Wholesalers and independent retailers who get their spirits range right can rake in healthy profits in the run-up to Christmas, even if the major multiples tend to dominate with an overall market share of about 70%.
Around 34% of all spirits sales occur in the final quarter of the year, with sales growing steadily every week as Christmas approaches, meaning that keeping stock available right up to Christmas Eve is crucial. Lee James, customer development director at Pernod Ricard, says: “Last year the category experiencing the biggest last week rush before Christmas was BWS, where sales were 224% higher than an average week in 2005. Availability in the last week before Christmas is more key for BWS than any other category.”
A number of seasonal factors drive spirits sales in addition to the regular consumers. There are many consumers who only buy whisky, gin or vodka once a year, and they will do so as Christmas approaches so they are prepared for visitors and the festive season. Many bottles are also bought as presents. Both these purchasers are looking for recognised trusted brands, and are less price sensitive, meaning they are particularly lucrative customers for retailers to target.
Tracy Walker, head of trade marketing (off trade) at First Drinks Brands, comments: “Up to half of all spirits sold at Christmas are purchased as a gift. With this in mind, we are investing heavily in gift packaging across a number of our brands. Glenfiddich, Grant’s Family Reserve and Three Barrels will be available in special Christmas gift packs in 2006.
“Given that these packs will only be available for a limited time, it’s important for wholesalers to make this stock available during the Christmas period. Depot managers might want to keep an eye on stock rotation to ensure they make the most of this opportunity.”
Lee James, at Pernod Ricard, says: “Getting gifting right is key at Christmas and this year Pernod Ricard has its strongest ever range of gift packs for both wines and spirits. To support the convenience sector we have also provided sector exclusive packs to give retailers opportunities to compete on other areas than just price.”
Ian Davidson, C C/wholesale channel manager at Whyte Mackay, says: “Christmas is important to us – about 50% of our business is in the 12 weeks prior to Christmas but our malt range also benefits from activity around Fathers Day and Easter. We are looking to get some value from niche slots such as Burns Night and Halloween.”
Getting the right stock on the shelves at the right time is also an important consideration as brands which trickle through for the rest of the year suddenly burst into life.
Angela Watson, category manager at First Drinks, point out: “Understanding the spirits and liqueurs categories can be challenging. As well as knowing which brands to stock, wholesalers need to know when to increase their stockholding.
“Take Advocaat for example. Warninks is highly seasonal, selling half of its annual volume in the four weeks up to Christmas. Consumers often forget to buy a bottle of Warninks during their main grocery shop, so this is a great opportunity for independent retailers to catch them during their ‘top up’ shop.
“With so many spirits on offer at Christmas it would be very easy for wholesalers and retailers to overlook brands such as Warninks, and in turn missing out on a significant profit opportunity.”
== Whisky and Whiskey ==
Within the mainstream spirits it is vodka and blended whisky which dominate the market and this trend is amplified in the impulse sector, which ‘overtrades’ in both categories compared to other channels. Blended whisky is the biggest spirits category in Great Britain, with 29% of all spirits volume, with Diageo’s Bell’s brand being the top seller in Great Britain for the past 25 years. Diageo is investing pound;2.5m in supporting Bell’s during 2006/2007 with the Christmas period as the focus. Marketing activity will include a range of gift boxes, and a Christmas pack containing a premium diary. Diageo’s Johnny Walker brand will also have a hip flask pack and a Monaco pack reflecting its sponsorship of the Formula One motor racing team McClaren, offering a chance to win a trip to the 2007 Monaco Grand Prix. Diageo has also just updated its Bushmills Irish Whiskey with a new look and a pound;500,000 marketing campaign.
While Bell’s is the top seller overall in Great Britain, the newly re-launched Whyte Mackay brand has reclaimed the position as number one best seller in Scotland off trade and Scotland impulse. In the eight weeks following its re-launch the brand achieved a 17% increase in sales. The re-launch involved new packaging with the roaring double lion rampant taking centre stage and new 13, 19 and 22-year-old blends being introduced into the brand portfolio.
Looking ahead to next year, Whyte Mackay Ltd will be taking back distribution of the Whyte Mackay whisky and Vladivar vodka brands from Maxxium. Stewart Lawrie, managing director of Whyte Mackay UK, comments: “We would like to thank the Maxxium team for their work over the period of the contract. We have ambitious plans to build on the success of the brands and we look forward to making further announcements in the coming weeks.”
Malt Whisky has been in decline, down about 10% over the past year, but is still a big seller at Christmas with 41% of all volume sold in the final quarter of the year. Lindsey Tier, group brand manager at First Drinks Brands, comments: “Glenfiddich is the world’s favourite single malt whisky, and is the best selling single malt in the UK. Sales of Glenfiddich are heavily skewed towards the Christmas season as both gifters and consumers stock up on their favourite. Glenfiddich is investing heavily in the festive period with attractive new gift packaging and an integrated support programme of more than pound;1m.”
Whyte Mackay also has a strong player in the single malt category with Jura, which is the fastest growing top malt brand in England and Wales impulse, with 55% volume growth.
Pernod Ricard’s The Glenlivet 12 year old had the highest value growth among malt whiskies last Christmas up 30%.
== Vodka ==
Vodka has been the strongest grower over the last year in the spirits category, up 4% in the impulse channel, and is the most heavily skewed towards the impulse channel with 40% of all sales.
Diageo’s Smirnoff is the biggest selling spirits brand in the UK and took a 35% share of the vodka market from October to December last year. This year Diageo is investing pound;2m in marketing Smirnoff Red, including a pound;1.4m advertising campaign running throughout November and December. An offer to win a chance to ‘Live like a Czar for a year’ will appear on 500,000 bottles of Smirnoff Red, and there will be a Christmas gift box.
Sanjay Patel, marketing manager for Smirnoff, says: “Our previous Smirnoff on-pack promotion, ‘diamond in a bottle’, drove a 30% uplift in one major retailer. This year’s Czar competition and heavyweight advertising support during the Christmas period should ensure Smirnoff Red remains a popular vodka choice for consumers. We recommend that retailers feature Smirnoff prominently from October in the lead up to Christmas to capitalise on the consumer marketing activity.”
== ARTDs ==
The most turbulent part of the spirits sector is ARTDs, a group of products which came from nowhere to build a pound;1bn a year market in under 10 years, but which is suffering some growing pains as it begins to mature. A number of products achieved meteoric rises, only to fall out of fashion just as quickly, causing a decline in the market, but a handful of products are now proving they have staying power and the market shows signs of stabilising.
One of the brands that has withstood the test of time is WKD, and Karen Salters, marketing director at Beverage Brands, says wholesalers should carefully consider brands previous performance before giving them shelf space this Christmas.
She says: “Just looking at what happened last Christmas gives a pretty good insight into which brands will fly off the shelf and which ones will be languishing long after the festive period is over.”
WKD was the only top three ARTD to achieve take home growth last Christmas, with sales up 18%, and it accounted for almost one in five ARTDs sold at Christmas.
Salter says: “WKD’s performance last year demonstrated that it is the strength of brand offering that counts as far as shoppers are concerned. Christmas is a key period for WKD because it’s a time which is all about people having a laugh with their mates, which is what our brand is all about.” This year Beverage Brands will be supporting the brand with a pound;4m marketing spend spearheaded by the ‘Have you got a wicked side?’ campaign.
Bacardi Breezer had looked to be one of the brands which was failing, but NPD with half sugar variants has helped to reverse the decline. Frank McGuire, senior trade marketing manager, Bacardi Breezer, comments: “Bacardi Breezer has had an excellent 12 months and is now back in growth, recording a consistent increase in sales, especially in the off trade sector, over the past 12 months.”
McGuire says cash and carry is a vital channel, and the company has been a strong supporter of the sector. This year it has been a Gold Package supporter of Bestway’s 30th birthday celebrations and of Landmark’s Winner promotion. The company offers off trade specific SKUs to cash and carry outlets, and he adds: “We are very open to running outlet-led promotions such as the recent offer led by Booker with the objective of driving distribution of our new half sugar flavour Bursting Blueberry.”
Diageo is another company which has been investing heavily in NPD. Smirnoff Ice has been joined in the company’s ARTD portfolio by Classic Mix and Quinn’s. Classic Mix was launched in May with a pound;1m campaign. Diageo will be spending pound;100,000 on marketing over Christmas, and it expects Classic Mix to benefit from the investment in its three main flavours, Gordon’s Gin, Smirnoff and Morgan’s Spiced rum.
Quinn’s, which contains alcohol made from fruit and was supported with an pound;8.5m campaign on its launch in April, will receive pound;2m backing during November and December.
Nicola Miller, Diageo innovation manager, says: “We are really pleased with the initial results of Quinn’s. Distribution is ahead of forecast and the brand’s attributes and appeal to consumers continues to increase, particularly since the launch of the TV advertising campaign in August.”
Global Brands is looking to develop sales of its products in the off trade having established them through the on trade. As with other ARTD brands it has found that bringing in new products and removing others as they fall out of fashion has helped to refresh sales of its Vodka Kick brand.
Jenny Allaway, head of retail at Global Brands, says: “When we launched VK Tropical in April last year it was at a time when many ARTDs were experiencing significant declines in sales. The fact that VK Tropical has enjoyed continuous growth for the past 12 months and has current month-on-month growth of 34% proves that the market is still very responsive to the right product, marketed in the right way.” She says there has been a move away from 275ml packs and towards high value 70cl bottles, adding: “Our 70cl range is going from strength to strength, and is currently growing at 60% year on year.”
Global Brands is also making inroads into the off trade with Corky’s Vodka Shots obtaining listings in Booker, Makro, Bestway and Batleys. The 20% ABV product comes in nine flavours and is popular among 18-25 year olds, although the company says cream-based flavours have widened the appeal to 18-35s with a female bias. Although Christmas is an important sales period for Corky’s, Allaway says the cream-based variants have proved to have far more year-round appeal than other products whose sales are based around Christmas.
== Other spirits ==
Diageo has a number of other strong Christmas performers in the spirits sector. Gordon’s is the number one gin brand in the UK with a 35% market share. This Christmas the company will be spending pound;2.5m on marketing activity including a new TV advertising campaign. Baileys is the number one off trade spirits brand by value in the eight weeks leading up to Christmas. This year Diageo will be launching two new flavours, Baileys with a hint of cr egrave;me caramel and Baileys with a hint of mint, and will be backing the brand with a pound;5m marketing campaign.
Last year Diageo also launched Pimms Winter, taking a leading 11.3% share of the speciality spirits category during the winter, and it will be spending pound;1.5m promoting it this year.
For Beam Brands, sales director Nick Paget, comments: “This Christmas, our activity in cash and carries includes PDUs, pallet displays and gift box work. We are creating pallet displays for Courvoisier, Harvey’s and Cockburn’s, which are all UK number one category leaders. The displays will communicate this message to retailers to help them with their choice of brand, and therefore help them to maximise sales and revenue this Christmas.”
Lee James, at Pernod Ricard, says: “Liqueurs and specialities has the highest customer penetration of any BWS category in the eight weeks to Christmas. Retailers can drive early Christmas sales and maximise value for their whole spirits category by upweighting bestselling liqueurs and specialities such as Malibu and Tia Maria. He points out that Cognac is also a Christmas top seller with Martell the number one in independents. Martell litres grew faster than the Cognac category last Christmas and it is the number one Cognac in Scotland with 52% market share, almost double its nearest competitor.
Disaronno is another liqueur which will receive major backing this Christmas. Andy Corris, brand team – Disaronno at First Drinks Brands, comments: “We ran a highly successful campaign in 2005, and we will be running a campaign in excess of pound;1m during Christmas 2006.”