"A-B gets into the spirit of things with Jekyll & Hyde"
By Gregory Cancelada
ST. LOUIS POST-DISPATCH
Sunday, Nov. 6, 2005


Innovation has driven the brewing business of Anheuser-Busch Cos. for the last 153 years. Now the nation's largest brewer hopes to duplicate that innovation in an entirely new business: distilled spirits.

Anheuser-Busch has created a subsidiary, Long Tail Libations Inc., that will focus on developing and marketing distilled spirits. Created in September, the St. Louis-based subsidiary and its small staff began a very limited test market last week of a set of distilled beverages named Jekyll & Hyde.

So far, the subsidiary is testing the product in fewer than 40 retail accounts in four cities: Orlando, Fla.; Denver; Las Vegas and Columbia, Mo.

Though early results are encouraging, there has been no decision yet on whether to offer Jekyll & Hyde to more markets or even to launch it nationally, said Mic Zavarella , director of innovations at Long Tail Libations.

"This is a completely new space for us, and it's going to be a great deal of fun getting out there and seeing how the product does," Zavarella said Friday. Beer remains the country's most popular drink, and no other type of beverage is close to surpassing it. Beer represents about 58 percent of alcoholic servings, while distilled spirits account for about 28 percent. The rest is wine. But distilled spirits appear to be steadily growing at the expense of beer consumption. Last year, industrywide shipments of domestic beer rose at a minuscule 0.6 percent, while spirits sales volume is estimated to have grown by more than 3 percent.

This new competition has forced Anheuser-Busch to look beyond its traditional brewing rivals in order to grow sales. During a May investor conference, Chief Executive Patrick Stokes told analysts that the company wouldn't limit products by the source of alcohol, raising the possibility that it might venture beyond brewing.

Still, creating a distilled spirits subsidiary, even if it is small, represents an interesting twist.

"It's amazing. I never would have thought (A-B) would do this," said Robert Weinberg, a St. Louis-based beer industry consultant and a former director of research at Anheuser-Busch.

Though focused on spirits marketing, Long Tail Libations isn't a distiller. United States Distilled Products of Princeton, Minn., is producing Jekyll & Hyde.

It's too early to talk about whether A-B would start its own distilling operations, said Pat McGauley, vice president of innovations at A-B's domestic brewing unit and Zavarella's boss.

However, Anheuser-Busch's wholesalers are distributing the product. The four wholesalers whose territory lies in the test markets already have applied for and received licenses to sell distilled spirits.

Jekyll & Hyde is a set of two bottles of different spirits that are combined in a single shot glass.

At 60 proof, Jekyll is scarlet red with a taste of wild berries. Jet-black Hyde, at 80 proof, is a mix of spice and a strong herbal licorice taste. When combined, the drink becomes layered, with the Hyde liquid floating on top and Jekyll below.

The two distinct tastes play off the Jekyll & Hyde theme of offering "the good and the bad, the naughty and the nice," Zavarella said.

This duality also fits the mood of young adult drinkers, McGauley said. "They're shifting from work to fun, and that's what Jekyll & Hyde is all about," he said.

The drink also lends itself to mixing with other spirits and flavorings, something that young adult drinkers often desire.

"See how the black floats to the top," said Marianne Radley, manager of innovations at Long Tail Libations. "You can add other flavorings, and they drop down between the two layers."

Though the unit has come up with a dozen drink recipes, they saw bartenders create four new recipes Thursday night while visiting bars in Columbia, she said.

A-B could have delegated marketing and development of this beverage to its main brewing unit. Instead, the brewer decided it needed a separate subsidiary to create a unique approach to this business.

"Some of the larger, mass-marketing vehicles don't work quite as well in this space," Zavarella said. "There's a lot for us to learn, a lot for us to do."

Though Long Tail Libations is working on these other drink ideas, the subsidiary will devote its attention over the next year to the Jekyll & Hyde product.

Though a bold move, the decision reflects Anheuser-Busch's willingness to innovate and look at every opportunity to grow, said Weinberg, the consultant.

"It sounds like a good probe," he said. "It's not way out in left field."


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