The UK drinks business is very much alive and wholesalers are responding well to the challenge of an expanding market place. Latest ACNielsen figures suggest multiple grocers have progressed at the expense of independents and specialists and record independents’ MAT value for spirits down 5.2% and light wine volumes down 1.3%.
But it is notoriously difficult to secure accurate information with the limited EPOS data emerging from independent retailers, and groups such as Nisa-Today’s and Landmark have been reporting strong sales growth.
Keith Hogg, sales managing director for Scottish Courage Brands, takes cheer at ACNielsen’s GB off-trade market data for the four weeks to March 17 (versus the same four weeks last year) which shows growth in all liquor categories except ARTDs.
The take-home beer market figures show growth despite a dismal start to the year. Lager volumes are up by 3%, premiums up 2% and mainstream up 9%. Ale volumes declined by 4% and stouts grew by 1%.
“Strong brands remain at the heart of the evolution of the beer market,” says Hogg. “Foster’s and Carling dominate standard lager. Within the battleground for premium lager, Stella’s dominance has been eroded, while Kronenbourg 1664 is up by 8%.”
Scottish Courage is turning up the heat with a £40m marketing spend, including its biggest ever support for Foster’s, with new TV ads and BBQ promotions. Paul Stanger, Scotco’s head of customer marketing, says: “Foster’s BBQ is at the heart of the brand, offering promotional platforms for consumers to participate in, and retailers to maximise in-store.” Scotland’s standard lager market is dominated by Miller and Tennent’s but the introduction of Foster’s Super Chilled will give the brand a major boost north of the border.
Kronenbourg Blanc, a 5% ABV French premium white beer is now available to the off-trade following significant on-trade success. Stanger says it is the perfect accompaniment to food with proven unisex appeal, encouraging female drinkers into the beer category.
The ale category was down 2% year-on-year, but John Smith’s Extra Smooth achieved a 20% value growth, overtaking Guinness to become the number one dark beer in the UK off-trade, bigger than Tetley and Boddington’s combined.
Stanger says: “We are the only brewer investing consistently in the ale category, increasing backing for John Smith’s to £25m. The brand is benefiting from its award-winning Peter Kay advertising campaign and the ‘No Nonsense’ racing sponsorship.”
Speaking at the FWD annual conference, Kevin Brownsey, sales director off-trade for Coors Brewers, drew attention to price deflation in the beer market. “It is vital to get value back into the market,” he said. “Suppliers want to invest in innovation and margin is essential. We are promoting too many products, too often, too cheaply. Premium lagers are currently selling at 92% of 1997 prices and mainstream lagers at 98% and the top 10 brands account for 55% of the market.”
Interbrew UK is helping wholesalers and independent retailers maximise sales opportunity with strong promotional activity and new product launches and is driving beer sales with major on-pack promotions such as Stella Artois ‘Live Film’ and Tennent’s Lager ‘Futsal’. It is also introducing a new size Stella and launching its premium Brahma Lager from Brazil in the autumn.
‘Live Film’ spearheads a record £40m marketing spend by Interbrew UK. The promotion provides consumers the chance to ‘experience’ a film classic or win one of 1.5 million opportunities to view films at home. Ten top prizes offer a holiday for two to see The Birdman of Alcatraz at Alcatraz.
Des Ewing, director of customer relationships, take-home sales, says: “Stella delivers a unique sales opportunity for retailers and drives value in the beer category.” A new pack format for Stella Artois, Le Demi, a half-pint can packaged in a fridge-friendly ‘six-pack, will help retailers maximise seasonal opportunities.
Scotland’s number one beer brand, Tennent’s Lager, has generated take-home sales of £60m over the past year. A summer on-pack promotion will give away 100,000 futsal balls, part of a £1.5m spend, including TV advertising, leading to Scotland’s first national Futsal tournament.
Heineken Premium 5% is going head to head with arch rival Stella Artois, inviting drinkers to taste the difference in a national taste challenge. A Heineken-branded bus is touring the country with a Heineken versus Stella taste test, the results of which will be used in a major promotional campaign.
Chris Duffy, Heineken UK’s customer marketing controller, says: “Research shows people prefer the taste of Heineken and we are offering drinkers the chance to compare the taste themselves.” So confident are they that they have devised an on-pack deal offering drinkers their money back if they are not completely satisfied.
Heineken is also investing heavily in Europe’s premier rugby club tournament, the Heineken Cup, supporting outlets with tailored incentives, POS kits and promotional packages, while Diageo has signed a £20m, four-year agreement for Guinness to become the new title sponsors of the leading domestic rugby union competition, to be known as The Guinness Premiership from the 2005/2006 season.
Jim Gorczyca, marketing director UK for Anheuser-Busch Europe, has announced a programme of activities and sponsorship for its Budweiser and Michelob brands.
In the off-trade Budweiser is exploiting its sponsor status of the BMW Williams F1 team with an on-pack promotion ‘Trackside Experience’, giving the chance to win tickets to a grand prix, travel on the BMW Williams F1 team coach and behind-the-scenes access. Gorczyca says: “Michelob and Budweiser are sponsoring a number of music festivals and sporting events, gearing up for an exciting summer, particularly when Formula One fever hits the UK with the British Grand Prix at Silverstone.”
CIDER RETURNS TO GROWTH
The cider market has returned to value growth (MAT +1%), driven by Strongbow, up 8%, with more than 32% value share, five times greater than its nearest competitor Blackthorn.
Scotco has unveiled new packaging for Strongbow, backing a £22m marketing spend this year, while the wholesale trade is awaiting details of new promotional tactics to maintain sales of its PET range – Strongbow, Woodpecker, White Lightning and Symonds – which no longer carry extra fill.
While wholesaler brands continue to hold a substantial market share in the economy sector, the premium cider market is developing well through the efforts of Merrydown and Thatchers.
Thatchers is focusing on the independent on-trade and off-trades for its varietal ciders such as Katy and Cox’s following success in leading multiples and has recently launched its first single orchard cider from Christon, in the Mendip Hills in Somerset.
Rumours suggest Strongbow, too, will be looking to enter the premium cider market.
WHERE IS THE SPIRITS BUSINESS GOING?
ACNielsen reports multiples growing their spirits trade by 5.1% value in the year to March 2005, gaining in every category, while independents lost 5.2% with only white rum and vodka showing progress. For security reasons many independents display spirits behind the checkout counter but those adopting the FWD Blueprint for spirits and offering a wider choice on open sale are performing well.
Multiple pricing activity on litre sizes over Christmas hit independents’ performance, especially whisky, vodka and cream liqueurs. A concern for brand owners, however, is the presence of own brands in multiple outlets holding a 36.2% share for whisky, 39.7% for gin and 44% for vodka.
The situation is similar in independents where wholesaler brands are growing, with half and quarter bottle sizes making a significant contribution to sales and profit.
Pernod Ricard’s recent takeover bid for Allied Domecq and the disposal of strong independent sector products such as Teachers, Courvoisier, Cockburn’s and Harvey’s to Fortune Brands will hopefully result in new and much needed investment into the sector.
Diageo has strong marketing plans for the summer. With Bells eight year old whisky, Smirnoff Vodka and Gordon’s Gin losing sales in independents its fresh ideas and investment are also eagerly awaited.
Some brands are performing well. “Pimm’s is in great shape,” says Russell Jones, Pimm’s marketing director. “We are spending £4m this summer with ‘sizzling’ advertising linking Pimm’s with BBQs and the ingredients are in place for a great year.” Pimm’s ready-to-serve cans have been repackaged and limited edition jug packs, cooler jackets, cool bags and T-shirts are available to the off-trade. Sales of Pimm’s have increased by 18% through independent outlets over the past year making it the fastest growing speciality brand in the sector.
ARTDs continue to decline, down 10.8% in independents and by 14.3% in multiples. WKD remains the best selling brand with around a quarter of all sales but, like Bacardi Breezer and Red Square, is losing volume. Diageo’s Smirnoff Ice and Black Ice and Archers Acqua are showing some growth. The company has a new creative campaign for Smirnoff Ice with a media spend of £4m over the next three months. Halewood International is displaying confidence too, focusing on just five flavours of Red Square Reloaded, launching Reloaded Juiced and introducing a 35cl size for its Sidekick Shots brand.
CRAZY PRICE PROMOTIONS DRIVE WINE SALES
Price promotions such as three for a tenner, BOGOF’s and heavy price discounting have played a greater part in the reshaping of the wine market than any changes in consumer taste preferences. And it has been good for business as many beer drinkers turned to wine, now the most popular take home drink.
There are further shifts in share of sales by country and ACNielsen reveals a narrowing in the mix between multiples and independents.
The launch of the FWD Blueprint for Wines was a wake-up call for independents to the big wine opportunity and the importance of the New World, which now over performs in our sector, particularly California. Recent price-led promotions again distort this market and surely fail to generate sufficient financial reward for the brand owners. While the big five enjoy nearly a third of trade, a price war rages between them to gain market share.
Now the multiples and specialists have also joined the battle to increase their footfall. Profit, we presume, will come later.
Top brands remain very active. The number one Blossom Hill (RSPs £3.99-£5.99) has a 7.1% share of the impulse market, growing at over 16%. The range has grown to18 variants with the recent addition of Pinot Grigio. With an RSP of £4.99, this wine will be offered initially through a major multiple. A pity given the independent sector support since launch.
Disappointing, too, that Piat d’Or’s new sparkling wine will be launched through a high street specialist and second division multiple retailers before reaching the wholesale sector.
E J Gallo, Britain’s third largest supplier, is gearing up for a strong summer performance. Blush (Rosé) wines, currently 5% of all wine sales, are up by 26% and Gallo is building on its Sierra Valley White Zinfandel and White Grenache successes by adding a Syrah Rosé to the Turning Leaf range which now also includes a Pinot Grigio. Gallo is also introducing Sierra Valley Bag in Box.
Through its association with McWilliam’s wines, Gallo has expanded its Australian portfolio. The JJ McWilliam’s range includes six dual varietal wines priced at £4.99. The launch is supported with a £1.5m marketing campaign.
Lloyd Stephens, sales director for E J Gallo, comments: “McWilliam’s is becoming a major force in the UK wine market. Gallo and McWilliam’s winemakers have combined forces to deliver new styles and distinctiveness and initial feedback has been extremely positive.”
But ACNielsen’s figures suggest that while more of the independent sector’s wine business is in the hands of the five major brand owners, market share is slipping.
Wholesalers and independent retailers should observe the activities of multiples and specialists and never underestimate consumers’ insatiable appetite for wine. That means offering more choice and some exclusivity. No doubt Drinksummit will have something to say about this, too.
Liz Aked, Senior Trading Controller, Wines, Spar
It’s a fashionable attitude to knock the branded wine supplier. Indeed, as the argument goes, they are not interested in our sector, preferring to support the major retail multiples and increasing their market share daily.
Almost everyday you read about consolidation in the supply chain making the situation worse. How can these behemoths understand your needs and requirements?
Britain is forecast to become the second largest world market for imported wines in sales terms by 2008 and the largest consumer at 1.74 billion bottles. It’s not small beer.
For our sector to compete and to have its fair share of this market there needs to be a radical re-think around ranging, promotions and exclusive labels.
Believe me, there are alternatives to the major brands – who are only in a bidding war for your shed space.
John Baines, Senior Trading Controller, The Today’s Group
Last year was excellent for the group with drinks turnover up by more than 10% in spite of a disappointing final quarter. We are a very retail-focused business. In helping our VIT and retail club members generate extra business our process is to work back from the consumer through the supplier to create the right promotional package.
We can help our independent retail customers match multiple offerings across all drinks categories. They have no need to fear the multiples. They can provide the right products at the right prices – in the right place, with the added benefit of chilled beer and wine.
The brewers are very pro-active, providing different packs and new strategies. Scotco’s influence on the cider category has helped us increase volume by 24% – and improve profitability. ARTDs are faltering but WKD and VK brands are performing well. And as for our wine business – it just grows and grows.
Top ten beer brands 2004
1. Stella Artois
2. Carling Black Label
8. Kronenbourg 1664
10. John Smith’s
Best selling wines in the impulse market MAT to March 2005
Blossom Hill – 7.1%
Sierra Valley – 5.5%
Jacobs Creek – 4.3%
Stowells – 3.0%
Kumala – 2.0%
Piat D’O – 1.4%
Hardy’s Stamp – 1.3%
Lindemans – 1.2%
Echo Falls – 1.1%
Paul Masson – 1.1%