Spirits may not sell as fast as beer or wine, but the category remains an important one for convenience retailers, creating a bigger basket spend and providing the opportunity to entice consumers to trade up. And whether it’s to be shaken or stirred, over ice or as it comes, there’s a spirit for all tastes and pockets.
Yes, volume sales are in decline, but value sales are up, with customers willing to splash out on spirits as a treat. According to Mintel’s senior drinks analyst Chris Wisson, the spirits category is set to keep growing in value, too, following a small blip. “Following a small decline in the aftermath of the recession, value sales in the white spirits and ready-to-drinks (RTDs) market have posted positive growth since 2011,” he says.
He believes that there is a bright future for the category, especially in value terms, although volume may continue to suffer. “Value sales are expected to grow from £4.3bn in 2013 to £4.7bn by 2018,” he reveals.
Sales at Kirran Patel’s Londis Pickwick in Leyton, London, back up the statistics, where customers are splashing out on higher-end lines when they do decide to buy. “There are times when it’s doing really well and then others when it’s very quiet,” he explains. “Christmas is obviously a good time for spirits, but otherwise people seem to be buying spirits as a treat. When it is busy, I’ve noticed that dark spirits such as rums have become more popular, especially with younger customers.”
For most of Kirran’s customers, the cheapest price is no longer the motivator when buying spirits. “The cheaper brands aren’t doing as well anymore,” he says. “We still have some because you have to stock them for some customers, but it’s the premium lines that are driving the category growth. Customers are even bypassing well-known brands such as Smirnoff and going for Grey Goose and Ciroc which have an rrp of £30. They want to treat themselves without breaking the bank and trading up in spirits is the way they’re doing it.”
Premium-priced lines are also driving sales at Nisa retailer Saki Ghafoor’s Gateshead and Northumberland stores. “Spirit sales are steady, but sometimes a promotional offer in the supermarkets will hit us,” he says. “To counter this we stock a range of higher-end spirits that the supermarkets don’t have, as it offers a point of difference for us. The multiples rarely stock 10- or 12-year-old malts so there’s an opportunity to upsell by having a premium range.”
The right size
As well as having the premium lines that the multiples don’t, there is potential in stocking smaller bottle sizes that the big boys aren’t interested in, but which your customers are.
Diageo off trade head of category development Paul Isherwood says that the spirits category has been buoyed by the demand for fractionals. “Smaller bottle sizes such as 10cl and 20cl see an increase in sales over summer, with consumers looking to bring smaller quantities of alcohol to outdoor social activities such as barbecues,” he says.
“Retailers should make sure that they stock a range of fractional spirits to ensure shoppers can pick up product on their ‘something for tonight’ shopping mission.”
Speers & spiders
Spirit-flavoured beer and cider (speers and spiders) is one of the biggest stories to come out of the alcohol category of late, burgeoning to be worth £27m in the off trade (Nielsen MAT 22 December, 2013).
With big names such as Heineken and AB InBev growing their speers offering with Desperados Verde and Cubanisto respectively, the newest sub-category on the block is one to watch.
Heineken believes that speers could be worth as much as £200m by 2016. Managing director of off trade sales Martin Porter says the success is driven by consumers wanting new flavours. “Palates are changing, with consumers increasingly opting for sweeter flavours and lighter tastes,” he says. “We have seen an explosion of flavour innovation across both the cider and spirits categories and are beginning to witness a similar pattern with flavoured beers.”
SHS Drinks’ Debs Carter thinks that the growth of this new sub-category can only be good for the alcohol market. “Spirit beers are carving out a vibrant new sector,” she says. “We know from launching the Dead Crow spirit beer brand that they appeal to the same age group as RTDs and are becoming part of 18- to 25-year-olds’ drinking repertoires, but we don’t believe they are having any greater impact on the RTD category than they are on beer or cider.”
Carter adds that this crossover isn’t restricted to alcohol, and retailers can look forward to more mergers. “It’s simply that former category boundaries are now becoming blurred. We’re seeing it throughout the FMCG market from chocolate-flavoured cheese to pizza burgers.”
First Drinks off trade sales director Andy Clifton concurs that fractionals have been a winner for the spirits category. “One in four convenience spirits sales are a 35cl bottle and with 72% of 35cl shoppers only buying that size, fractionals are key in driving spirits growth,” he says. “They are a success story in the sector for a number of reasons: they meet a range of consumer budgets; provide an easy and affordable route into a new category; and cater to the all-important gifting occasion.”
Donna Morgan of Brownlies of Biggar in Lanarkshire stocks a wide variety of fractionals that sell well, with most of the key lines available in 10cl and 20cl options. “They’re very popular as a treat and for customers who might not want to buy a larger bottle as they’re more expensive,” she says. “A full range behind the counter looks good as well. It’s a bit different to what’s available in supermarkets.”
Diageo’s Isherwood says that pre-mix is another area of strong growth for spirits, for similar reasons behind fractionals’ success. “There is an increasing trend towards pre-mix, which has seen strong value growth of 14% since the summer of 2012,” he says. “Pre-mix allows consumers to enjoy different spirits and mixers without committing to buying several full-size bottles.”
Kirran says that pre-mix is a great seller in his store. “They’re popular with our younger customers and there’s plenty of variety so there’s the chance to offer something different,” he says. “Plus, we have chilled availability for pre-mix, so that’s an advantage over the multiples. It suits those customers who want to drink it that day, which really comes into play when the warm weather kicks in.”
It’s not just the size of the packs that retailers have to be mindful of. In the convenience channel, every inch of space has to be justified and retailers can’t afford to have lines that are gathering dust. But with so much innovation taking place in the category it can be difficult deciding which lines to stock and which to ditch.
Kirran is one of those retailers who manages his alcohol category closely due to space constraints. He uses experience of knowing what his customers want to inform his range. “I tend to know what will sell well based on what customers have bought previously,” he says. “I have a lot of Eastern European customers and they’re keen on malt whisky, so I make sure that I always have a selection of those available. They’ll either buy the value option or go for the premium names, nothing in between, but they’re willing to pay top price for a bigger brand name.”
Despite the space constraints, Kirran is keen to embrace innovation and will try most new products at least once. “It can be very hit and miss, but if you don’t try then you’re the one who could miss out,” he says. “Luckily, we can buy in small amounts of new spirits products. This way, we can trial lines and buy in more if they sell well. Ciroc, which is one of our top-selling products, was one of the lines we’ve trialled and if we hadn’t we would have missed out on massive sales.”
He says that retailers shouldn’t worry about a quick return when it comes to new products as there are long-term benefits to be gained from offering something innovative and the chance of creating loyalty among customers. “I tend not to worry about profits on the first bottle of a new product and sell it at as good a price as possible to engage the shopper,” adds Kirran, “especially if it means a customer will start to buy the product regularly afterwards as that’s when the real profit is made.”
Saki finds that innovation is a key part of a successful spirits offering. “There are core lines that you must always have, but there is an opportunity to offer something different,” he says. “We have some 3ltr bottles of vodka and gin, which no other stores in the area stock, so they have novelty value and they look great on the shelf. Some customers will buy them as a gift, or sometimes customers will club together to buy one if there’s a party. It all helps to create a point of difference and customers remember that you’re the store that has new and interesting products.”
When deciding which new spirits products to stock, Saki usually sticks to the trusted names. “We’ll look at every new product launched and assess its future potential,” he says. “We look at price, brand name, category history and if the manufacturer is putting much support behind it and judge it against our customer base. All these factors are taken into account before dedicating space to it as no retailer can afford to have space taken up by non-sellers.”
Donna is not shy of trying new things in her store. Part of her business’ mission statement is to offer the core range and something more, and the spirits category is no different. “It’s those extra products that will increase basket spend and help you stick out in customers’ minds,” she says. “We have a wider than average range of whiskies because people are always looking for something a little different. Once they know that they can get the product they came in for initially and something extra, then you’ll have satisfied the customer and added something extra to their basket.”
Ready for a comeback
Unfortunately, things haven’t been as good for the RTD category. According to Mintel’s Wisson, time hasn’t been kind to the market. “While white spirits such as vodka and gin look set to stave off the cutback on consumer drinking in the coming years, RTDs remain unable to halt the decline in their sales over the past decade,” he says.
Who’s buying spirits?
The spirits market is a diverse one, meaning that choosing the right stock can be a complicated task. But knowing what type of shopper buys which type of spirits can make stocking the right range for you a lot simpler.
Mintel data shows that dark spirits such as rum and brandy appeal to both young and old drinkers, while males over 45 are proving to be traditionalists and are opposing drinks with added flavours.
The wave of flavoured spirit drinks is finding favour with women and under-35s looking to experiment and who are more likely to be receptive to something new.
When it comes to white spirits, over-65s are the least likely age group to drink these spirits and RTDs, with 25- to 34-year-olds the most likely age bracket to do so.
While the RTD market has been struggling of late, they are favoured for ‘up-tempo’ occasions such as nights out, so if you have a student or younger customer base, you could be on to a winner, especially with the number of 25- to 34-year-olds expected to increase 8% by 2018.
For those customers looking for a more sophisticated evening, the Mad Men effect has taken hold when it comes to low-tempo occasions, with gin and premium vodkas seen as the perfect tipple for these more laid-back situations.
“The segment continues to be weighed down by negative connotations from a decade ago. Many pre-mix brands which were popular with under-30 drinkers over a decade ago are now more likely to be seen as ‘uncool’ rather than credible drinks to be seen with.”
However, he does believe there is hope for the sub-category thanks to recent innovation within the market. “The new style of pre-mixed drinks in a can are helping the segment to take steps on the path to a more sophisticated image, but further work on premiumisation is necessary to try to reverse its falling fortunes,” he says.
Saki says he’s cut back on RTDs as they are no longer the seller they once were, and with space at a premium he can’t afford to be sentimental about the sub-category. “It was a big success when they first launched, but then the market became saturated,” he says. “Consumers are moving away from these drinks so we stock only a limited range of the more trusted brands as space is at a premium and we can’t afford to stock lines that don’t sell.”
SHS Drinks marketing director of alcohol Debs Carter admits it’s been a tough year, but all is not lost for RTDs. “The past 12 months have seen a slight decline in RTD category sales for impulse stores, but there have been some positive areas of growth,” she says. “We have seen shoppers trading up from single bottles to larger pack formats. Four-pack sales have increased and there has been a massive uplift in sales of the 10-pack format through impulse stores, and pricemarked packs have performed particularly well.”
Carter advises retailers keen to benefit from RTDs to look at their range. “Getting the basics right in terms of range and space allocation and ensuring chilled RTDs are available will go a long way in helping to drive RTD sales,” she says.
She adds: “In terms of range, start with the biggest-selling brands and variants which are ‘must stocks’ and accommodate as many of the top 10 best-sellers as your space permits, but it’s also important to allocate some space for new launches and limited-edition lines. Innovation is crucial to the success of this category as RTDs are mainly consumed by 18- to 24-year-olds who are always looking to try something new.”
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Halewood aims to revitalise RTD category
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Desperados goes green
Heineken has extended its Desperados spirits beer range. Available in 330ml bottles, Desperados Verde is flavoured with tequila and a twist of mint and lime. POS including posters, shippers and wobblers is available to drive shopper awareness.
Jägermeister creates UK division
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Keep it cool
Diageo has introduced Smirnoff Sorbets and frozen pouches. The sorbets come in mango, lemon and raspberry flavours, while the frozen drinks are available in Smirnoff apple bite and Smirnoff Ice (rrp £2.99). The pouches can be sold ready-frozen, or to freeze at home.
Rum-flavoured beer hits shelves
AB InBev has added a rum-flavoured beer. Cubanisto is available in both off and on trade in 330ml bottles, ABV 5.9%. The drink comes in single 330ml bottles and 3x330ml bottle packs (rrp £4.99). AB InBev hopes the brand will capitalise on the recent successes of the flavoured beer and rum markets, which grew by 100% and 29% respectively in 2013 (Nielsen).
Cuvana rebranded as Dead Crow
SHS Drinks has rebranded its spirit-flavoured beers under the Dead Crow name. The rum-flavoured Cuvana has been renamed Dead Crow like its bourbon-flavoured counterpart. Packaging has also been updated.
Dewar’s unveils new look
Dewar’s blended whisky has a new bottle design and packaging. The new design is inspired by imagery and fonts from the brand’s archive in a bid to give each bottle in the range its own distinctive look and shape.
Pernod Ricard embarks on Malibu campaign
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Amaretto cider is the latest spider
SHS Drinks has created Orwell’s - a 5.5% ABV amaretto-flavoured cider. The new line will be available in 330ml glass bottles from June. A summer launch campaign will focus on sampling activity and support for stockists including POS material with shelf-barkers and posters.
Bacardi TV adverts highlight its history
Bacardi has unveiled its new UK marketing campaign. The ‘Untameable Spirit since 1862’ multi-million pound activity pays homage to the 150 years of the brand. The campaign includes 30- and 60-second TV adverts as well as out-of-home ads featuring re-creations of key events that have taken place over the brand’s 150 years.
Santa Teresa in ski holiday giveaway
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Gordon’s Gin adds elderflower variant for summer
Gordon’s has expanded its flavours range to include an elderflower variant. With an abv of 37.5%, Gordon’s Gin elderflower is available in a 70cl bottle (rrp £16.11) and a 250ml pre-mix can (rrp £1.95).