Davos Brands CEO state of the spirits industry

Yahoo Finance’s Alexis Christoforous and Brian Sozzi speak with Davos Brand CEO, Andrew Chrisomalis, about the recent Diageo acquisition, Ryan Reynold’s Aviation Gin, and how the spirits industry is faring amid COVID-19.

Video Transcript

BRIAN SOZZI: Sales in some industries are booming right now during the coronavirus pandemic-- baseball cards, RVs, motorcycles, as well as alcohol are all seeing momentum. For more on the spirits industry, we're joined now by the CEO of Davos Brands, Andrew Chrisomalis. Good to see you here, Andrew. So you've had a pretty eventful few weeks. You had that successful $610 million sale to Diageo led by the-- Ryan Reynolds' American Gin brand. What has the integration been like? And has the brand gained more momentum, just given the attention we've seen from that deal?

ANDREW CHRISOMALIS: Yeah, the-- hi, Brian. Thanks for having me. The deal hasn't closed yet, so we haven't had any, you know, real integration to speak of. We've been operating on our own since the announcement, which was August 17. For us, it's been business as usual. The brand has seen increasing momentum throughout the entire epidemic, frankly, and since announcement.

You know, with that-- with the big announcement, obviously, Diageo is a name that people follow globally. So the brand is in a few dozen markets around the world, both in the US, which is our dominant market for Aviation American gin, and globally. You know, we've seen increases in sales and demand across all channels. So we're very, very excited about it.

ALEXIS CHRISTOFOROUS: You know, certainly, Andrew, Ryan Reynolds is not the first actor to partner with Diageo. We saw the deal with George Clooney's Casamigos Tequila. What does it mean to have a celebrity have their name on or back or be involved with an alcohol product like this?

ANDREW CHRISOMALIS: Yeah, it's a great question, Alexis. We-- you know, frankly, you sort of ask yourself that. Well before we ever met Ryan and then even today, we get inbounded inquiries from folks all the time, especially now, about the idea of celebrity integration, et cetera. I would say, the iPhone, in particular, has a tremendous success story, you know, a history of success with a few examples of this.

There's Aviation Gin and Ryan Reynolds, obviously, now. Casamigos with George Clooney-- really big success for the Casamigos folks and for Diageo. And the brand has done exceptionally well since it was integrated to be part of Diageo. And then they've had others-- you know, Ciroc with Diddy. They have a bit of a history of founder-led brands. So whether it's Bullet Bourbon or the Nolet family with Kettle One, you know, they have a great, great track record.

The industry and other CPG more broadly is littered with examples of things that have not gone as well, that have failed. And so I think, for us, the key is authenticity, you know, ultimately ownership and authorship. And with Ryan, we had those three in spades. And it's led to a great deal of traction, frankly, in the marketplace.

BRIAN SOZZI: Andrew, $610 million is nothing-- it's no chump change here. And Diageo's a publicly-traded company. What are their plans to blow out this portfolio further? I know you also have a sake brand in the mix as well.

ANDREW CHRISOMALIS: Sure. You know, I think there's-- we're looking to capitalize on a few broad trends that have been occurring since prior to the pandemic and have been accelerated through the pandemic. One broad trend, the trend of premiumization in spirits, which we're seeing our portfolio fit square in the middle of that. And the second is, you know, consumers may be drinking less, but they're drinking better. It ties to that. And so-- then do the brands resonate with consumers? And do they still sort of need for consumers today to expand their repertoire?

You're seeing an increasing, you know, amount of experimentation, if you will, on behalf of consumers throughout this pandemic. They're drinking at home. They're no longer drinking at bars and restaurants right now. They will return to that, obviously. And they're willing to expand their consumption occasions and their, as I said, repertoire.

So with sake, you have TYKU sake. The idea of sake is you can drink it with sushi, of course. It pairs well. But it's a lighter, gluten-free, tannin-free, sulfite-free, less acidity than wine-- a more healthful, if you will, beverage. We can't say alcohol is healthy, but it has helpful properties. You know, it resonates with today's health conscious consumer.

We have a mezcal, sombra mezcal. Mezcal is a really hot category. It was very hot in the bars and restaurant world before the pandemic. Increasingly, people are experimenting. It's the original artisanal spirit of Mexico for tequila. And so, you know, a desire to understand what mezcal is and what separates sombra-- it's less smoky, et cetera. And then, of course, gin-- gin, globally, is a huge category. In the US, it is-- especially in the premium end, it is accelerating.

And we've got some tailwind with Aviation Gin, the idea being there's a bit of vodka fatigue. You know, people are no longer just drinking a vodka soda or whatever may be their go-to product they're experimenting. The botanical medley in gin-- Aviation is not your grandfather's gin. It's less Juniper forward. It's more balanced and nuanced. And so we're seeing it, Brian, of course, can recruit an enormous consumer group, and the brand will deliver with-- you know, with the subtleness of the flavor profile, et cetera.

So I think Diageo saw that in our portfolio for our own brand, two partner brands. And the idea of this sort of Goliath, if you will, of them with their data and their insights and their route to market globally and our entrepreneurial spirit and, hopefully, hustle, together, we'll be a powerful combination. So we're super excited about blowing the door off, as you said, of all the brands, quite frankly.

BRIAN SOZZI: I was on the Pernod Ricard call, earnings call a couple weeks ago. And they were highlighting a lot of stress on the distribution channel for spirits industry-- the mom and pop liquor store, the bars and restaurants. What's the aftermath of the pandemic for businesses like that?

ANDREW CHRISOMALIS: Sure. Huge, huge. You know, the pandemic has profoundly altered so many industries. I would say, you know, other than maybe travel or otherwise, you know, that the restaurant and bar world-- dramatic, obviously. Terrible impact. And so we've seen a shift in consumption to retail to the off-premise and to stores.

And there's been an increasing, you know, desire from consumers on behalf of spirits. The category more broadly-- RTDs, we're seeing. But from mom and pops to the big, you know, chain stores, whether it's the Costcos or the Total Wines or the groceries in the west coast and various markets-- you know, southeast, you can purchase liquors in chain grocery-- the retail industry has been performing, I think, exceptionally well.

The advent that you've seen-- it's been probably less of an advent and more of an amplification, if you will, and adoption is this idea a fourth tier. So three tiers traditionally in the liquor business. You have the suppliers or the brands like Aviation Gin or Davos Brands. You have distributors, licensed wholesalers, distributors, and you have retailers. Bars and restaurants are retail. Now you've got this fourth tier, which is essentially customer aggregators. You know, the idea of e-commerce has finally hit, and it's here to stay in the liquor business.

So you know, ease of ordering of consumption-- going online and getting product delivered, whether it's through Instacart in the grocery market or in other markets, Drizly, which is essentially a consumer-facing storefront that leverages the backbone infrastructure of retail of mom and pop stores in New York and allows people to have the convenience of delivery to their home. So we're seeing the advent of the fourth tier really come to life. It's here to stay. It's been one of the silver linings, if you will, of the pandemic.

ALEXIS CHRISTOFOROUS: Andrew, where do you see innovation in your industry right now? I mean, is it in what you were just talking about-- you know, the digital platform? Is it in CBD-infused alcohol? Where do you see the innovation for yourself.

ANDREW CHRISOMALIS: I think, you know, you'll see-- for the industry, you'll see, I think, this idea of this fourth tier platform just continue to grow and grow and grow and get more and more share of consumer wallet, if you will. In terms of the brand specifically, you know, we as a company, our ethos, our philosophy is always to be innovative.

And so either that can take the from of format-- and so today, you're seeing an acceleration of RTD, Ready To Drink, cocktails of cans as a format. There's convenience factor, et cetera, travelability, whether it's, you know, taking food to go from restaurants or taking a product to the beach or wherever. So you'll see format, you know, continue to evolve and innovation there.

You'll see ease of consumption in the form of ready-to-make, high quality cocktails, not sort of generic low brow, low grade cocktails or simple formats. And for all of our brands, you know, we'll continue to think about, you know, those things, the broader trends. And importantly, innovation relates to flavor profile and not necessarily a flavor of the day or this or that, you know, color or infusing. That's not what Davos is about.

That's not what our brands are about, but the idea of the consumer today being more open and oriented toward experimenting, as I said, expanding their repertoire. So you have to, you know, give consumers opportunity to do that with different botanical flavor profiles, perhaps, in the case of gin or otherwise. So I would say stay tuned, but we're excited about the future of each of our brands.

BRIAN SOZZI: All right, let's leave it there. CEO of Davos Brands, Andrew Chrisomalis. Good luck on the path forward.

- Thank you very much. Appreciate being here.