In the pound;2.7bn UK spirits market vodka and whisky dominate with whisky accounting for a third of all spirits volume, but Diageo’s Smirnoff taking top spot. Blended whisky accounts for pound;737m of off trade sales, but is in decline, while sales of vodka total pound;688m and are growing at a rate of 8.6%.
Spirits is the most seasonal of the alcoholic drinks categories with one third of volume sold in the 12 weeks preceding Christmas, and with sales of pound;416m in December it easily pushes beer out of the second place it holds for the rest of the year behind wine. While Smirnoff is the leader on annual sales another Diageo brand, Baileys, is the leader at Christmas with sales of 4.5 million bottles in November and December.
From October and to the end of December Diageo will be spending pound;25m on promoting its brands. Within the wholesale channel Diageo will be running price-marked packs of 70cl Smirnoff, Gordon’s, Bell’s and Baileys for pound;9.99, enabling wholesalers’ customers to provide a different offer to the grocers which tend to concentrate on litre bottles. Paul Downing, RTM channel director, says: “We ran PMP activity earlier this year and saw an uplift of 20% across our core spirit brands.” The activity will be supported with posters, shelf barkers and small display units.
In addition, Diageo will be running “Baileys Days” in the top 100 cash and carries for Baileys sales, offering retailers a “buy a case and get a bottle free deal”.
Availability is key in cash and carries, according to Downing, and spirits should be highlighted so that retailers cannot miss them. He says cash and carries should be building spirits stocks from late October and adds: “The critical time is the last two weeks before Christmas and the week between Christmas and New Year, when independent retailers have distinct advantages over the grocers due to opening hours and location, and brands are particularly important in the independent sector.”
Gift packs of branded spirits are major sellers in the grocers at Christmas, and these can be money spinners for larger independents, but Downing says that if independent retailers have limited space they would be better served by ensuring they have adequate stocks of the main brands.
Diageo has also been working with independent retailers to enable them to bring spirits out from behind the counter. Downing says: “We have been working with wholesalers to distribute safety caps for retailers wishing to protect themselves from theft.” In trials retailers have seen sales uplifts averaging 37%, meaning the average pay-back period is just 12 weeks.
Pernod Ricard has unveiled a range of Christmas gift packs for its leading spirits brands – The Glenlivet, Chivas Regal, Martell, Jamesons, Malibu and Tia Maria – as well as its Jacob’s Creek wine brand. Like Diageo the company is seeking maximum visibility in cash and carry depots and will be distributing 1,800 pallet display units. For the first time the company will be offering a mixture of both case and bottle displays.
There is a lot of volatility within the spirits sector as a result of changing consumer tastes and Sarah Harding, trade development manager for Beam Global UK, points to a number of these trends. She says: “There is a general trend towards premiumisation and newer things, as categories such as tequila and sambuca emerge in the off-trade through consumer experience in the on-trade. Enjoying spirits as long drinks rather than the ‘short’ is also gathering pace.”
Regarding the wholesale channel she says: “Beam Global is committed to helping the delivered wholesale and cash and carry channels boost sales and is focusing on added value promotions rather than encouraging price discounting.” An example is Courvoisier, which is offering a cash and carry pack giving customers a free 5cl bottle of Courvoisier VSOP with a purchase of a 70cl bottle of VS. “This has proved to be a great success in the trade where we are driving trial and distribution of different styles,” she adds.
After consolidation among the global players in the spirits market earlier in the decade, the pace of change has slowed this year, but there has been one major deal. Whyte Mackay, best known for the whisky brand of the same name, Vladivar vodka, its Jura single malt and Glayva liqueur, was acquired for pound;595m by United Breweries to become part of the world’s second biggest spirits company. At the FWD’s Drinksummit conference in June 2007, Whyte Mackay sales director Simon Oldham told wholesalers the company had a five-year plan to move from being strong regional player in Scotland, where it is tussling with Famous Grouse to be the top whisky, to become a player on the world stage. As part of the plan the company has invested in a new dedicated sales team for the cash and carry sector and is looking to grow distribution of its brands outside of its Scottish heartland.
Ian Davidson, senior channel manager, wholesale/cash and carry, says the wholesale channel is vitally important to the company as a route to market to the independent retailer market, and accounts for about a third of its sales.
After a decade of growth the ARTD market is now undergoing consolidation as it matures, but is still worth pound;730m. Sales have dropped off in the multiple grocers, but the impulse sector is showing greater resilience.
Karen Salters, marketing director of Beverage Brands, which manufactures WKD and Caledonian Cooler, says: “ARTDs are performing better in the impulse sector than in any other trading channel, so there’s real potential for independents. Suppliers and wholesalers can work together to encourage independent retailers to get their offering right and to make the most of the major financial rewards on offer.
“As a result of the category’s consolidation it is increasingly important to stock and allocate most space for the pillar brands – the best sellers, as these will be the ones in most demand.”
According to the latest Nielsen data the top three ARTD brands – WKD, Smirnoff Ice and Bacardi Breezer – account for 71% of category volume in the impulse sector. WKD is the number one brand in impulse, accounting for over a third of category sales, it’s showing 10% volume growth on an annual basis, and it’s the only brand in the top four showing growth.
Salters says: “WKD is without doubt a big brand and therefore a must-stock as we head into the all important Christmas trading period. Its performance over the past decade has been staggering and with a busy programme of profile raising activity planned for the months ahead, we expect more of the same.”
WKD works closely with the wholesale sector as an active member of the FWD Blueprint and runs promotions tailored to the channel. Currently the “WKD … or Not!” promotion is running in depots and is offering prizes for retailers.
Other tailor-made initiatives include the promotional WKD rack end units, which are produced to create additional off-fixture displays and theatre in depot. Salters says: “Our research tells us that 47% of retailers look for display units to help them decide what lines to stock and that off-shelf displays can increase sales by up to 30%, so the promotional WKD rack end units are fantastic sales drivers. Not only that but we’re happy to supply and build these units free of charge.”
Smirnoff Ice sales are flat year-on-year, which Paul Downing rates as an achievement when compared with the overall ARTD market. He says there has been growth in independents in the larger 70cl bottles and this Christmas there will be two consumer facing offers in cash and carries: two 70cl bottles for pound;5 and four 275cl bottles for pound;4.