CANANDAIGUA, THE NEW BEVERAGE POWER. WHO? ALCOHOL MARKETER EYES NEW MONIKER TO REFLECT GROWTH
Beer, bargains and buying pretty much tell the story of Canandaigua Brands, quite possibly the liquor industry's biggest secret.
Even though it has indulged in an almost $1 billion acquisition spree in the past year and its well-known brands -- such as Black Velvet, Almaden and Arbor Mist -- stock many liquor cabinets, consumers barely know the marketer nestled in an upstate New York burg.
"People outside our industry know our brands very well. . . . Everyone knows Corona. Everyone knows Inglenook," said Canandaigua CEO Richard Sands. "What people don't know is that all of these products are marketed by one corporation. We're trying to change our corporate brand -- or image -- to communicate that we are a large, important beverage-alcohol company providing a broad and growing range of products."
That will include a new, as yet unchosen, name to reflect the growth that boosted Canandaigua's sales 24% last year to $1.5 billion. Under its current moniker, the company also moved to the New York Stock Exchange earlier this month.
BETTER THAN AVERAGE
The secret to Canandaigua's success? J.P. Morgan & Co. analyst John Faucher credits executives who "know this business inside and out -- better than the average [expert]" in addition to local marketing and an acquisition plan that includes buying less sexy -- but still profitable -- brands that just need a little marketing support."
The company has taken its own road. While many beverage marketers are going upscale to attract sales, Canandaigua last year rang up better than billion-dollar receipts on some 180 subpremium products, such as Almaden boxed wine, Manischewitz wine, Richards Wild Irish Rose (a pink dessert wine named for the current CEO when he was a toddler) and Barton vodka. Many of Canandaigua's offerings can go for half the price of their superpremium counterparts.
"There is a lot of volume opportunity and share growth below the top tier, and Canandaigua has been very good at identifying the brands [that will grow]," said Bill Hackett, president of Canandaigua's Barton Beers unit. "They aren't necessarily paying top dollar, which is what happens when you buy the top-end brands."
Even though the country's No. 4 spirits marketer, No. 2 winery and No. 2 beer importer has made millions on low-brow products, it isn't ignoring the booming premium market. Its powerhouse Corona Extra is the country's No. 1 imported beer and the No. 10 brand overall, growing faster than any other brew. Barton distributes Corona and other products from Mexican brewer Modelo in the western half of the U.S.
In addition, in April, Can-andaigua laid out almost $185 million for Black Velvet premium Canadian whiskey.
To combat a declining market share in the wine category, Canandaigua joined the push toward the upper end with the purchase of Simi Winery and Franciscan Estates, whose labels go from $25 to $100 a bottle.
Despite its foray into posh goods, Canandaigua stays close to its roots. It reintroduced Almaden's $10 boxed wine and launched Arbor Mist, a $4 fruit-flavor varietal wine in summer 1998. The low-alcohol wine, which comes in strawberry, peach and other flavors, sold an unprecedented 1.5 million cases in just six months last year, said Bob Keane, editorial director of the beverage group at Adams Business Media.
"I can't ever imagine a wine brand that came on that incredibly and sold that many cases in its initial year. It went from non-existent to the 28th-largest wine brand," Mr. Keane said. Canandaigua isn't "afraid to take chances on a new product and a new idea."
It's also reaching out internationally with its first major non-U.S. holding, the December acquisition of the U.K.'s Matthew Clark, an on-premise wholesaler and a producer and marketer of wine and alcoholic cider.
Mr. Sands predicted Can-andaigua's net income before special one-time charges of $62 million would grow about 20% annually from 1997 through 2001.
But it will do so without a major strategy change. Mr. Sands, who has run the company since 1993, said it will stay the same course despite the August death of his father, company founder and chairman Marvin Sands. He said the company would hold off on acquisitions for a while, as it pays down debt built up through its recent shopping spree.
Analysts are bullish on Canandaigua, trading around $57 a share -- near its 52-week high of $61.50. A recent analysis by Schroder & Co., New York, said the stock is undervalued and predicted it could hit $73 a share by October 2000.
Analyst Mr. Faucher said Canandaigua has also vetted its purchases wisely.
"They've done a good job of scouting out acquisitions that they can integrate fairly quickly and [that can] be additive to their earnings."
Case in point: Black Velvet. In April, Canandaigua bought the neglected brand from No. 1 spirits marketer United Distillers & Vintners. Under Canandaigua, the Canadian whiskey has gotten wider distribution and a $1.5 million ad infusion, and has reciprocated with 15% volume increases over a year earlier, company executives said.
By comparison, United Distillers last year spent just $437,000 to promote Black Velvet, according to Competitive Media Reporting.
Mark Maring, Canandaigua's director of planning, said the double-digit growth likely won't continue but predicted the brand should do better than it did under United Distillers.
"It's attention. For us this is a major brand. For Diageo [United Distillers' parent], it wasn't a major brand," he said.
LOOKING FOR AGENCY
Edward Golden, president of Canandaigua's Barton Brands spirits division, said it will spend up to $5 million on Black Velvet next year, and for the first time is looking for an outside ad agency. Black Velvet ads currently are done in-house.
Because most of it's products have a regional following, Canandaigua spends little on national campaigns, laying out just $32 million on measured media in 1998, according to CMR. Instead, it's focused more on consumer giveaways, sweepstakes, mail-in rebates and on-premise promotions.
Its ever-more sprawling empire also will be reflected in Can-andaigua's name change coming early next year, signaling its reach past its humble Rochester-area origins.
"Canandaigua is not an easy name to pronounce or spell. It's not totally representative of what the business is today," Mr. Hackett said.