DB diversifies from beer with bourbon RTD

Barrel 51, a new bourbon and cola RTD from DB

A not-so-sweet bourbon and cola mix is spearheading DB Breweries' entry into the domestic ready-to-drink alcoholic beverage market worth an estimated $190 million a year.

The just launched Barrel 51 - a bourbon and dry cola mix - is the first of a series of products DB plans to introduce this year to tackle RTD leader Independent Liquor, as well as Lion and Fosters, said DB managing director Brian Blake.

DB, now fully owned by Singapore's Asia Pacific Breweries, had been very focused on strengthening its beer brands in the past few years, Blake said.

"We've had three years of double-digit [earnings before interest and tax] growth," he said.

DB was now turning to the RTD market to try to maintain impetus. Blake estimated retail sales of RTDs in New Zealand were about $190 million a year, with bourbon and cola mixes taking about 60 per cent of that. Independent Liquor, established by the late Michael Erceg who pioneered RTDs in New Zealand, was the biggest player in the market with about 60 per cent share, he believed.

Barrel 51 was aimed at existing bourbon and cola drinkers, "a market that's growing very rapidly". Research showed they were interested in a dryer, less sweet drink, Blake said. "That was the key difference that we saw that we could actually build into this product."

On what other new drinks would be introduced by DB, Blake said the emphasis would be on looking at fresh products rather than simply copying others.

Internationally there was a "crossover" going on in the drinks market.

"You're getting some products that are not strictly beer and not strictly RTDs. So we're hoping to do some innovative things in that respect."

Future innovations would also include new beer styles and packaging.

Blake declined to give a target for the share of the RTD market DB hoped to capture. "But obviously we have an ambition to be a reasonably significant player in that market."

However, DB would remain "a beer company at heart", said Blake.

Liquor analyst Rob Mercer, head of research at broker Forsyth Barr, said RTDs were one of the fastest growing categories in the liquor market.

Barrel 51 was a "reasonably late runner" into that sector but DB had the distribution network to do "a fairly good job" with it. DB could have paid goodwill to market an existing brand or used that money to develop their own.

"I think they're obviously trying to cherry pick where there's a gap in the market and use that going forward to gradually roll out other products," said Mercer.

While it might prove difficult for DB to make a profit out of its latest venture, the company would take a long-term view on RTDs. "I don't think it's a market that's all of a sudden going to turn into a heap. I think it's sort of an entrenched trend."

The reality was that DB was targeting "the youth of today that is perhaps not drinking as much beer, so it's a defensive move as well", said Mercer.

On whether DB had been too slow to respond to the rise of RTDs, Blake said the brewer had achieved good results by being "quite single minded" about growing the strength of its beer brands, which include Heineken, Monteiths, Tui and Export Gold. In the last few years consumers had begun to demand a wider range of products and there was an opportunity for DB to get a slice of the action.