A fun twist on a classic or a bad hangover waiting to happen? You decide.
Champagne is the traditional celebratory libation, but executives at Beam Inc. probably toasted the company's plan to acquire the Pinnacle brand with vodka.
Specifically, Pinnacle's whipped cream vodka — a product that managed to perfectly capture the zeitgeist when it debuted in 2010. Inexpensive and novel, Pinnacle sold 2.7 million cases in 2011, largely on the strength of the Whipped flavor. This staggering 93 percent year-over-year increase was buoyed by a line of spinoffs and a wider array of dessert-themed vodkas in flavors like gummy candy and cinnamon red hots.
Beam announced an agreement to buy Pinnacle, along with Calico Jack brand flavored rums, for $605 million from privately held White Rock Distilleries. Analysts say Beam can keep the Pinnacle juggernaut going by exploiting its widespread distribution network and by continuing to crank out new flavors. "This is a bolt-on acquisition that significantly enhances our position in the sweet-spot of premium vodka," Beam spokesman Clarkson Hine said via email.
Beam's distribution network will help the brand grow by expanding its reach, analysts say. "They certainly should be able to get this product into new channels and benefit that way," Morningstar analyst Kenneth Perkins said. Beam also will be able to cut some costs by eliminating operational overlap.
Beam wouldn't comment on Pinnacle sales, but Adam Rogers, senior analyst at Beverage Information Group, estimates White Rock earned $220 million from the brand last year.
Privately held White Rock began selling Pinnacle in a handful of tamer flavors in 2007, but Whipped was its breakout star. In stores, the vodka was cheaper than other brands that played with novelty flavors like Three Olives, a former White Rock product the company sold the year it launched Pinnacle.
In addition to being slightly cheaper, Pinnacle's Whipped flavor landed on store shelves the same year market research company Nielsen found that 47 percent of consumers reported going to bars or clubs less often in response to the economy.
"“Staying in continues to be the new night out," Danny Brager, vice president of the Beverage/Alcohol Team at Nielsen, said in a statement at the time. “Uncertainty about the extent of the recovery continues to dampen the consumer ‘rush’ to go out more often… this trend continues to serve as a significant opportunity for alcohol beverage retailers," he said.
"Pinnacle was really able to take a lot of customers because they over-delivered in value" for the price point, Rogers said. "They were able to take the current situation of the market and they had something different and new, and it was exciting for consumers with all the flavor extensions."
Consumer appetite for new flavors of vodka is still going strong, and Beam's wide reach can help it penetrate more markets with specific flavor preferences. "It's definitely fast-growing," Perkins said. "If the consumers seem to be wanting it, these companies are going to continue to innovate." Perkins added that flavor innovation for Pinnacle could have a spillover effect for Beam's, which has already been experimenting with adding flavors to its signature bourbon with the Red Stag brand. "New flavors are an easy way to leverage your brand into multiple consumer taste preferences," he said.