Behind the Bottle: Exploration of Trends in the Spirits Category

1. | Behind The Bottle Glad Trash Strength: An Exploration of Trends in The Spirits Category Introduction Background Key Objectives Ten years ago, the word “craft” was synonymous with sewing supply stores and children’s homemade gifts. Fast forward and the word is now more often associated with the fastest growing trend in the Spirits category: small batch products connoting a return to authenticity and heritage. Walk down any liquor store aisle and craft Spirits abound. This trend is one of several that have helped reshape and revitalize a once stagnant product category. Traditional Spirits, such as Bourbon, Rye, and Cognac are riding the wave of renewed interest in classic cocktails, especially among Millennials who are just entering the category. Call it the Mad Men effect, or a search for authentic experiences, or even a way to connect with previous generations – whatever the reason, there is a renewed interest in the Spirits category that is undeniable. Never before has there been this level of brand choice for consumers. According to the International Bartenders Association, seven of the 10 ten fastest growing categories of spirits in the U.S. are “brown whiskeys” (which includes Bourbon, Rye, Whiskeys, Brandy, and aged Rum.) This rising whiskey tide lifted all boats, with U.S. spirits’ supplier revenue up 4.1%. So how do consumers discover new brands? How do consumption patterns differ between on and off premise? And how do important lifestyle factors, such as Gift-giving (Gifting) and Entertaining, impact brand selection? Finding answers to these questions is an exercise in futility. The Spirits category is an important one for both Havas and Evolve Media. With the current spotlight on both craft and heritage brands, understanding the consumer and their purchase path was a top priority for both companies. In order to advise category clients on the best practices for investing their marketing budgets efficiently and effectively, there was a need for data. Given the lack of any definitive and authoritative industry research, both companies partnered together to fill the void, resulting in the Havas/Evolve Media “Behind the Bottle” research report. The objectives of the study were developed with an eye towards applications against strategic business outcomes that would inform targeting efforts, creative messaging, and tactics to drive trial. Uncover trends in Spirits consumption, both on and off premise Understand the relationship between consumer behavior and brand adoption Identify opportunistic potential of Gifting and Entertaining Uncover the impact of each media touchpoint in the decision journey Understand the role of digital media in driving consideration $

2. | Key learnings Top three touchpoints to get ideas and recommendations about what spirits to buy BRAND MATTERS -There is a high level of brand preference in the Spirits category both on and off premise, indicating that brand preference is determined before consumers enter the premises. That said, brand agnosticity is slightly higher among On-Premise patrons , opening the door for mixologists and servers to generate trial and discovery. The Spirits with the strongest brand preference for “On-Premise” drinking occasions (consumed in bars, restaurants and nightclubs), were the “brown spirits”: Bourbon and Scotch. For off-premise consumption, tequila had the most loyal drinkers, as almost 9 out of 10 respondents said they had a brand preference. INSPIRATION BEGINS BEFORE ENTERING THE STORE OR RESTAURANT; DIGITAL A MAJOR DRIVER: Word of mouth was an influential touchpoint to get ideas and recommendations about spirits brands – 59% of respondents said it influenced their decision to buy. Digital (search, digital newsletters, mobile apps and social media) was one of the top touchpoints for 42% of respondents while traditional (TV, print, radio) was a touchpoint for only 24%. Source: Behind the Bottle Spirits Study, 2016

3. | Top Shelf Brands Not Picky Store Assoc. 74% 7% 19% INFLUENCERS BUILD BRAND AMBASSADORS Knowledge of spirits is rapidly becoming social currency, especially among Millennials, who will order name brands as a way of impressing others. Millennials are more interested in top shelf brands than other age segments: For every type of spirit, millennials beat out their older counterparts as more of them said they order top shelf brands when out at a bar, or restaurant. The implication for Spirits Brands: On location “intelligence” matters. When purchasing spirits for yourself to drink at home, what do you typically buy? Millennials LIVING ROOM LOUNGE -The high level of brand preference for off-premise consumption is driving the movement to “bring the bar home.” Gen-Xers , and Millennials want to recreate the bar experience at home by stocking their liquor selections with a wide range of premium brands so there is something to please everyone. Source: Behind the Bottle Spirits Study, 2016

4. | GIVE THEM A REASON TO SPLURGE – Consumers will spend more on a bottle for someone else than they will on themselves. When purchased for a gift, 67% of respondents said they spent $30 or more on a bottle while 53% said they did when they purchased it for themselves and 50% when purchased for entertaining. The implication for brands? Make your product stand out: Presentation, aesthetics and personalization trump budget when purchasing a gift. Presentation matters – a lot. DIGITAL PLAYS A MULTI-FUNCTIONAL ROLE – Digital encourages conversation, reinforces the experience and is a valued resource for in-the-moment discovery, especially when searching for recipes and brand information. Consumers are more likely to pay attention to a digital ad if it offers them value – like a recipe, food pairing idea, or coupon. A MODERN MEDIA MIX – Consumers leverage their personal network, community and culture channels to stay connected, build trust and get ideas about spirits. Brands can win by fueling the dialogue throughout the spheres of influence to be relevant at the “zero moment of truth”, when they order or purchase. BUILD AN EMOTIONAL CONNECTION – Consumers want stories and experiences more than product/brand information. Brands will be rewarded for content that inspires authentic personal connections through relevant and meaningful stories. These results have helped deepen the perspective on the Spirits consumer, and provided strategic applications across the communication spectrum. While there is still more to explore in this fascinating category, the Behind the Bottle study has done much to fill the void in authoritative research. For more information, please contact: Peter Sedlarcik at Havas Media Group - Peter.sedlarcik@havasmedia.com Jennifer Catto at Evolve Media - Jennifer.catto@evolvemediallc.com