Celebrating 10 Years of Magnus Cigar Blend Whiskey

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1:27Bloomberg Audio Studios. Podcasts, radio, news. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Do you, Emily, know what the buzz ball is? No, I don't. Okay. The New York Times has a story today. It's about buzz balls. It says it's the high alcohol drink taking over Gen Z. Oh, is this like, this is a cannabis drink? No, it's no 15 % alcohol by volume more than double over the average beer. See, that's interesting because I feel like in the zeitgeist, as Tom Keen would say, is that, um, Gen Z is drinking less. And so they wouldn't want something that is higher alcohol.

2:14That's why this is so surprising. You know, something cannabis related or like a low ABV. Um, but that's surprising and sales are taking off. Sales are taking off apparently. So there's two different narratives happening, right? People don't want to drink anymore, but there's also the high alcohol bus balls that are taking over Gen Z, at least according to the New York Times. Well, it's Friday, so we're wrapping up the week, Tim, with a little toast, a little cheers. That sounds good. A taste of whiskey. We actually have joining us Allie Anderson, and she spoke to you and Carol just a few months ago, right, Tim?

2:47Yeah, we talked a lot about tariffs a few months ago. That was when she was joining us from a distillery. Ali is CEO of Craftco. They've got a great portfolio that includes more than two dozen spirits and liquors. Think bourbon, gin, rye, ready to drink cocktails and more. They also do co-packing for other brands. Ali joins us from Alexandria, Virginia. Good to have you on the program. How are you? I'm doing well and thank you for having me. Good to be with both of you today. It's Friday. We have a lot of reasons to toast. We do. We do. We always have a lot of reasons to toast. Hey, Ali, last time we spoke with you was in November.

3:19And I think what we always like to talk to you about is this real-time view of what the consumer is buying, how the consumer is doing, how your customers are doing. We're in a different situation right now with this war with higher energy prices. And I'm just curious if you're seeing any real-time data about any difference in spending with what they're buying. What we see is that consumption is not disappearing. You were talking about Gen Z earlier. I've got a Gen Z daughter, and I'm constantly canvassing her at college. What are you drinking? and I can tell you anecdotally that Buzz Balls is real.

3:51It's real. It's so real. It's a genius idea, right? But, you know, it's that consumption isn't going away. Gen Z is drinking. In fact, I think a lot of us are drinking. I know the Gallup poll said 54 % of adults drink, but what we're seeing is big shifts in the way that we drink. People are drinking more intentionally. They're doing it around events. They're alternating alcohol with non-alc. They're maybe doing it, especially Gen Z, in these smaller, more curated social settings. Or, you know, they're doing kind of day cap type occasions that favor maybe more lower proof, a little more sessionable, more flavor forward.

4:33And they're really prioritizing experiences over just tons and tons of volume. How does that influence what portfolio companies you're working with in the portfolio? Leo? Well, I think what it changes is we have to listen really, really closely to the consumer. For example, we have RTDs. We have a line of that. We're really known for whiskeys and spirits, but we've also got RTDs. The ready to drink. RTDs, ready to drink. Yeah, ready to drink. The pre-mixed cocktails. Yeah. And you're also seeing ready to pour, which is on the more spirit forward side. So you're seeing that be a consistent growth engine across the spectrum.

5:11Now we're really focusing on spirits. But what we do is we go, okay, we've got a variety of people coming into our social house, our distillery and saying, what do we want to have? Some people just want to have RTDs. Some people want to have that, you know, that great big bourbon. Some people are looking for something a little more refreshing, a little more gin, you know, vodka forward. So I think the key, like what is the lesson in this? It's to be really flexible with what you offer, but not to go after everything. You've got to be very intentional about what you go after. So we have some of the Joseph Magnus spirits here in the studio with us.

5:45Thank you for that. And then this one we've poured, the Murray Hill Club bourbon whiskey blend. This is what I'm going to take a sip. We're going to drink it. Are we going to take a sip? I have some too. Can I share? Oh, yeah. Yes. It's close to five o 'clock, Allie. It's fine. We're going to call it. I'm in D.C. Yeah, we're calling it. All right, we'll do a toast, Allie. So as you guys are drinking this, Ali, I'm going to ask you the question about these brands and how you position them in a really, really crowded category. Because like I said, you also do co-packing. People might be drinking alcohol that you distill, not even know that you're distilling it because you're doing it for other brands.

6:24But how do you position these? Well, with something like Magnus, which you guys are enjoying right now, it's very premium. Like, premiumization was kind of the trend and the buzzword really for the past 10 years. What we're seeing now is a ceiling with that. You can't just be expensive. And, you know, Joseph Magnus, it is expensive. You're drinking$119 bottle of really exquisite bourbon. Ooh, OK. OK, wait, so that's not Gen Z's not buying this kind of bourbon. This is a different audience. If they are, then I want their job if that's what they're doing. But I think the lesson here is that premium isn't dead, but that lazy kind of premium is.

7:04Like you can't just put out a brand and say, we've got premium whiskey. You've got to have the goods to back it up. And what is that, right? That's the technique you're using. That's for sure the liquid you're using. But are you differentiating what your story is, your process, your place? Are you tying it to a special occasion? Those are the kinds of things that we prioritize when we're talking about our premium portfolio. Well, we're always trying. I feel like on this show, we're always trying to kind of learn about the consumer and the economy through CEOs like you, because you do have a unique kind of viewpoint here.

7:41We were talking earlier about consumer sentiment hitting like the lowest on record. Yeah. Higher inflation kind of crimping Americans there. I mean, are you seeing kind of the way that people buy? Maybe they're buying just one premium spirit as opposed to kind of going all out. Are you seeing any kind of signals of consumer stress? Well, for sure. What we're seeing in the data is polarization. So you're seeing a whiskey like this, right,$100 and up. That's not struggling as much as the ones in the middle. and then you've got the ones at the bottom, maybe$29 and below that are doing fine too. There's a lot of growth there.

8:24So, you know, for example, we've done with one of our brands has come out with an age stated it's Coppercraft nine-year straight bourbon whiskey. A couple years ago, a nine-year would be well over$50. We've said, we're going to bring that down to $37.99 because we know that consumers are looking for that rare combination of value and quality. And how can they get that for a great price? And like that University of Michigan study was saying, or that report was saying, what we're seeing is that really near-term crunch, that near-term sentiment. When you pull that out and look up, I think on the longer term, we expect to see some recovery, even with whiskey.

9:01What are the areas in terms of the types of drinks that you guys create? What are the ones that are selling the best right now and where there's the most area for growth? Like we said, you do gin, rye, ready to drink cocktails more. What's the biggest growth area? This has surprised us. I will even say we pay pretty close attention to the data. And one of the things we're seeing tremendous growth in is gin. Wow. Martinis. Okay. Yes, a gin martini. People like the twisties now. Martinis are in. You guys heard it here first. I guess it's not surprising to you, Emily. No, I do like a martini. Allie Anderson, Craft CEO, a Craftco CEO.

9:40Thank you so much for joining us on this Friday. And thank you for the bourbon. And cheers, Emily. Cheers. Cheers, Tim. All right, we've got to save this too for next time.