Powerhouse Premiums

Profit-Taking On Premium Spirits is at an All-Time High On-Premise

By Michael Harrelson



Contrary to recent history, the upselling of spirits did not start with the arrival of super-premium brands. Nor does the opportunity to cultivate the palate of patrons and reap higher profits rest with them alone.


Before super-premiums, before ultra-premiums and luxury labels, premium brands occupied the top tier of the spirits stratum. For most of the 20th century, premiums represented the star pours on the back bar — the higher-priced and more profitable alternatives to well and value pours.
And they still do today. True, they must share the limelight with super and ultra spirits in the grand new age of cocktails. But for all the attention that higher-end spirits receive in sexy ads and commercials, on the silver screen, in the trade and on popular television shows, premiums bring both value and a higher price point to the table relative to well brands — a powerful one, two, punch in any venue’s revenue arsenal.


In the two-year span from the beginning of 2003 to the end of 2004, volume sales of premium spirits grew by 11.9 percent (premiums and high-end premiums combined) according to the Distilled Spirits Council of the United States (DISCUS). The double-digit increase was only slightly less than the 14.2 percent increase posted by the super-premium category over the same period, and it represented a better than 10-percent jump over the 1.7 percent increase in the sales of value brands.


Hedge Your Bets


In the on-premise world of the new millennium — where the constant arrival of new high-end products only adds to the competitive pressure to upsell, not to mention patron confusion — there is every good reason to keep the back bar well stocked with premium brands. Unlike super-premiums or some well brands, premiums offer patrons value without sacrificing quality. They provide a logical point of entry for patrons looking to explore the whole range of their spirits categories of choice. And they function as a revenue enhancer for operators when a customer might otherwise go with a well brand.


At Shelly’s Backroom, a cigar bar located on F Street in Washington, D.C., bourbon is a hot commodity among patrons at the capital establishment that Bartender Matt Krimm describes as a classic cocktail bar. “We serve a lot of scotch and a lot of bourbon,” Krimm says. “We’re not into lychee extractions and Watermelon Martinis.”


It wasn’t that long ago that many of his 23- to 25-year-old customers would come in and order a generic Bourbon and Coke, but now, Krimm says, “We get people asking for Wild Turkey and Coke by name. Being that it is 101 proof, it (WT) has got the body to stand up to a cigar as opposed to lighter liquors in general.” Even among the uninitiated, he says, Wild Turkey is one of the easiest upsells on the back bar. “They say, ‘Bourbon and Coke’ and I say, ‘Wild Turkey?’ And they say, ‘OK.’”


And sure enough, his customers are trading up to super-premium Wild Turkey Jimmy Russell Reserve Bourbon when the occasion warrants it. “What I’ve found is, when the typical Wild Turkey 101 drinkers are out celebrating — having one or two drinks instead of three or four — that is when they will go to the Kentucky Spirit or Russell’s Reserve.”


Such upwardly mobile brand positioning is precisely what premium-priced Bulleit Bourbon had in mind with the launch of its new luxury-class spirit. And they are achieving it in places such as Manhattan, where the only way to go with bourbon sales was up until relatively recent times.
“It is very distinct,” says Justin McManus, beverage director of Blue Smoke, a New York City-based barbecue restaurant and lounge with more than 35 bourbons in stock. “I enjoy the high rye content — a lot of bourbons have the sweetness to them, but Bulleit is a lot more rounded. It has a dry finish.”


And with fine bourbons now outselling scotch at Blue Smoke and other trendy Manhattan venues, McManus says his tastes in spirits are not atypical of local consumers in general. “In a lot of New York bars, people are starting to ask for calls of Bourbon and Coke, McManus says. “It is getting treated like scotch. Now, it is getting respect.”


Their Own Reward


In spite of this proven capacity to turn low- to mid-range drinkers into high-end connoisseurs, a premium spirit also can be its own reward. The well-heeled, cocktail-savvy Manhattanites who frequent One Little West 12th — a 200-person-capacity restaurant and lounge located in New York City’s trendy Meatpacking District — can well afford any vodka they choose when they go out on the town. But the vodka of choice by far at this popular, Westside watering hole is not an ultra-premium nor even a super-premium but rather Stolichnaya — the premium Russian spirit that has morphed into a virtual dynasty of flavored line extensions since its importation into the United States.


“Stoli (is) my No.1, especially with the flavors,” says veteran Bartender Bernie Bernstein, who orders between 70 and 100 liters of Stoli for the venue each week. “It’s light and smooth. The citrus is citrus. It doesn’t have the bite that others have or the bitterness to the tongue.”


In addition to fueling higher profits via lower pour costs, Bernstein says of Stoli, “You don’t have to promote it at all. Even my female customers order Stoli shots. They don’t want Kamikazes. They want Stoli O.”
It’s a given that no back bar is complete without premium rums, and since the days of the Cuban embargo, the premium of choice has been Bacardi — the world’s No.-1-selling brand and a true powerhouse premium spirit to Frank Castro, general manager of Son Cubano, a restaurant and bar also located in New York City’s Meatpacking District.


“When you think of premium rums, the first one that jumps out at you is Bacardi,” he says. “They set the standard. Today’s rum has a little bit of a woody flavor, like a barrel flavor. Bacardi 8 is just a wonderful product.”


True to its reputation, Castro says Bacardi 8 works on more than one level behind the bar. “In premium Mojitos, a Cuban drink made with rum, we offer Bacardi 8 as a premium upgrade. We also encourage guests to enjoy Bacardi 8 as a sipping rum. The diversity of rums is huge now.”
To Castro, the only thing better than being a bona fide premium is being recognized as such by the public at large. “The Bacardi brand is already known. It is an easier sell. Besides being a good product, the customer always goes for a sure thing.”


No-Brainers


To quench its thirst for profit, McFadden’s Pub in Washington, D.C., looked no further than Jameson’s Irish Whiskey — a premium import that matched the bar’s brand and clientele perfectly.


“It helps that we are an Irish theme bar,” Bartender Brian Westlye says. “We try and push products like Jameson.” That push includes an upside down bottle display that attracts patrons’ eyes as well as dispenses Jameson shots to the youngish crowd. “It’s the combination of the bottles being displayed and the bartenders promoting it.”


Still, he suggests the most powerful promotional tool is the whiskey itself. “Jameson is top-notch Irish whiskey, but it is affordable. It is not going to cost you $12 for a drink.”


Another Washington, D.C., venue that has discovered its premium spirit match is Dream, an upscale club known for special events and VIP parties.“If I was to label our venue, we are like the Ritz-Carlton in this industry,” General Manager Kris Ramson says. “Not just from an aesthetic point of view but from a service standpoint. Every aspect of Dream has to connect like dots to convey that image that this is where you want to be.”


Ramson says the house premium Cîroc vodka, a French import, fits the bill nicely with a sexy, crisp, bottle design, a taste that he describes as clean with no aftertaste and its premium position but value pricing that allows him to offer guests a signature cocktail for $6. “It really allows and affords us the opportunity to entice people to come to the club,” Ramson says. “We are not a traditional club. We are like an events center. We want our patrons to walk away feeling like they went to the best event ever.”


In the world-class club destination of Miami Beach, it’s a brown premium spirit that’s making waves. These days, bar pros like former Oxygen Lounge Bartender Elvis Rodriguez wouldn’t think of being caught without copious quantities of Dewar’s 12-Year-Old scotch, a premium label now in the Bacardi portfolio that had its first 15 minutes of fame back in the 1960s and ‘70s.


“The Latin community here is big (on) scotch,” Rodriguez says, describing the clientele at Oxygen as a premium scotch crowd in general and a Dewar’s 12 crowd in particular. “They prefer Dewar’s 12 over Dewar’s White Label” or other premiums, he says.


That Dewar’s 12 is back for an encore has been apparent to Rodriguez in the behavior of his loyal scotch-drinking customers over the past two years. He says customers would invariably ask for other call premiums until they were introduced to Dewar’s 12. “Don’t ask me why,” he says. “Dewar’s 12 is just smoother.”


Proof of Dewar’s premium heft also is underscored by the weekly spirits inventory at Oxygen Lounge. “Typically, we would go through a couple of cases of Dewar’s 12 a night,” Rodriguez says.


The Wellness of Premiums


With a new age of cocktails in full swing and a consuming public both educated about spirits and aware of the need for moderation as never before, many operators have gotten in sync with the times by adopting the ultimate upselling strategy behind the bar with premium spirits.


Premium pours such as Jim Beam and Jim Beam Black are not merely alternatives to well brands at Iggys, a late-night lounge and eatery located in Chicago’s artsy Winter Park. They have, in fact, become the well brands, veteran Iggys Bartender Dion Antic says.


“The reason we use Jim Beam for wells is because we only do a premium well. If you are going to charge $9 for a drink it needs to be a premium. I am a firm believer that if you provide customers a premium drink, a dollar or two won’t matter.”


While this practice might mean higher costs and less profit per drink, Antic says the long-term advantages greatly outweigh the initial drawbacks. “I think it is good for repeat business. There are too many operators out there who got brainwashed into a 1.4-ounce drink that has to be a cheap well brand. I never bought into that philosophy. Our drinks are poured heavy and strong. You want to taste the JB. People know they can come here and get value for their money.”


Premium spirits are taking over wells at venues far and wide.


“Basically we decided on a premium well before we opened to give better products to our customers,” says Kevin Streisfeld, GM of Michael’s Kitchen, a full-service bar and restaurant in Hollywood. Fla. “You’ll end up, from my experience, doing more business.”


To further distinguish his bar from others in South Florida, Streisfeld has gone a step further, recently setting up an infusion program with the help of Frïs Vodka. “Frïs is one of those newer premium vodkas that is a little lesser known, but it is such a great quality product compared to other premium vodkas,” Streisfeld says.


The five-time distillation process adds a whole new dimension, he says. “Because it is such a well-distilled vodka, it takes on the flavor of the fruit. There is no aftertaste.”


Streisfeld brought the idea of infusion to Michael’s from his former restaurant. And when representatives from Frïs mentioned they were launching a national infusion program, he decided to be a part of it. “They came to me with new infusion jars shaped like Frïs bottles that are eye-catching for the back bar. They are a lot more functional that previous infusion jars.”


Now, guests can choose from a number of different infusions on the back bar, including Pineapple Mango, Pineapple and Strawberry, a Mixed Berry with Strawberry, Blueberry, Raspberry and Blackberry, Georgia Peach, a Summer Melon with Cantalope and Honeydew and a Roasted Red Pepper Jalapeño used for Blood Marys.


“I can sell an infusion for anywhere from $10 to $12 dollars,” Streisfeld says. “On a good Saturday, I will do anywhere from 50 to 70 infusion Martinis.”


The increased revenue potential is but one aspect of the profitability of infusion programs on-premise. The Upside Down Tuaca infusions at Fireside Pies, a gourmet pizza parlor and lounge in Dallas, also have become a top draw for customers in a highly competitive metropolitan area.


“It’s a staple of Dallas, easily,” Fireside Pies Bartender Wil Broome says of the house drink specialty made from premium Tuaca Italian liquor and fresh pineapple. “It has become a house signature of Fireside. People know that when they come to Fireside, they have to have a Tuaca shot.”


Broome says Fireside sells approximately five gallons of Tuaca shots each week at $6 per 1.5-ounce serving. And he adds that his competition is starting to take notice as well. “It is starting to be copied everywhere. Other bars are starting to make their own versions.”


Quality Wills Out


Premium vodkas and the latest jokes can be enjoyed in abundance at the Wynn Hotel and Casino in Las Vegas, where, in true Vegas style, the customer gets what the customer wants. And what do customers who stop at Bartender Gary Kurtz’s bar at the Wynn want in the way of finer spirits?


More and more, Kurtz says, guests young and old are asking for Finlandia — a higher-end pour that is catching on in a ferociously competitive club Mecca despite its lack of flashy trade dress or big-budget advertising.
The antithesis of a marketing- and advertising-driven brand, Finlandia, Kurtz says, nevertheless has all of the attributes to become the next breakout brand in the premium category. It arrived on the scene before Absolut vodka, and even before Stoli, he says. The taste is smooth and distinctive. And, he adds, “The price is right. It’s a little under Stoli and Absolut.”


Indeed, Kurtz says Finlandia may be a spirit launched well before its time that is only now ready to be appreciated in all its understated glory. “Pick up a bottle of Finlandia and what you see is minimum advertising, minimum glass and maximum product.”


Everything about Sauza tequilas lives up to the premium label to Mico Rodriquez, the owner and creative spirit behind 21 Texas-based Mexican restaurants and lounges serving more than five million meals each year.


“I am drawn by the appeal of quality, the passion in the brand, the professional nature of the distributor — the whole Sauza team that supports me,” Rodriquez says. “I have been to the Sauza distillery in Jalisco, and I’ve seen firsthand the commitment to quality and the passion and the respect they give to tequila, as well as the tradition that they hand down and the legacy they continue. The brand is 100 years old.”


More than just rhetoric, his conviction is underscored by the fact that Rodriquez chooses to pour Sauza and Herradura tequilas exclusively at his venues, even though he is well aware that he is making less money per drink.


“It costs me more to make a Margarita, but there is an internal pride in this, and that equation is passed on to the customer. It’s a commitment to quality that we share internally and externally.” NCB