The spirits firm – other brands include Maker’s Mark, Jim Beam, Teacher’s, Courvoisier – yesterday recorded net sales of $637.6m in Q2 up 7% year-over-year, and operating income or EBIT rose 27% to $160.1m.
Explaining the Skinnygirl growth slump, CEO Matthew Shattock pointed to comparable sales up 81% by mid-2012 and said Beam Inc. was “cycling-in new innovations” such as wines and flavored vodkas to re-energize the brand.
So what, asked Ian Shackleton, analyst at Nomura Securities, was Beam Inc. doing to get the brand moving again, and how did Shattock explain the broader weakness in US ready-to-serve cocktails?
Explosive growth, and Bethenney Frankel…
The brand was cycling explosive growth last year, Shattock explained, driven by a partnership with talk show host and author of ‘Skinnydipping’ Bethenny Frankel, brand-building, distribution space and product innovations – not only in cocktails abut also vodka and wine.
“So we’re cycling against that…coincident with a very poor summer weather season, and the seasonality of ready-to-serve is particularly high, one of the highest of the industry,” he said.
Skinnygirl also played in the ‘impulse purchase’ category – two to three times more so than other spirits segments, the executive added. “So if the weather’s not there, we won’t get the display”.
But Shattock insisted the brand had a unique market position and strong future prospects in the “white space which is kind of really controlled cocktails for women”.
He added that Skinnygirl would build on its partnership with Frankel – who has a new talk show out this Fall – while new innovations included moving from blends to veraisons in the wine area.
Since Skinnygirl was “almost like a sort of CPG brand” it required strong merchandising, constant news and engagement with consumers, Shattock said.
RTD beer drinks biting?
Caroline Levy, CSLA, returned to the issue later in the call, asked if AB InBev’s success with flavored RTD beers such as Bud Light Lime-A-Rita, or other beer innovations, were eating into Skinnygirl sales?
While accepting there might be some overlap between beer innovations and Skinnygirl, Shattock said he thought the Skinnygirl target market was "little more discreet and different from some of those products”.
“Therefore, I think the factors we pointed to – it’s more to do with the cycling of our own success and the weather. I think it really did affect, broad scale, the overall ready-to-serve category,” he said.
Elsewhere Jim Beam grew double digits in the US and Europe as Jim Beam Honey and Devil’s cut boosted brand equity, and Beam Inc. grew share in Tequila (Sauza, Hornitos) and vodka (Pinnacle).
“At mid-year we feel good about our strength in fast-growing segments like Bourbon, the breadth of our premium portfolio, the success of our innovation engine and our global footprint,” Shattock said.