SALE BOOSTS ALBERTA WHISKY
$355M deal lifts spirits of industry
Black Velvet Canadian Whisky, produced at a distillery in Lethbridge for decades, has been promoted by some of the biggest names in show business.
Over the years, ads featuring Telly Savalas (with the slogan “Feel the Velvet, Baby,” playing off his role as TV detective Kojak) supermodel Christie Brinkley, country music star Tanya Tucker and TV villain Larry Hagman
(the original J.R. Ewing, donning a black cowboy hat and boots) endorsed the product.
Powered by a slick marketing campaign, the brand had plenty of sizzle for the times, touting a whisky made in Alberta and sold around the world.
Those advertisements are laminated and still adorn the company’s walls in Lethbridge.
“They were all icons promoted in the U.S., to promote and build the brand,” said Lethbridge Mayor Chris Spearman, who worked at the distillery as the accounting and administration manager from 1980 until 2013.
“Black Velvet is an important employer in the city, it’s great for our city’s reputation … it’s an icon in Lethbridge.”
Today, there’s hope its new
U.S. owners will breathe life into the aging, but well-established brand.
Liquor giant Constellation Brands Inc. announced Tuesday it was selling Black Velvet Canadian Whisky, and some other brands tied to the Lethbridge facility, to Heaven Hill Brands for US$266 million in cash (Cdn$355 million).
A privately owned distilled spirits supplier headquartered in Kentucky, Heaven Hill is acquiring the second-largest-selling Canadian whisky, trailing only Crown Royal.
The deal includes the distilling operation in Lethbridge and remaining portfolio of Canadian whisky brands that were owned by Constellation. Combined, these products had net sales of US$67 million last fiscal year.
“We recognize that Black Velvet probably didn’t fit their long-term prospects. It does ours,” company spokesman Josh Hafer said in an interview from Louisville, Ky.
“We know the whisky industry and we know how to sell brands, much like Black Velvet, so we’re excited to bring it into our portfolio and give it the time and attention it deserves.”
The deal is expected to close in the second half of the year.
Heaven Hill, the largest independent family-owned supplier and marketer of distilled spirits in the U.S., should be well positioned to revitalize the brand.
While public companies are under pressure to deliver revenue growth that exceeds category trends, the new private owner isn’t stuck in that position.
“We think there’s tremendous untapped potential with Black Velvet,” Hafer said, noting the company intends to retain the 60 local employees once the deal closes.
“We can work with this brand and get it the marketing attention that it deserves to move it back into the positive — and we don’t necessarily need it to grow at six, seven or eight per cent a year.
“If we can steady the growth on this … then we’re satisfied.”
Over the past five years, U.S. sales of Black Velvet have slowly dropped, dipping 2.6 per cent in 2018.
According to data from the Beverage Information Group, Canadian whisky made up about seven per cent of total distilled spirit sales volumes in the U.S. last year, selling about 16.8-million cases.
Of that amount, Black Velvet sold 1.9-million cases.
“It’s a production facility and it does need a marketing arm and people to promote the brands. Black Velvet in Canada, sadly, hasn’t received the attention it’s needed,” said Spearman.
“It was priced near the bottom and didn’t have a whole lot of promotional support.”
Whisky expert Davin de Kergommeaux, editor of canadianwhisky.org, sees the sale as a positive step for Black Velvet and its facilities in Lethbridge.
He believes the Alberta operation was stuck playing “second fiddle” to Constellation’s wine portfolio, and having a company focused on whisky should put attention back on the product.
“I am really thrilled with that sale because I love Black Velvet, but it’s slowly been in decline in Canada,” he said.
“There is a real opportunity to re-energize the brand.”
Analysts said unloading Black Velvet makes sense for Constellation as the multinational strives to emphasize its premium brands with more immediate growth potential. (It is also a major investor in Canadian cannabis giant Canopy Growth Corp.)
“They are moving up the value chain,” said analyst Caroline Levy, a beverage analyst with Macquarie Capital. “They want to get out of stuff that isn’t adding to their top-line growth.”
The deal also underscores Alberta’s potential in the spirits business.
Industry data shows Albertbased facilities produced about 10 per cent of the total spirits sold in the country last year and about 12 per cent of Canadian exports, worth about $81.7 million.
There are three larger commercial distillers in the province that employ about 400 people, while a number of smaller craft distillers have opened up across Alberta in recent years.
“It’s moved from the domain of large international distillers to the craft world, really following on the heels of what happened in the craft beer world,” said Alberta Craft Distillers Association president David Farran, who also serves as president of Eau Claire Distillery in Turner Valley.
“We’re now at 32 active (craft) distilleries in the province. Five years ago, there were zero … People are looking for quality and change and want something they can buy that’s local and has unique flavours.”
In Lethbridge, the mayor believes new ownership can propel Black Velvet into a new era focused on expanding the market and product lines.
“In some ways, this is a better fit for Black Velvet. They will be run by people who understand the whisky business,” said Spearman.
“People don’t spend $266 million just to watch something diminish. I think they see a lot of opportunity for Black Velvet.”
Kojak made his mark asking, “Who loves ya, baby?” For Black Velvet, the answer is clear: a new owner willing to pay up and take over a recognizable Alberta brand.