Can a Margarita in a Pouch Weather Bud's Margarita in a Can?

By Anita Hamilton, Bloomberg Business Week

The infamous alcohol-fueled slushies sold at open-air bars on Bourbon Street in New Orleans have led to countless brain freezes. For fourth-generation locals Antonio and Sal LaMartina, they led to a business: Big Easy Blends. The brothers are trying to bring a taste of the city's night life to homes around the country with a line of frozen drinks in squeezable pouches they launched in 2009. Dubbed Cordina, a mashup of their last name and the last name of their co-founder and chief financial officer, Craig Cordes, the bestseller of the brand's five flavors is the lime Mar-GO-rita, which is 6 percent alcohol by volume. "It's like Capri Sun for adults," says Sal, describing the drinks' fruity flavors and flexible packaging.

The next few years read like a startup fairy tale. The cocktails appealed to women in their twenties and thirties, accounting for most of the $4.6 million in revenue in 2011, according to Cordes, and earning the brand the nickname "Mommy Juice Box." After signing a deal with Walgreen for distribution in its 4,800 stores with liquor licenses in January, Big Easy increased headcount from 38 to 126 employees, funded in part by a $1.5 million private investment. Next, it landed a deal for 1,000 Food Lion stores nationwide and some 500 Wal-Mart locations in eight states, including California, Florida, and New York, says Cordes. He expects this year's revenue to top $27 million.

Here's where the fairy tale gets its tension: In April, Anheuser-Busch launched Bud Light Lime Lime-A-Rita, a margarita-flavored beer-based cocktail with 8 percent alcohol by volume. In its first full week of sales that month, Lime-A-Rita zoomed to the No. 1 spot among premixed cocktails, according to research firm SymphonyIRI. "Lime-A-Rita will by nature compete with the premixed cocktails," says Paul Chibe, vice president of U.S. marketing for Anheuser-Busch, who says he hadn't heard of Cordina Mar-GO-rita before launching his brand. "Lime-A-Rita is a unique product with a very different name."

It's no coincidence Budweiser is dipping its toes into the premixed cocktail market now. Overall beer sales are nearly flat, and Bud Light Lime, which had a successful launch in 2008, slumped last year as its novelty factor wore off. Beverage giants have a tradition of barreling into successful, growing niches pioneered by smaller brands: Miller Coors' Blue Moon label, which launched in 1995 to compete with craft beers, is now a bestseller. Coca-Cola bought Glaceau's VitaminWater in 2007 for $4.2 billion just as the energy drink market was taking off. Cordina's Cordes concedes that Lime-A-Rita will cut into Mar-GO-rita sales. "They're Bud Light. They can put it everywhere," he says.

Premixed drinks are one of the fastest growing parts of the $150 billion U.S. alcohol market, with nearly 500 different products available today, according to Nielsen, though big brands such as Smirnoff Ice and Mike's Hard Lemonade dominate.

That's another reason Big Easy's founders are doing their best to differentiate their label. While many premixed cocktails are malt beverages (which use a malting process as opposed to fermentation or distillation), Cordina uses flavorless wine made from fermented orange juice, in part because there is less competition from powerhouse brands in the wine-based cocktail market. Switching from the trendier but pricier agave wine it once imported from Mexico helped the company lower its retail price from about $15 to $8. "The turning point was last year," says Cordes, who credits the cost reduction with boosting sales and making the company profitable.

The independent brand hasn't captured much beverage-industry trade press, which tends to ignore all but the bestselling premixed products, but its three recent distribution deals will obviously improve its reach with consumers. "Cordina's product tastes better [than its direct competitors], and I think the packaging is better," says Food Lion's wine, liquor, and cocktail manager Jimmy Faller, who pushed the button on Cordina last month, just in time for summer barbecues and beach parties. "It's something that is easy and convenient for consumers. That's what the difference is-these guys have found a niche."