Let's kick off with a quick Christmas quiz. What was the best-selling grocery sku in November and December last year? Paxo sage and onion, perhaps? An own-label Champagne? Brussels sprouts?

No. According to Nielsen, it was Baileys Original 1ltr. If you're surprised by that, it's an indication of just how many retailers underestimate the potential of spirits and liqueurs as key profit drivers in the festive season.

Before the celebrations and gift-giving hit full swing, it's well worth re-evaluating the role branded spirits play in your store. In the 12 weeks preceding the big day last year, the beers, wines and spirits category was worth £3.65bn, and what many retailers might not appreciate is that spirits accounted for £959m of that, that's the second biggest contribution after light wine. 

Raising spirits

Spirits saw a phenomenal surge in popularity, with sales for the season increasing by £60m over the previous year. Shoppers spend more on every spirit category during Christmas, with vodka, cognac, malt whisky, imported whiskies and golden rum performing particularly strongly. Only blended whisky still number two in the category showed a slight decline.

The message from the suppliers of the category's leading brands is that despite a difficult economic year, Christmas 2009 is most definitely not cancelled in fact, they believe there's a good chance of similar growth which would push the season spend through the £1bn mark.

"Despite the economic climate, there is a strong opportunity for retailers to enjoy a successful Christmas period this year by stocking recognised market-leading brands that are respected and trusted by consumers," says Pernod Ricard UK customer development director Dan Reuby. "Our shopper research shows that people are willing to trade up for special festive occasions such as social gatherings, or when buying gifts and it will be high-quality and successful spirit brands that are the key to capitalising on this and driving profitability."

Premium spirits, in particular, saw a huge uplift last Christmas, he says, when compared with the category's base sales for the rest of the year; value sales increased by 161% in the eight weeks from November 10 to January 4, 2008 in contrast to standard spirits, which saw value sales increase by only 55%.

And following the success of Absolut, which saw a 30% sales growth last Christmas, he says "the value of premium vodka should not be underestimated this season for its potential profit opportunities over standard offerings."

Stressing the value proposition, but focusing on mid-market rather than premium, is the approach taken by Diageo for its portfolio of established brands such as Smirnoff, Gordons and Bell's. "This year is all about bringing the value of spirits to life," says sales director David Smith. "With customers facing a cash-strapped Christmas, we'll be making the point that there are 28 great drinks in every 70cl bottle of spirits. This is the key to achieving increased consumer understanding of the category." 

Home mix

Diageo's message is that mixed drinks are a good alternative, particularly when entertaining at home. "Our aim is to illustrate clearly the benefits of spirits at Christmas, to help shoppers make informed decisions about the best- value options for their sharing occasions," says Smith.

The versatility of spirits is another key message, and with long drinks in vogue, a bottle of vodka, gin or rum offers a variety of cocktail mixes.

"Consumers who enjoy a drink from the comfort of their own home may want to create their own cocktail to serve to friends as the party season gets under way," says Global Brands trade marketing manager Justin Horsman. "Signature cocktails can bring the feeling of going out to a bar into a consumer's home, and won't take too much time to prepare."

Adding cocktail ideas to shelf labels and pos will stimulate interest as well as increase add-on sales of additional ingredients. For Christmas, Horsman recommends a cinnamon punch of Global Brands' Goldschlager liqueur, with cranberry juice and amaretto and a dash of triple sec, poured over ice and topped with ginger ale.

Diageo's Smith also recognises the value of "tapping into customers' imagination with the variety of uses of the product in the home". He says the company will be providing retailers and consumers with a range of simple and affordable recipes and serve options in the run up to Christmas.

Vodka rocks

The hero of the spirits shelves by a clear margin, vodka contributed £22m or 37% of the spirits category's growth last Christmas and is expected to be the flag bearer again this year. Smirnoff marketing manager Neil Skinner claims that of 95m bottles of spirits sold in the 12 weeks to last Christmas, one in eight was Smirnoff, and that supplier Diageo will be investing a further £32m in the brand this time around. Its 'Be There' media campaign is currently running on television and online, and further campaigns will stress the quality credentials of Smirnoff.

This month premium market leader Absolut introduces its Absolut Rock, a special-edition bottle wrapped in leather and studs, with the strapline 'In an Absolut World, You Rock'.

Both brands are expanding their ranges into flavoured vodkas, with Absolut offering advice to wholesale cash and carry customers on how to mix its Naturals range, which contain only natural ingredients and no added sugar. Smirnoff is putting heavyweight support behind its Flavours skus, Lime and Apple Green, with a £1m spend in the run up to Christmas including national radio and online activity.

Cream of the crop

Few stores this season would be without Baileys, the world's biggest cream liqueur brand, which was bought by some 2.7m households over Christmas 2008. It's one of the items most frequently bought on impulse, with four out of seven bottles purchased that way.

After the success of Baileys with a hint of caramel (up 32% year on year) and Baileys with a hint of mint (up 17%), this Christmas sees the rollout of a new coffee variant.

Brandy battles

Still hampered by its fuddy-duddy image, the brandy and cognac category is declining slowly, but retaining its popularity as a regular treat for home consumption in the 45+ age group.

Anthony Habert, brand manager for Three Barrells, says customers are choosing "top-end brandy rather than bottom-end cognac", with cognac VS suffering particularly. French grape brandy is up 1% year on year, he says, with Three Barrells up 7%.

Courvoisier's brand manager Barbara Annis disagrees. "Customers are increasingly looking to trade up as they become more knowledgeable about what they drink and they are refining their tastes.

"This is particularly relevant at Christmas when people are more likely to indulge in premium brands, so it is important to stock a range from VS right through to XO to maximise the profit potential of cognac."

Annis also points out the potential of the Christmas cocktail. "We are encouraging consumers to enjoy cognac in simple mixed drinks at home, like Courvoisier VS with apple juice and ginger beer a fantastic long drink at Christmas celebrations and easy to make using inexpensive ingredients which are readily available."

Rum does

Rum's resurgence over the past two years can be traced to the popularity of the mojito cocktail, with golden rum in particular showing phenomenal growth.

Havana Club grew 23% over the last Christmas period. This year sees the first gift pack for the brand, with packaging stressing the cocktail connection and a mojito recipe. Rrp is £16.69.

Morgan's Spiced is growing at 25% in the off-trade and has been supported by TV and cinema ads. Diageo says it now views it as one of its core spirit brands.

Global Brands says its Myers's Dark Rum is the best-selling premium dark rum in the world, and suggests you grab customers' interest with a recipe for a Caribbean Christmas cocktail; 50ml of Myers's Rum, 25ml of lime juice, 50ml of chilled mineral water, and four dashes of angostura bitters.

Make it special

Cellar Trends which has a £50m annual turnover in branded wines and speciality spirits such as Jagermeister, Grand Marnier, Wild Turkey and Luxardo Sambuca is reporting a growing consumer interest in more interesting, authentic spirit brands.

Marketing director Terry Barker says: "There is a danger that a typical c-store's spirit offering can look very limited, with a couple of whiskies and couple of vodkas and a gin, but if you take your cue from the back bar in pubs and clubs, consumers are drinking a wide variety of speciality spirits these days.

"You could ask yourself the question: am I stocking what people are actually drinking? For example, the sambuca market in the UK was about 20,000 cases per year in 2000, but is up to 250,000 now."

Jagermeister is being actively promoted in the on-trade in 19 cities across the UK this autumn, and Barker expects this marketing to trigger more demand for take-home sales.

"The consumer is exposed to brands such as Jagermeister in the on-trade, on ski trips abroad as well as at music events and then wants to drink them at home as well," he adds.