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Considering an Organic Bourbon . Melissa Ong Joe Seavey HAAS SCHOOL OF BUSINESS. Rob Frederick Ana Kornegay Andy Battjes BROWN FORMAN. Please Note: This material herein is considered incomplete without the accompanying commentary described in the “Notes” of the slides. April/May 2007.

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slide1

Considering an Organic Bourbon

Melissa OngJoe SeaveyHAAS SCHOOL OF BUSINESS

Rob FrederickAna KornegayAndy BattjesBROWN FORMAN

Please Note:This material herein is considered incomplete without the accompanying commentary described in the “Notes” of the slides.

April/May 2007

DRAFT

table of contents
Table of Contents
  • Team
  • Scope and Methodology
  • Background/Context
  • Key Consumer Insights
  • Recommendations

DRAFT

the team
The Team

Joe Seavey

  • First-year MBA
  • Expertise in consumer insights

Melissa Ong

  • First-year MBA
  • Market analysis expertise

The team was formed by way of a mutual matching process between Brown-Forman and the Center for Responsible Business at the Haas (Berkeley) School.

DRAFT

we were asked by brown forman to help answer the following questions
We were asked by Brown-Forman to help answer the following questions

Understand who are the potential primary and secondary consumers for a premium, organic spirit

1

2

Evaluate the market potential for an organic bourbon.

Recommendations for how to best enter the market and how to communicate benefits to the consumer.

3

DRAFT

to answer these questions our team examined the following sources of data
To answer these questions, our team examined the following sources of data:
  • Focus Group w/ Whiskey/Bourbon drinking MBAs

Primary

  • In-Depth Interviews w/Bartenders
  • In-depth interviews with industry contacts, B-F internal team
  • Aggregate Perspective (SPINS)
  • MINTEL
  • NMI’s 2006 LOHAS Survey
  • General research on CSR, bourbon industry topics (Internet: sources cited)

Secondary

DRAFT

slide7

Background/Context:

Opportunities in Organic!

DRAFT

the world is changing
The world is changing…

“A fine scotch is vulgar. A 'fair trade' scotch is righteous”

Joseph Rago on conspicuous consumption in The Wall Street Journal (3/23/07).

DRAFT

huge growth in organic food beverage averaging 18 growth per year
Huge Growth in Organic Food & BeverageAveraging 18% Growth per year

Source: Nutrition Business Journal estimates based on OTA’s 2006 Manufacturer Survey, annual Nutrition

Business Journal surveys of manufacturers, SPINS, and other sources.

DRAFT

among spirits there have been numerous organic vodkas
Among spirits, there have been numerous organic Vodkas

…is an organic bourbon next?

DRAFT

slide12

Key Consumer Insights

  • Who are Lohas?
  • Organics and Beverages
  • Bourbon challenges

DRAFT

research methodology
Research Methodology:
  • Consumer research from the Natural Marketing Institute’s (NMI) 2006 LOHAS Consumer Trends Database, an annual survey of 2061 adults in the US.
  • Graph shows % of general population in NMI defined consumer segments; Descriptions from NMI
  • Active stewards of the environment
  • Dedicated to personal and planetary health
  • Lifestyle-oriented
  • Heaviest purchasers of green/socially responsible products
  • Unconcerned about the environment and society
  • Practical
  • Interested in LOHAS behavior when they can make a difference
  • “Municipal” behavior
  • Secondary target for many mainstream LOHAS products
  • Personal health is their primary motivation
  • More likely to use LOHAS-related consumables (compared to durables)
  • Good intentions, little action
  • Trendy
  • Price sensitive

Source: The 2006 LOHAS Consumer Trends Database, The Natural Marketing Institute (NMI)

DRAFT

lohas states strong preference for sustainably manufactured products
LOHAS states strong preference for sustainably manufactured products…

(Q.7 - % consumers when thinking about how products are made and sold, who indicate they agree completely/somewhat with the following statements)

Source: The 2006 LOHAS Consumer Trends Database, The Natural Marketing Institute (NMI)

DRAFT

and says they are willing to pay premium
…and says they are willing to pay premium

(Q.7 - % consumers when thinking about how products are made and sold, who indicate they agree completely/somewhat with the following statements)

Source: The 2006 LOHAS Consumer Trends Database, The Natural Marketing Institute (NMI)

DRAFT

yet all segments relatively less concerned about environmental impact of beverages
Yet all segments relatively less concerned about environmental impact of beverages

#1 priority overall, including durables, incidentally is cars…

(Q.19 - % consumer segment stating the environmental impact of the following products and services matters “a lot” to their purchase decision; ranked numbers in parentheses indicate a tie)

Source: The 2006 LOHAS Consumer Trends Database, The Natural Marketing Institute (NMI)

DRAFT

gap with bourbon drinkers

B

B

Gap with Bourbon Drinkers…

D

L

N

Gender

Male

Female

D

L

N

Age

21

60+

L

D

Marriage

Single

Married

D

N

L

Causes vs. Purchase Decisions

Aware, but Cost Driven

Aware, Cause Driven

D

N

L

Employment

Mid to Early Career

Retired

DRAFT

little connection to key organic association health
Little Connection to Key Organic Association: Health

Reviewing Top Reasons for Buying Organic Products

But there’s a disconnect between

Health and bourbon… “I don’t think about being healthy when I drink bourbon!”

Wine on the other hand, is able to make that connection, due to its heart/cancer benefits.

Source: ACNielsen Global Study, December 2005.

DRAFT

consumers lack awareness about production

Difficult for consumers to care about content, when raw materials/ process a mystery

This presents a stark contrast to wine…where Bonterra is able to create a strong connection to the grapes due to prior awareness.

Consumers lack awareness about production

???

Consumers discuss the aging and the barrels, but the actual content is a mystery.

DRAFT

slide20

Challenges for Bourbon

Concluding:LOHAS attractive, but not aligned with bourbonBeverages less priority for Organic Environmental impact not primary…health is.

DRAFT

slide21

Recommendation:Niche market exists and is growingClear advantage in being proactiveNeed for education on bourbon + organicOrganic can support quality and other benefitsIt fits B-F’s Brand-centric CSR strategy

DRAFT

be proactive o wine was once a tough case
Be Proactive: O-wine was once a tough case...

Organic wine sales

grew 26% to $80 million

in 2005.

Source: Ann Thrupp, Fetzer

DRAFT

adding credibility to narrative
Adding Credibility to Narrative

Organic can support:

  • Quality: Use of high quality raw materials and a unique, pristine natural source  even potential for perceived taste benefit
  • Tradition: Promoting idea that the bourbon’s production process follows traditions from hundreds of years ago, before mass-marketed agriculture existed.
  • Environmental sustainability (if education)

“Organic” Label does not create instantly compelling product.

DRAFT

opportunities in educating on organic
Opportunities in Educating on“Organic”

No brands really educate on what is in bourbon…B-F can

use to highlight benefits

“Corn can be genetically modified (36.5M acres in US in 2003), is a huge monocrop, and uses many pesticides, so let's make corn-based spirits, such as vodka and bourbon, number one on the organic drunk's new shopping list.”

– Umbra Frisk in Grist Magazine, May 19, 2007

DRAFT

effective csr reporting effective csr marketing consistency
Effective CSR Reporting = Effective CSR Marketing = Consistency
  • Does it fit with overall brand/ marketing strategy?
  • Does it fit with overall communications/ PR strategy?
  • Is it unique to company (competitive advantage)?
  • Are the themes, tones reflected in other company materials?

B-F’s strategy is to communicate CSR through Brands  O-Bourbon bolsters!

Source: Adapted from Kellie MeElhaney’s Frameworks.

DRAFT

next steps
Next Steps:

Other category opportunities:

  • Vodka & wine = better demographics

Consumers:

  • Apply insights to marketing mix across brand portfolio

Production/Logistics

  • Understand costs of organic bourbon in more detail.

DRAFT