Read the full interview HERE

We recently interviewed a Current Executive Vice President of Southern Glazer’s Wine and Spirits, the largest spirits distributor in the US, to discuss how Fever Tree is positioned versus Schweppes.

We explore:

  • Southern Glazer's strategy of pitching Fever Tree to on-premise accounts
  • How bartenders view Fever Tree and buy mixers
  • Advantage of Southern Glazer's versus Schweppes distribution
  • Fever Tree's structure of co-merchandising with spirits brands and Southern Glazer's
  • How the change in pricing of Fever Tree could impact volume

What are Schweppes doing about Fever-Tree entering the US?

It’s kind of a Catch-22. All the business that Fever-Tree has been taking has not just been Schweppes. Across the US, Schweppes is a national player but, in every marketplace, there’s the local tonic and club soda and mixer, from a particular geographic area. Some of the business that we’re capturing is from those guys. I just don’t see that, at this point, they seem overly worried, because it is only 5% of the business, despite the fact that it’s growing. We just haven’t seen any kind of change in how they go to market. Maybe, behind the scenes, they’re looking at if they should be producing a premium product where they can come in and take a segment of that business or if they’re talking with national chains, to create premium level private labels, for them. I’m not aware of any of that.

From what’s going on at the street level, we really haven’t seen any change in how they are going to market.

How has Fever-Tree been able to take share from such a large player, with distribution, arguably with a bigger brand? What has it been that’s made that possible?

At the end of the day, it’s the change in the customer taste and what they’re asking for, from their customers. I’d love to say that it’s all us, but the reality of it is, it’s a tremendous product and the gatekeepers and mixologists and the bartenders are very fond of it and love to use it in their cocktails. But at the end of the day, it’s because the consumer is willing to pay more, for a better cocktail. That’s like in a lot of other industries, the same thing is happening. We feel it’s an affordable luxury for people. Maybe someone can’t afford to go out and buy a Mercedes-Benz, but they can go and buy a cocktail with a high-end alcohol and a great mixer, in Fever-Tree. Ultimately, I think it’s the changing tastes of the customer.

Let’s say that Schweppes, Dr Pepper or Coca-Cola, they change their go-to-market to more premium products and they really start to challenge Fever-Tree head on, how do you think that could impact Fever-Tree’s growth and positioning?

I’m not going to discount companies like that, like Dr Pepper, that are big companies. The one big advantage that Fever-Tree has, particularly in the on-premise arena – in the US, that’s where spirit brands are built, is in the on-premise so we think it will be the same for Fever-Tree – is that Fever-Tree is working, hand in hand, with all the spirit brands. If you’re the Dr Pepper distributor, you’re the guy that’s delivering Dr Pepper and the other sodas that they have. You have no connection to the spirits. A lot of times, in these restaurants and bars and things like that, the person that buys the alcohol, is not the same as the person that buys the soda or the restaurant supplies, depending on where someone like Schweppes is coming from. They could be coming from Sysco, which sells meats and supplies and all kinds of things like that.

They don’t have that connection with the spirit brand. They don’t have people that are really aware of how to create and craft a cocktail, like our sales consultants are. I think that’s a big advantage that Fever-Tree has. Particularly in the on-premise arena, I’m not overly concerned if, using their traditional channels, they try to go after us. I think it would be a more competitive situation if, instead of being Southern Glazer’s, if another new premium brand went to RNDC, as a national alignment, which is our biggest competitor, but they’re still considerably smaller than Southern Glazer’s.

I think that would be a tougher competitive battle than it would be with the current distribution model.

You actually think that it’s more of a risk for Fever-Tree that a similar premium mixer goes to a Southern Glazer’s competitor, to target the on-prem channel, rather than Schweppes?

Particularly because of Sysco’s understanding of how the brand is sold, in this arena. The bottom line is, if Schweppes is coming through a soda distributor or it’s coming through a Sysco, which is restaurant supply, it’s just one small piece in a number of things. So from a percentage of what that Schweppes is going to be, to the total invoice, it’s going to be small. They’re not out working hard. They’re not taking the time to go into the bar and work with the bartender and mixologist, to create cocktails. They’re just taking an order. Unless they dynamically change the model of how they go to business in these accounts, it doesn’t concern me.

Is it Coca-Cola that distributes part of Schweppes, for Dr Pepper, or is it both of them?

It’s really different. There’s no exclusivity, so you’ve got a lot of different food brokers and things like that, that are also distributing it. There’s no big incentive for people to try to develop business, because somebody else could come in behind you, like a food broker, who are working on a much smaller margin. If you were a soda distributor and you had the business, the food broker might come in and undercut your price, to take your business away from you. It drives the margin out of it and drives the incentive for somebody to push it.

The distribution of those larger brands then, especially in this arena, like you said, it’s quite dispersed or fragmented and they’re not clearly pitching the Schweppes brand, to the account?

Correct. For our company’s business, prior to making the alignment with Fever-Tree, that’s how it was for us. In Missouri and St Louis, we’d be pushing one brand, but in Dallas, Texas, they’d be pushing another brand and in California, they’d be pushing yet another brand, because there was no consistency. Now, that’s the only brand that we’re gold on, in this category. So we are held accountable to making certain sales goals and things like that and it’s a company-wide focus, for the brand. When you have that and you have that consistency, you’re going to have the better opportunity to build a brand, long term.

Read the full interview HERE