Christmas spirits

As we hit the tail end of 2012 and the R word sits stubbornly at the forefront of most people’s minds, it’s no surprise that shoppers are trading down to cheaper grocery food brands. However, it seems that thoughts of cutbacks and austerity are forgotten when it comes to alcohol - just 14%are switching to cheaper alcohol brands, according to Nielsen’s global consumer confidence survey.

This is reflected in premium spirits performance, which is performing well even outside the Christmas period, says Pernod Ricard customer marketing director Dan Reuby. “Premium spirits in the off trade (+7.5% value +1% volume) are performing ahead of standard spirits (+4.8% value -0.8% volume), which is good news for retailers as premium spirits remain a significant opportunity.”

First Drinks agrees that, while price is a key factor for consumers, quality is equally important. “Consumers are looking for best value as opposed to just best price, and expect to receive quality and value at all price points,” says First Drinks head of category management Roy Summers. He cites research from GfK Roper Consulting which found that 47% of UK spirits drinkers agree that ‘it is better to buy products from well-known brands, because you can be assured of their quality’.

Thirst for premium is especially strong over Christmas. During the last festive season, premium spirits accounted for 25% of all spirits sales, rising to 33% in the final week to Christmas (Nielsen).

Convenience retailers can not only benefit from growth in premium, but growth in the overall spirits category, too, at this time of year. Last Christmas spirits grew by 10.6% in value (Nielsen) in the convenience channel, representing the strongest growth in the total off trade and driving overall alcohol growth. And the good news is that it doesn’t appear to be a one-off - the channel is set to grow in value by more than £10bn over the next four years, says First Drinks. In addition, trip frequency is increasing, with close to one-third of convenience shoppers using the channel at least four times a week.

One of the reasons for this predicted growth is soaring petrol costs. “Shoppers are increasingly shopping locally to either save time or fuel, or because they are managing their cash flow more closely,” says Maxxium UK sales director for off trade, Mark Riley. “One of the key issues for retailers is stocking the optimum range and merchandising it properly.”

Smaller bottles

Smaller formats such as the 35cl bottle are becoming an increasingly important way to improve accessibility to premium spirits - the size contributed £38.6m incremental value growth to the spirits category in the year to April (Nielsen) and only 10% was sold on promotion - this is “substantially lower” than 1ltr, 70cl and 50cl, suggesting a strong opportunity for full-price trial, says Reuby.

While the impulse channel share of total spirits volume is 19%, the channel over-indexes in ‘fractionals’, adds Riley. About 40% of 35cl spirits and 94% of 20cl sales are sold through the impulse channel (Nielsen). He says: “During recessionary times consumers will often try to manage their personal cash flow and look to buy ‘just the right amount’ of each product in their basket, trading this off against the fact that purchasing in larger quantities is cheaper on average. This is an opportunity for retailers to ensure they have the correct range and space for their stores.”

The 35cl format also encourages trial, with 37% of shoppers stating they would be encouraged to try premium spirits if smaller bottle sizes were available, according to Pernod Ricard research.

“We urge retailers to set up 35cl as a separate category,” Reuby adds. “We advise retailers to stick to 35cl and 70cl, as there is a danger of 50cl cannibalising the 70cl format.”

To capitalise on this growing trend, Pernod Ricard UK is this Christmas introducing its eighth brand to be available in 35cl format. Havana Club 3 Year old joins Absolut, Jameson Irish Whiskey, Malibu, Chivas Regal, Martell, Beefeater and The Glenlivet in 35cl, meaning the company has 35cl formats in all of the sub-categories that experienced double-digit growth last Christmas.

First Drinks now has 10 brands in 35cl, including Glenfiddich 12YO, Rémy Martin Mature Cask Finish VSOP, Grant’s, Cointreau, Disaronno, Tia Maria, Green Mark, Three Barrels, Sailor Jerry and OVD.

Of all the spirits sub-categories, vodka has the highest share of the convenience market by value and volume at 43% and 47% respectively, followed by blended Scotch (24.8% value) and gin (5%). However, over Christmas whisky, brandy, non-cream liqueur and cream liqueurs all become important to shoppers, says Diageo senior category development manager Roz Nash. American whiskey and non-cream liqueurs are seeing some of the fastest growth in value, at 12% and 21% respectively - giving them a 4% and 2% share of the market (Nielsen).

The key drivers of vodka growth include consumer demand for authentic provenance, flavours, and the rise in cocktails. In fact, one-third of vodka shoppers look for the country of origin when buying vodka now, according to First Drinks, which has recently taken over distribution of Russian vodka Green Mark and Poland’s Zubrowka bison grass vodka. The top five vodka brands are: Smirnoff Red Label, Glen’s, Russian Standard Original, Red Square and Chekov Imperial (Nielsen).

Flavoured vodka, meanwhile, accounts for only 3% of the vodka market, but it is nonetheless seeing 6% growth. The top five flavoured brands are Smirnoff Lime, Smirnoff Green Apple, Absolut Raspberry, Smirnoff Blueberry and Zubrowka bison grass.

The growth in American whiskey is being fuelled by younger drinkers, with 67% of consumers under the age of 45 (Nielsen), and it has the widest appeal within the whiskey category across all socio-economic groups, according to First Drinks, suggesting the sub-category has a bright future. Premium American whiskeys such as Maker’s Mark and Gentleman Jack are driving the sub-category, which is now worth £137m in the off trade.

The latest trend in home-made cocktails is behind the growth of non-cream liqueurs, which is now worth £128m. The top five brands are Disaronno, Jagermeister, Tia Maria, Cointreau and Drambuie - in fact, all of those brands with the exception of Drambuie are included in the top five overall liqueur brands, which is topped by Baileys Original. Diageo’s Nash says Baileys should in particular be at the heart of any Christmas core range given that Baileys shoppers spend up to 14% more in store than other shoppers (UK Customer Basket Analysis).

She advises retailers to ensure the brand’s visibility over the Christmas period: “Going a step further and bringing Baileys out from behind the counter and stocking it on the shop floor alongside other leading brands could increase total spirits category sales by up to 38% (Diageo ‘Free Your Spirits’ store trials 2011).”

Another strong performer is Sourz, which accounted for 24.9% of the sub-category share in impulse last Christmas (Nielsen Scantrack). Sourz Raspberry was the fastest-selling new non-cream liqueur over Christmas 2011 (Nielsen), Maxxium UK states. “We expect Sourz to be the drink of choice for 18- to 25-year-old consumers this Christmas as they often call into impulse stores on the way to parties to stock up on spirits and other party essential such as mixers,” says Riley.

Meanwhile, Drambuie is bucking the 35cl trend by introducing a 50cl bottle size for Christmas in both Drambuie Original and Drambuie 15. To coincide with the November launch, the brand has created a bespoke selection of large format punch recipes. Each recipe uses exactly 50cl of the original Drambuie and serves up to 20 people. The Drambuie Original 50cl will be neck collared with the recipe for the Drambuie hot toddy recipe.

Gifting

Shoppers’ willingness to spend more on premium alcohol at Christmas plays into the hands of gifting, which is worth £572m (Nielsen) - and spirits account for more than one in three of all alcohol gifts purchased.

Pernod Ricard’s Reuby says: “Gifting drives penetration, rate of sale, profitability and trial beyond traditional spirit shoppers - it is therefore important to bring gifting to life at the point of purchase and provide shoppers with inspirational gifting ideas.”

Pernod Ricard is offering a range of branded gift packs this Christmas. It has updated its premium whisky selection pack (RRP £12), which contains 5cl bottles of Jameson, Aberlour, Chivas Regal and The Glenlivet. It is also unveiling the Espresso Martini pack to convenience (rrp £16), which comes complete with all the ingredients - Absolut, Kahlua and coffee grounds - plus martini glasses and instructions. The Glenlivet has launched a new premium gift pack for its 12-year-old (rrp £30.29) and 15-year-old (£38.89) whiskies, featuring a contemporary slide-out box to reveal the bottles inside.

In fact, 43% of Scotch Malt whiskey is bought as a gift, according to this year’s First Drinks report (Nielsen), with the category seeing a recent growth in the number of gift packs at accessible price points.

Meanwhile, Absolut is aiming to capitalise on the growing flavoured vodka trend this Christmas by bringing back its freezer gift pack, which it launched for the first time last season. The gift pack, designed to be placed in a freezer, contains 5cl bottles of Absolut Raspberri, Absolut Citron, Absolut Vanilia, Absolut Pears and Absolut Original.

Maxxium UK has launched Sourz Apple and Raspberry in gift cartons this year, which it describes as the perfect gift for 18- to 25-year-olds, and the brand is being supported by a £1.3m media investment this year. Courvoisier VS is also available in a gift carton and in a value-added pack containing a hip flask.