Q Mixers: US Distribution | In Practise

Q Mixers: US Distribution

Vice President at Breakthru Beverage Group

Why is this interview interesting?

Premium mixer vs spirits penetration

Fever vs Q US market positioning

How Q works with distributors

Pricing outlook across tonic and dark spirit mixer category

Growth opportunities for Fever and Q


Executive Bio

Vice President at Breakthru Beverage Group

The executive has over 30 years experience in spirits distribution and is the Former Senior Vice President at Brekathru Beverage, one of the largest spirits distributors in the US. Breakthru currently distributes products from suppliers such as Brown Forman, William Grant, and also Q-mixers, the fast-growing tonic brand that competes with Fever Tree.Read more

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Interview Transcript

It's very helpful to get the opportunity to learn about Q Mixers and other people in the space. If I understand correctly, you work with the spirits labels as well. Did I get that right?

I do.

Why don't you give me your background, and we'll jump into questions.

I graduated out of college in 1990 into the industry. Gallo recruited me and put me into the small distributorships, and I've grown in the industry since and have had every role from operations, finance, and sales division. I'm now VP of sales capabilities and operational efficiency, which gives me a vague enough title that I can get involved in anything I like or get involved in anything my executive vice president chooses for me to be involved in. One big part of my role is vetting potential new suppliers, going through the potential fit with our organization, etc. I took this role on because I have experience in pretty much every aspect of running a distributorship. I've run every channel from chains to clubs to on-premise to off, to operations and finance.

The first question would be, how big do you think the premium mixer segment can get to be?

I don't have a hard number for you when you say big because everybody's got their crystal ball; there are consumer preferences and what we're dealing with now with COVID and those kinds of things, but I believe there's a long runway. You've probably done your homework on the industry as a whole, but within the spirits and wine segments, premiumization just continues to occur. It doesn't slow down. It's been happening for a decade. You'd expect it to plateau at some point; it hasn't, and COVID has just accelerated that.

When you're talking about premium mixers, the competition is a two-liter Schweppes or Canada Dry or what have you in the retail environment. It's often done on-premise, so I expect a long runway with premium mixers as long as premiumization in the spirits category continues. I can speak to Florida specifically. The opinion-leading influencers are already on, so the next segment is the people still pouring out of the gun, which is a cheap, inferior product but very cost-effective. But leading that route to premiumize to get to that cocktail level, I'm sure we'll talk about at-home consumption and how we figure that out better. But from the on-premise segment, yes, more people are getting rid of the price wells and going to the premium wells. You know the cocktail craze and the craft craze have been going, and it continues to go premium. To my surprise, at some point, it's got to a level that people are continuing to pay more. Why put an inferior mixer into a superior product that you're paying a premium for? I think there's a long runway in that category, especially with at-home consumption.

With ginger ale and ginger beers in general, over four-fifths of the consumption in general, of Schweppes, is for non-alcohol purposes. Do you think there's an opportunity for both Q and Fever-Tree to break out beyond the alcohol companionship?

You mean specifically to ginger beer and ginger ale?

Just in general.

Yes, in premiumization, you would think it would go that direction. I think more people are at home and drinking non-alcoholic, and you brought a great example with a relative of yours. Hopefully, that's a trend that will continue. For folks who are either doing a cleanse or trying to get off of alcohol, it seems like club soda and lime is a go-to, on-premise or off, and we see that. We're struggling with Q Mixers' flavored tonics, the elderflower, and things like that. We've had some success with grapefruit, but I think that's because it's an easy mixer, like a sparkling Paloma with tequila. It's not sweetened so much to bother the mixologists in the bars who are not using tonics. Club soda is 23% of our Q Mixer business, and ginger ale or ginger beer is 50%. So you've got all the flavorful products out there, and I get where you're going, and I think there's an opportunity with the variety pack. That's the way some of these people are going.

If you look at all the RTDs, the ready-to-drinks, they are off the charts. Their individual packs don't sell a portion of what the variety pack does. I've seen East Imperial do it. They've got a great little octagonal piece that has the flavored mixers and things like that. I don't know that in retail we've done well enough. It has no application on-premise because when they need club soda, they'll buy that, ginger beer, tonic. They can buy those in quantity. For at-home consumption, you either have to buy a whole pack of one Q. I'll show you a picture. I think I have one in the mixology bar next to my office. East Imperial has a great little pack, they're just unknown. I think Q is coming with one, a variety pack that's like RTDs, ready to drinks, with two elderflower, two grapefruit tonic, two regular, and two of that. I think that's going to be maybe the next level of at-home drink consumption. We're hoping that's the home bar. People are comfortable drinking whiskey on the rocks at home or gin and tonic at home, but they're not doing a lot of mixology at home, so we're hoping this variety pack will create more of that. So I see that as something that's coming in terms of the offerings.

Do you think these companies were prepared for distribution in off-premise over the last year, and how do you think they've changed their approach for COVID and making sure they're prepared for more in off-prem?

Obviously, everyone had to ship their products to retail for a while, but Will shared a few questions in advance, and one of the questions was the importance of the bartender in the bar, and I think that's everything. There's no doubt that Fever-Tree caught on because the bars caught on first, because the bartenders got behind it. I believe that was a success, and I think that continues to be the key. They were affected by COVID by shifting their focus toward retail because that's the only place they can make up their dollars through enhanced programming and copacking with premium suppliers, which we can do on a national basis. Still, we do a lot of that on a local basis. We do the packaging here at our warehouse.

For instance, if we come up with a local idea with Jack Daniels, prepacked with a two-liter of Coke for a specific chain, we just have them do the packaging and send it to us. We buy from Coke locally, and we package it all here in our distributor with temp labor, chargeback to the supplier. Next thing you know, we got a beautiful Coke back on the shelf. We don't have to wait for all the supplier delays and authorizations. We're equipped for that. That in-house is such a piece of cake because I don't have to go through the Coke distributor or whatever distributor we're using.

But we do a tremendous amount of cobranding in-house. Our smart spirit suppliers and our smart non-alcoholic suppliers decide how to get together, and those things tickle the feather of the right chain. Certain large chains love co-pack offerings; others want this or that. So we try to remain nimble and fit whatever the environment dictates. So if you come up with a great idea with a non-alcoholic and want to partner with Stoli or Jack Daniels or whatever, that drives everything.

You asked how the liquor ties into me as a distributor. Wanting to prioritize my brand is critical. Non-alcoholic cases are very low-dollar adds. We love to sell thousand-dollar cases of champagne, three-hundred-dollar cases of Jack Daniels, and four hundred-dollar cases of Woodford. We certainly like the volume that comes with our seltzers and Barefoots, and non-alcoholics. Still, it's a huge piece to be relevant with that premium mixer because if we can sell somebody on a concept of going with premium mixers, that just kind of dovetails into we’re going to plug our spirits in. The spirits almost become an afterthought. They're just ours because we've sold them on the concept of getting off the gun and into a premium package. If we settle on that, we expect if you bought the concept, our spirits are going to come along with it, and I get to drive two hundred fifty dollar cases of Stoli, three hundred dollar cases of Jack along with our mixers.

Maybe unpack the last one for me because that kind of inverts what I've been thinking, which is the penetration of premium spirits is about three to four times ahead of premium mixers. You’re saying if you sell premium mixers, it drives sales of premium spirits?

If we do it correctly, from my perspective, yes. If we're driving a concept sell to elevate somebody's beverage program, we're not going to stop it at, okay, great, you took the effort to go from a premium spirit from a gun. That's a big step. We're going to say how are we going to pair these spirits up, or these mixers up? We've got a beautiful elderflower tonic from Q that's going to go great with Hendrick's gin. We're going to go for the Moscow mule because that's one of the top three drinks ordered in America right now. When you sell into ginger beer or ginger ale, depending on what intensity they want of that, of course, we're going to close the deal on our vodka-based spirit, whichever one we're prioritizing. One of the big reasons we're so interested as a distributor in these kinds of concepts is to drive along the higher dollar spirits, at least from my perspective, and that’s a big role.

Something like a Moscow mule, you're more inclined to drink that when the weather is warm, and you want something refreshing. Do you there think there will be a seasonality that emerges with these kinds of drinks, or like you said, half of your sales are ginger stuff, which will mix with brown drinks that have a more winter base?

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