Skyy Spirits LLC

1 Beach Street, Suite 300
San Francisco, California 94133
U.S.A.
Telephone: (415) 315-8000
Fax: (415) 315-8001
Web site: http://www.campari.com

Wholly Owned Subsidiary of Davide Campari-Milano S.p.A.
Founded: 1988
Employees: 80
Sales: $74 million (2004 est.)
NAIC: 312140 Distilleries

A subsidiary of the Italian beverage company Davide Campari-Milano SpA, Skyy Spirits LLC produces America's second-highest selling super-premium vodka. Skyy Vodka is known for its thorough distillation and filtering process, which the company claims removes most of the impurities it says are responsible for the symptoms of a morning-after hangover. In addition to its original vodka, the San Francisco-based company offers Skyy90, created specifically for use in martinis; flavored vodkas that include Skyy Melon, Skyy Berry, Skyy Vanilla, Skyy Citrus, and Skyy Orange; and Skyy Cosmo Mix, used to make Skyy Citrus Cosmopolitans. Skyy also distributes Cutty Black whisky and Miller's London Dry Gin.

ORIGINS OF SKYY VODKA

Skyy Vodka was created by Brooklyn-born millionaire and maverick inventor Maurice Kanbar. A mechanical engineer by training, he would hold more than 36 successful patents on a wide variety of products. The foundation of his fortune, when he was still in his early 20s, came from the 1960s invention of the D-Fuzz-It Sweater Comb, used to remove "pills" of fabric that form on sweaters. Other Kanbar inventions included the Safetyglide hypodermic needle protector cap and a cryogenic cataract remover. In the early 1970s he also launched the first East Coast multi-screen movie theatre: the Quad Cinema in New York City's Greenwich Village. It was in 1988 that Kanbar was inspired to create Skyy Vodka after suffering from a headache caused by after-dinner cocktails. He talked about his hangover with a physician friend, who told him that the symptoms might have been caused by congeners, natural toxins that are produced during the distillation process in making spirits. Kanbar told the Toronto Star in a 2001 interview, "I said to myself, 'If someone would create a dependably pure vodka that wouldn't give me a headache, I would drink it.'" Sensing a business opportunity, he began conducting research on congeners and the distillation process.

According to Eban Shapiro writing for the Wall Street Journal, "The search for a bender without consequences dates back to the ancient Greeks, who believed that wearing amethyst, also known as the Drunkard's Stone, protected them from alcohol's ill effects. Even 'The Dialogues of Plato' contains a discus-sion of 'how can we drink with least injury to ourselves.' But the Golden Age of Hangover Research came in the 1960s." It was during this period that one study found that just one out of 30 test subjects who got drunk on vodka reported a severe hangover, compared to a third of the subjects who drank bourbon and suffered from severe hangovers. Because vodka contained one of the lowest congener contents of all alcoholic beverages, Kanbar reasoned that congeners were the primary contributor to the severity of a hangover. He decided to use vodka as a starting point for a hangover-free liquor, then try to make it as congener-free as possible.

Kanbar began searching for a distiller to work with on his idea for a purer vodka. "They thought I was nuts," he told the Toronto Star, adding "I finally found a distillery to distill it four times. They said they would do it if I paid for it beforehand." Following distillation, Kanbar had his vodka subjected to a three-step filtration process to remove odor-forming compounds. After patenting the process Kanbar tried to sell it and move on to other projects, but once again he was met with skepticism. "There were already strong vodka brands around," he told Beverage Industry in a 2000 profile. He explained: "Nobody felt it was a real proposition—that people really cared about impurities in their vodka."

Kanbar decided to invest his own money and market the vodka himself. In 1992, working out of his San Francisco apartment, he began selling the vodka in a clear stock bottle, essentially going door to door to bars and restaurants. It was while gazing out of his apartment at the beautiful sky above San Francisco that he hit upon the brand name "Sky," because it connoted purity and balance, like the vodka he had produced. A second "y" was added to the name to help it stand out and for trademark purposes. He then began using a cobalt blue bottle, which referenced the name and was also more stylish than the clear glass bottles used to contain competing vodkas.

SKYY VODKA INTRODUCED IN 1993

With all the pieces in place, Skyy Vodka was introduced in 1993 and rolled out nationwide a year later. It enjoyed exceptional success in large part because of timing: the economy was on an upswing and younger people were rediscovering the cocktail, eschewing the spritzers and wine coolers of the 1980s. In 1994 Kanbar attended the 1994 Wine and Spirits Wholesalers convention in New Orleans, at a time when Skyy had a presence in only a handful of states through commissioned brokers. He approached some national distributors about carrying Skyy Vodka but they asked to wait until the convention was over before meeting with him. In the meantime, regional wholesalers who had heard about Skyy Vodka's success in California approached Kanbar and sought to represent the brand in their markets. By the time the national companies got back to him, Kanbar had cobbled together his own plan for national distribution. In 1994, the company had sold an impressive 190,000 cases of Skyy Vodka and was poised to enjoy even stronger growth.

By that point, Kanbar had reached his limit as an executive, preferring to create enterprises and then turn them over to someone with more management skills. He recruited his 27-year-old nephew, David Kanbar, owner of a small New York mortgage business, who sold his company and moved to San Francisco, where Skyy was still just a three-man operation working out of his uncle's apartment. They soon decided that they needed the services of someone experienced in the liquor business. Two executives did not pan out but the third did. He was Anthony Foglio, the chief operating officer and president of IDV North American, the spirits division of Grand Metropolitan plc. Foglio brought along his right hand man, Keith Greggor, and together they were instrumental in taking Skyy Vodka to the next level. Sales grew to 375,000 cases in 1995 and 585,000 cases in 1996.

COMPANY PERSPECTIVES

Skyy brings a wide selection of distinctive tastes to fit any cocktail occasion.

Another important element in the brand's success was its marketing, which was put in the hands of people who were part of the target demographic. "A lot of these larger spirits companies are full of old farts," Skyy's director of marketing Dan DeDalt told Marketing News in 1995. "It's different at Skyy. We go into the hip bars because we know what's happening. We know what entertainment to get involved with because we know what's cool with our own group." To appeal this age group, Skyy Vodka advertising took an increasingly edgy tone. For example, one print ad featured a young man in a red leather chair straddled by a red-headed dominatrix. On a side table was a bottle of Skyy and a pair of empty martini glasses. According to Erika Brown writing about Skyy in Forbes in 1998, "Maurice grouses that he doesn't 'get' the ad campaign, but is willing to let Foglio take charge."

A PASSION FOR FILM HELPS BUILD THE BRAND

One of Kanbar's many interests was film. He gave generously to New York University's New York School of Film, which was ultimately renamed the Maurice Kanbar Institute of Film and Television. In 1998 Skyy found a way to incorporate the medium of film into its branding efforts, with the launch of the Skyy Cinema campaign. The company sponsored 30 independent film festivals and premieres, including the surprise hit of summer 1999, The Blair Witch Project. It also developed a series of short independent films that focused on a "cocktail moment." Moreover, a wordless print ad campaign displayed Skyy Vodka in film noir-like settings that encouraged viewers to imagine their own scenarios. Over the next five years approximately 50 such vignettes would be presented, some of which included celebrities like Ben Stiller, and others of which stirred public controversy. According to Skyy, the campaign was instrumental in raising brand awareness 200 percent. The Skyy Cinema campaign continued in 2003 with new print ads that featured actors Tave Dies, Heather Graham, John Leguizamo, Kyle MacLachlan, and Gretchen Mol. These ran in such magazines as Maxim, Cosmopolitan, and Stuff. In addition, Skyy began commissioning original content short films for viewing on its Web site, and established the Skyy Vodka Short Film Project, a contest in which entrants submitted a five-minute tape explaining why they wanted to be filmmakers. The three finalists would then be given a chance to shoot a short film in New York City, each relying on the same script, with a 72-hour time limit.

NEW CENTURY BRINGS NEW FLAVORS

At the start of the 2000s, Skyy Vodka sales approached the one million case mark with no signs of tapering off. Skyy took its first step in expanding the product line in 2000 with the introduction of Skyy Citrus, combining vodka with the essences of lemon, lime orange, tangerine, and grapefruit. Interviewed by Beverage Industry in June 2000, Kanbar said, "It took years to develop because we wanted to create a complex flavor, one you couldn't achieve by simply squeezing a lemon into your vodka on the rocks." Skyy Vodka passed Russia's Stolichnaya brand of vodka, becoming the second largest super-premium vodka brand in America, trailing only Sweden's Absolut. Skyy's success had already caught the attention of Italy's Campari Group, which bought an 8.9 percent interest in 1998 as part of a cross-marketing alliance: Compari would distribute Skyy Vodka in more than 100 markets outside of the United States. In early 2002, Campari acquired a controlling stake in a $207.5 million deal by purchasing another 50 percent from Kanbar, allowing the latter to concentrate on his other inventions and providing plenty of cash for his philanthropic projects. The change in ownership also improved Skyy's ability to grow as an international brand, while presenting Campari with a greater opportunity to expand in the United States.

KEY DATES

1988:: Maurice Kanbar decides to create a "hangover-free" vodka.
1993:: Skyy Vodka is introduced.
1994:: Skyy Vodka is distributed across the United States.
1998:: Skyy Cinema campaign is launched.
2000:: Skyy Citrus is introduced.
2002:: The Campari Group acquires controlling interest in the company.
2004:: Skyy begins distributing Cutty Black whisky.
2005:: Skyy90 is introduced.

Under Campari control, Skyy picked up the pace in filling out its portfolio. In 2002 it began selling Skyy Cosmo Mix, which contained a blend of cranberry, lime, and orange liqueur flavoring that could be blended with Skyy Citrus to produce a cosmopolitan cocktail. The pink drink had become popular due to exposure on television shows like Sex in the City. As a result it had become one of the most frequently ordered cocktails in lounges and restaurants across the country. The company became involved in a new category of 5 percent malt beverages, engendered by the popularity of Smirnoff Ice and quickly joined by the likes of Bacardi Silver, Captain Morgan Gold, and Sauza Diablo. Skyy entered the fray by creating a joint venture with Miller Brewing company, resulting in the introduction of Skyy Blue. In 2003 Skyy rolled out new flavored vodkas: Skyy Spiced, a blend of natural spice flavors including cinnamon, nutmeg and clove, which the company touted as a good mix with cola; Skyy Berry, a blend of all natural raspberry, blueberry, and blackberry flavors, good for mixing with lemon-lime soda; and Skyy Vanilla, a blend of Madagascar vanilla bean with a hint of amaretto, which was suggested as the basis for a Skyy Vanilla Martini. Along with the introduction of the new flavored vodkas, Skyy made changes to its packaging. Added to the signature cobalt blue bottle were such touches as a new cap, a sleeker neck design, and color differentiated logos, including a silver Skyy logo for the original Skyy Vodka and color-coded logos for each of the flavors. In January 2004 Skyy added another flavor, Skyy Melon, combining honeydew, cantaloupe, and watermelon flavoring, suited for creating a variety of fruit cocktails. Later in the year the company unveiled Skyy Orange, a mix of Brazilian and Blood Orange.

Skyy Spirits also began picking up the distribution of outside brands, courtesy of its corporate parent. In 2004 it began bottling and selling Cutty Black whisky under a license with the United Kingdom's Berry Bros. and Rudd, LTD., after the new 100-proof whisky performed well in test marketing. Skyy added the U.S. distribution rights to Miller's London Dry Gin in 2005. Skyy sales reached 1.9 million cases in 2004, which represented a 72 percent increase since 2000. The company was poised to continue the trend in the coming years, as it continued to build up its portfolio. In 2005 it introduced a 90 proof vodka, Skyy90, an upscale spirit retailing around $35 for a 750ml bottle. It was produced at a new state-of-the art distillery that housed a proprietary finishing stage able to eliminate all water and by-products from the fermentation process. By this point, Skyy had established its identity in the marketplace based on style and prestige, and it was no longer marketed as the cure for the common hangover.