream, good pubs, better chain bars and 3-4* hotels. • Sense of quality, MoR, authority and solidity (occasionally stuffy) – but lacking personal and commercial relevance • Focus on the brochure and supporting comm’s “I’m sure they’re good at what they do – but it’s not what we do, it’s not vanguard stuff” “It’s quite formal in a slightly glamourous way for hotel bars” “It looks like it’s aimed at smaller bars, decent pubs with one or two craft beers” “The whole feeling is about wine, hotels and wine bars” “It suggests a big wholesaler trying to be cool – there’s no soul in it, it’s for pub chains”

36. Wine dominance dilutes and distracts from the spirts offer • Driven by • Perceived share of content • Spirits at the back – front spirits section usually overlooked at first flick through • Portfolio / range considerations • Branded wines are a no-no • Mainstream spirits featured – less focus on niche brands • Even though they can be found on closer inspection to its credit • “Relatively safe and well known examples” • Focus on the brochure and supporting comm’s

37. Digging a bit deeper in to the content • Focus on the brochure and supporting comm’s • The front section • Credibility comes slowly • Better brands and some good features: Gin Mare and Monkey 47 for example • But… “this looks like they do not know what they are doing – who’s it for? The wine bit looks more confident” • Mainstream drinks preparations / supermarket wine brands • Awkward and arty images, not that useful – images need to be helpful and bolder • E.g. the cocktail serves: show me the right glass, the garnish, the equipment in large scale • Too many lifestyle shots – “meaningless and a waste of space” • Spreadsheet list for 2017 • All is not lost! • Range extension is excellent • Suitably niche and interesting options • In a format they are almost as happy with! A good list

38. Some content they really liked “Maps would be great – Tequila could be from everywhere but whiskies are important when it comes to certain points of origin. My geography is terrible – I thought Birmingham was in Scotland until I was 16” “The map is good – you don’t want to have four of the same thing. But at the same time, I don’t expect the supplier to be an educator, except on wine” • Focus on the brochure and supporting comm’s “It (the guide) could suggest interesting flavour combinations, which is something I can’t believe hasn’t been done yet… If you have some flavour notes then that would be great. I prefer to taste things for myself, but people don’t want to buy a bottle and then find out it’s not right”

39. Some more negative, but constructive, remarks – especially around pitch, tone and targeting • Focus on the brochure and supporting comm’s “It’s a very strange brochure. It’s got a lot of charts and things like that as well, which I don’t like unless it’s very important. I rather it was more succinct – like the drink first and foremost, and then the information” “I would always lead with a picture – the visual is massively important” “For me the instructions are not important in a brochure. We wouldn’t hire anyone who couldn't do this already” “In the Spirits section it looks like they have no idea about the audience they’re speaking to. Whereas with the Wine section, the simplicity makes it a lot more readable” “All this information depends on your audience. I wouldn’t use something like this because it’s too broad. Because of simply what we do here I just don’t have an interest in half the products in here”

40. Compared the competition: Venus • Sassy, sexy, energetic, vibrant, with movement – this is night time focussed • Focus on the brochure and supporting comm’s

41. Compared the competition: Matthew Clark • Spirits and wine share equal focus with moving front pages: a combined offer • Focus on the brochure and supporting comm’s

42. Compared the competition: Amathus • Clean and premium: equal weighting again – combined offers are normal • Focus on the brochure and supporting comm’s

43. Learn from Crafted where the medium fits the message • Focus on the brochure and supporting comm’s • This provides an excellent benchmark for what can be achieved • NB Pete Brown independent authority is good “Functional Useful Right size Great looking Tactile Love the elastic band All you need Good on ‘em, I’m surprised They should sell this in WH Smiths”

44. What can we take from this to create Distilled? • Focus on the brochure and supporting comm’s • A lot can be learnt from this and taken forward in to a focussed, dedicated new presentation for spirits – as a brochure, probably digitally delivered via iPad • Format, size and tactility – suits Crafted – what would suit Distilled? A metal book? It would be huge… • Visual stimulation and graphics – again, compatibility of styling and tone with the category • Interesting content – but functionally led, like Crafted – see quotation below • Range depth and breadth – hero certain brands, but do not be afraid of depth (=credibility) • Icons – useful guides and modern visual language (they love ‘bitter / sweet / sour’) • And simplify – don’t allow it to become too weighty and long – consider sub category bibles “I like a good list: visual, name, size, ABV, web address, price, maybe a bullet point or two of interest” “If they did something like this for spirits that would be incredible… A really big help. We’d keep it behind the bar… great for upselling” “Wow! Imagine if they did one like that for gin – what a winner that would be”

45. Distilled the brochure needs to be from Carlsberg UK – this can anchor and ground the proposition as an accessible supplier, consistent with desired positioning • Focus on the brochure and supporting comm’s “If a rep came in and said I’m from Distilled and we are a spirits supplier, I’d instinctively think: they can supply a good range but might be a bit expensive as a new player. But ultimately I’d sit down with them”

46. Crown Cellars II Conclusion: what could the future look like?

47. Conclusion: what could the future look like? They are willing to look ahead to the future and see Carlsberg in it – that’s very good from a point of no/low awareness – but there is some caution “I would never care if it was done by Carlsberg, it’s about the product” “I’d like to see the different categories – Fermented, Crafted, and Distilled. Make them look quite similar” “I would get it out there that Carlsberg is more than just beer – tell people that they do everything” “I guess there’s a stigma attached. I’ve only known Carlsberg to be Wholesalers to pubs – it depends who your target market is” “It’s a low end name, there’s a bit of stigma.” “The lever they can pull is the cost one – but, also, having it all together at as one is very tempting. If they did that there’s no reason why we couldn’t have a relationship with them. I can’t be alone thinking I want to buy everything from the same place”

48. Towards a ‘Distilled’ vision • It exists as a digital brochure and a section of a Carlsberg UK website accessed by different domain names. • Physical paper brochures would be likely to be too unwieldly – but smaller guides may be useful to signal intent: the Rum book for example • All from CarlsbergUK.com – and appearing on the same site to reinforce a sense of scale • Conclusion: what could the future look like? • Any brochure cannot be the only expression of the offer – they are rarely read – it is a statement of intent and positioning. • The offer has to be delivered consistently in other channels – service, people, websites, deliveries even • Distilled should be a vision for the future, like Crafted, the spirits division of Carlsberg UK. • But this will be a lot harder than Crafted ever was: • It’s a massive category and to do it properly you have to do it all • Your target is far more discerning and demanding than the Crafted target

49. What is the unique offer you get with CUK? • Facilitation? • White label? • Conclusion: what could the future look like? • Rewards? • Blue sky…? Go beyond… Social media management training and implementation? Traffic building programmes? Align with 1. a respected individual / group of successful high end bar owners and 2. connoisseurs / specialists in bar world Infusions Own label Tetra Pak ? Independent, emerging brands – organise them in to an “independent spirits collective” – give them presence and resource locally Staff and management incentives