Drinks Americas Signs With UMG

The small-cap beverage company has latched onto a big music fish.
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In a unique blend of adult beverages and music, Drinks Americas (DKAM) Drinks Americas, a $100 million market cap "premium beverage" company, penned a deal with Interscope Geffen A&M Records, which is part of Universal Music Group, the world's largest music company, on June 22 that will, for the first time, give artists an equity stake in new products that are jointly developed.

This deal shouldn't be surprising. Artists have influence over their fans' spending decisions, so why not get a share of the profits?

Celebrities have a big influence on the drinks industry in general. Last month, Rapper 50 Cent, who is also on Interscope's label, received approximately $400 million after

Coca Cola

(COKE) - Get Report

bought

Glaceau, the creator of the highly successful Vitamin Water in which he had a 10% stake.

Other news in the beverage industry included the sale of 80% of Sammy Hagar's

Cabo Wabo Tequila to Gruppo Campari for $80 million. Hagar is a Rock and Roll Hall of Fame inductee and was a singer and songwriter for Van Halen.

"There has been a winning tide between hip hop music and adult beverages for quite some time. Whether its rap artists are promoting champagne or cognac, they have lent instant street accreditation to emerging brands," says Pete Snyder, CEO of

New Media Strategies.

The UMG label has several heavy hitters on its roster from a number of genres. The talent includes Eminem, Dr. Dre, Snoop Dogg, 50 Cent, Busta Rhymes, G-Unit, Daddy Yankee, Sheryl Crow, Enrique Iglesias, Chris Cornell, Gwen Stefani and Marilyn Manson. The label is headed by Chairman Jimmy Iovine.

"The influence that these labels' artists have over mainstream culture, whether in the U.S. or abroad, is truly a remarkable thing," says Brian Kenny, vice president of marketing at Drinks Americas.

Some of Drinks' other lines include Willie Nelson's Old Whisky River Bourbon and Paul Newman's Own Lightly Sparkling Fruit Juice Drinks. Some of the marketing efforts planned include music videos, concert groups, album kick-off parties, lyrics and tours.

Part of the 50/50 partnership will identify, develop, commercialize and market jointly-owned alcoholic beverage products. Part of the agreement will also include marketing existing products including Trump Super Premium Vodka, through which Drinks Americas has a 50/50 partnership with Donald Trump.

What does this mean for the music industry? "It's a clear indicator that it's no free ride anymore. Also, I think it's smart business. The recording industry has been in turmoil for years. Entrepreneurs and recording artists need to find other revenue streams. Some examples include Jay-Z with Def Jam, and

when you look at Russell Simmons and other established hip hop artists,

one sees most of the bang is not coming from downloads and CDs," says Snyder.

Trump himself is pleased with the new venture. "This joint venture is a giant step in the business world. The world's largest music company joining forces with Drinks Americas is a brilliant move, and I am pleased that Trump Super Premium Vodka will be a part of this innovative and significant new concept," says Trump.

The Specifics

How will the deal work specifically? "It's not a licensing deal. It's a business partnership. There are no guarantees. We respect the nature of their iconic stature by treating them like business people and entering deals with them," says Kenny of the celebrities involved.

Kenny is clearly excited, comparing the deal to getting to work with the New York Yankees. "Music and marketing goes together perfectly. The music business is the largest driver of the fashion industry," says Kenny.

When you order Trump, you are making a fashion statement, says Kenny, a big believer in how picking beverages impacts your social image. Kenny is an expert in beverage sales and marketing and previously worked at

Seagrams

, where he turned around the company's fledgling nonalcoholic division.

The company is already on its way to success, selling 100,000 cases of Trump Super Premium Vodka in just 12 months of sales. The success of the company and the news involving artists and beverages impacted Interscope's decision to give the green light to the deal.

How did they land this connection? Drinks Americas had been in talks with Ryan Schinman, president of

Platinum Rye Entertainment, an entertainment consulting company, who brokered the deal.

Schinman also is excited about this unique opportunity. "This marks the first time in the history of the beverage industry that a record label will have the ability to embrace a beverage brand from a marketing perspective. Deals with individual artists have existed before, but never has a label taken on an endeavor like this," says Schinman.