Advertising Age: What is sparking the emerging national trend for consumers to pay more for their spirits?
Joe Tripodi: One reason would be the good economic times. Consumers are eager for different things. Sometimes when you trade up, it may not be [due to] a price premium. To capture consumers at different life stages is really critical. So much of the nature of our business is really image and badge related. As a result, [what people drink] makes a statement about themselves.
AA: What is Seagram doing to capture on people's willingness to trade up?
Mr. Tripodi: We'll continue with line extensions. As people trade up, that includes not only price but also [a desire to] try a new flavor. Look at the huge success of Absolut Mandrin this year. We introduced last year a French oak-finished Glenlivet [scotch whisky]. It's a little niche we don't expect to be as large as the core brands, but it certainly can be very profitable and very targeted and certainly appeal to people who want to have a different experience. With tequila, we have Don Julio, the ultimate superpremium tequila [that can top out around $47 for a 750-ml bottle]. You see people who want to have a higher-end experience like with Chivas Regal 18 year old, an extra special blend. The core Chivas [brand] is a 12 year old. Everyone looks to find those niches. However incremental the margin, it keeps people in the franchise.
AA: Does advertising affect how much people are willing to spend?
Mr. Tripodi: We hope it does. Advertising is a stimulus that gets people to trade up, to try new higher-end line extensions.
AA: What new and innovative is Seagram doing in that [advertising] arena?
Mr. Tripodi: One thing Seagram is doing is ramping up its interactive marketing activity. It's not just Web-based but direct marketing. I think we believe direct marketing can be a cost effective way to continue to engage in a dialog with current and future consumers. We've been big [proponents] of direct mail, and I think we will continue to build the database [both online and through regular mail]. I think we certainly have a view of the world that email direct mail will be the next big thing, so we're gearing up for that.
AA: People seem very name or brand conscious -- perhaps more so than at any time in the past.
Mr. Tripodi: A brand is a promise. We [as spirits companies] don't own the brand. Consumers own the brand. Certainly Coca-Cola learned that in spades [with New Coke]. You have to be very careful with how you play with a brand, its personality, how you extend it, or sponsorships you promote with it. If you're not true to the brand personality and heritage, you can run into big problems with the consumer. Delivering on a brand promise is one of the most [important] things that a marketer has to be cognizant of.