The take-home beer market faces a conundrum in the run-up to Christmas in how it can make up for the volume losses due to the poor summer, and still be seen to behave responsibly when it comes to festive case deals.
The warning bells are ringing for the drinks industry as a whole with the announcement in early September by Scottish justice secretary Kenny MacAskill of plans for a clampdown on take-home drinks sales north of the border, including a ban on what he called “irresponsible promotions”, and the need for supermarkets and shops to have specific display areas for alcohol by 2009. “We will stop shops displaying beer all around the store or cross-merchandising wine in the pizza counter to entice impulse buyers to buy and drink more alcohol,” he said.
Critics point out MacAskill’s plans may indeed lead to more loss-leading on alcohol in the major multiples, which will only have price as a possible competitive advantage over rivals. This in turn is likely to put greater pressure on smaller, independent retailers, many of which could go bust and leave the leading supermarkets with an increased share of the food and drink market.
Only time will tell if MacAskill’s ideas are made real in Scotland or whether the restrictions get rolled out into England and Wales. The trade will be hoping the experiences with the smoking ban are not replicated in the booze market.
Whatever happens, the take-home beer market will probably have to tread more carefully this Christmas. The nation’s TV screens and daily newspapers are full of stories about the younger generation and under-age drinkers “abusing alcohol and drugs”, leading to violence and general anti-social behaviour. As Mike Teague, sales director at Bavaria UK, says: “This will not be tolerated much longer by our government and the people of this country. Brewers and retailers must think carefully about how they approach Christmas this year.”
The wet summer may have left a large hole in the profits of both brewers and retailers, but at least the trade does not have to rely on the weather to bring in sales at Christmas. “The volume will come, so do not panic,” says Teague. “Why heavily discount or even sell below cost, where we all lose margin and encourage binge drinking with the younger population? Yes, have great offers, but be sensible.”
The next couple of months will show if there has been any stockpiling at home by consumers over the wet summer months, particularly the standard and premium lagers, who were unable to enjoy barbecues as they did last year. This could further impact on sales and the promotions running over the Christmas period.
Jon Whittle, who heads up Budvar UK’s take-home operation, takes a gloomy view of the prospects for the wider beer market, even fearing case offers on the leading lager brands could be as low as “four for £25”. He says: “Retailers will look to creative ways to maximise profits and the general Christmas mayhem will run for months not weeks. The trade needs to be positive. The summer volumes losses were only short term and must not lead to a Christmas price war.”
Economic issues could also have a bearing on how consumers behave over Christmas and how retailers try to boost volumes. “The tightening of spending, driven by higher interest rates and lower disposable incomes, will either reduce volume sales at Christmas or see consumers spend now and pay later in the New Year,” says Rick Payne, at Hall & Woodhouse. “Brewers and retailers should not be tempted to damage the category through over-aggressive pricing to ensure volume.”
Off-trade beer sales remain remarkably resilient, down over the wet summer months, but still slightly up on an MAT basis. And the big brewers are still talking up both the festive sales opportunities and the responsible retailing of beer in the next two months or so.
“It is essential that we [brewers and retailers] work together to build consumer value, especially at peak seasonal times such as Christmas,” says Craig Clarkson, head of off-trade customer marketing at S&N UK. He says responsible marketing and “increased emphasis on premium offerings and new drinking experiences, rather than price” will encourage brewers to invest in npd and innovative marketing
programmes.
Ironically, the more interesting recent developments in lager have come in what was once described as the standard lager sector, up to 4.5% alcohol-by-volume. The last couple of years or so have seen S&N UK launch Foster’s Twist, InBev UK introduce Beck’s Vier and Peeterman Artois, and Coors Brewers back its C2 2% ABV lager in the off-trade.
Steve McAllister, managing director for multiples at InBev, says: “Consumers are looking for beers to suit different drinking occasions and we’re now seeing the availability of beers with a wider range of ABVs and also the introduction of brands that are premium in terms of taste and image, but sit at the 4% ABV mark.” Peeterman Artois, for example, gives additional choice to consumers who normally drink
premium lager, but who occasionally want a more refreshing beer with less alcohol.
Clarkson says: “There are specific social and economic factors driving trends that are affecting the premium lager sector, specifically, consumers’ heightened aspirations to appreciate their experience with alcohol and desire to stay in control on a wider range of drinking occasions.
“As a result, consumers are increasingly looking for beers that are lighter and easier to drink, but can still deliver on taste and refreshment,” he says. And, you never know, perhaps price won’t be paramount for these consumers.
The cider revival came under close scrutiny in the media as the poor summer took a toll on sales for the first time.
Competition in what is being described as the ‘mainstream-plus’ sector, including the likes of Magners, Bulmers Original and Gaymers Original, intensified in-store with price
promotions being seen for the first time.
Profit warnings came out of C&C in Ireland and questions were asked about the long-term health of the category and whether ‘over ice’ would turn out to be a fad. Diageo chief executive Paul Walsh was quoted as saying: “It isn’t clear to me it’s a long-term trend and, when you have a summer like we’ve had, does it really have longevity?”
The general reaction from the cider industry about Walsh’s comments was: “Well, he would say that, wouldn’t he?”
Brand owners can point to continued heavy investment in marketing and advertising, whether it is for clear market leader Strongbow or the ‘over ice’ ciders, and the increasing consumer interest in the more specialist ciders, in particular those from Merrydown, Aspall, Westons and Thatchers. The Gaymer Cider Company says it cannot make enough Orchard Reserve, its single-orchard range of still ciders seen as alternatives to wine. Even some of the longer-established brands, such as Scrumpy Jack, Blackthorn and Gaymer’s Olde English, seem to be ripe for revival.
John Mills, managing director at The Gaymer Cider Company, tells Checkout: “There are no consumers walking away from the cider category at all. Our sales, year-on-year, show it is still by far the strongest category in BWS in the UK. What we have had is a crap summer. We know when it is very hot and sunny, as it was last year, cider sales are even better. Therefore, we do slightly worse when it isn’t.”
There is certainly a bullish feeling in cider despite the difficulties caused by the wet summer. Maurice Breen, marketing director at Magners, says: “Our experience over a near 20-year period in Ireland demonstrates the market’s true potential. Magners is the biggest-selling pint bottle of any beer or cider in Ireland today, with more than a 10% share of the long alcoholic drinks market – which shows how far the cider market has yet to develop in the UK.”
What is more, he says, Magners is a year-round brand in Ireland, proving popular with consumers “whatever
the weather”.
Where ‘over ice’ goes from here is open to question, although other drinks categories are trying to get in on the act, including some beer brands and even wine, particularly rosé. Research for Merrydown showed 65% of consumers still preferred cider chilled, compared to the 35% whose preference was for ‘over ice’.
Mills says there seems little indication consumers are giving up on ‘over ice’: “I am told by the supermarkets that [bagged] ice is still a growing category in a sector where frozen [food] sales have been in long-term decline. Ice is taking up increasing amounts of space and makes retailers a lot of money.” S&N UK sees ‘over ice’ as an important way of attracting new consumers who are looking for “refreshment and an exciting alternative to their usual drinks repertoire”.
The major multiples are now giving over extra space to cider, a move initiated by Morrisons and since repeated in Sainsbury’s and, most recently, in Tesco. What is also being seen in cider is a greater proliferation of price promotions, with some retailers including cider more often among the case deals on standard and premium lagers.
Breen says Magners aims to stay out of any price battle in the take-home cider market, despite the much-publicised problems caused by the poor summer weather on the long alcoholic drinks category.
The summer saw price promotions in-store on several leading brands, including Bulmers Original, S&N UK’s rival to Magners in the ‘over ice’ sector. Even Magners has been promoted in multibuy offers in some supermarkets for the first time, although they are not believed to have been instigated by brand owner C&C.
Breen says: “While consumers will always seek good value, we believe price promotions have no place in the premium sector. Consumers make their purchasing decisions based on many factors and price is just one. Product quality, past experience and brand perception are just as important in
motivating consumer choice.
“Cider spent many years as an ailing category precisely because the product image had been devalued by heavy discounting,” he says. “Over the past two years, Magners has invested heavily to create a new premium category for the trade, and we are therefore encouraging retailers to maintain and further drive value into the sector and not erode its potential through price promotions”. Chris Carr, managing director at Merrydown, says the growth of Bulmers Original has led to a shift to more below-the-line activity, and this is reflected in some retail promotions on Magners. There is, however still quite a large price difference between the two brands. “Some people will try Bulmers [Original] because of the price in the off-trade,” he says.
S&N UK says it is aiming to drive value into the cider category rather than “allow it to be led by price-driven promotions”. Craig Clarkson, head of off-trade customer marketing at S&N UK, says: “The industry has worked very hard to achieve the premiumisation of cider and consumers now recognise the quality of the product and are prepared to pay premium prices for cider.”
Clarkson says S&N UK has invested £45m behind its cider brands this
year: “In the run-up to Christmas, we will continue with this campaign
with a range of above- and below-the-line support.”
How will cider develop in the future? John Mills says cider, with its provenance and heritage, has more in common with wine rather than alcoholic ready-to-drinks. Household penetration has grown from 20% to 30% in just three years. “We still have a long way to go because wine is at 60% and lager at 50%,” he says.
Carr believes the bottled and more premium category will grow, with PET and white cider declining. “What has happened is we have recruited a new generation of cider drinkers,” he says. “Some will pass onto something new, but the rest will stay and we will attract new consumers. I don’t think it is a fad.”
Retailers are being urged to be patient and to give new brands in the ailing alcoholic ready-to-drinks (RTDs) market more time to get established in the major multiples.
Debs Carter, brand controller at Beverage Brands, tells Checkout: “The way to bring the RTD category back to growth is innovation, but it’s easier said than done.”
Retailers, she says, need to give time and space when testing out new brands. “Brands don’t happen over night. We are not going to have a brand within eight to 12 weeks that is on everybody’s radar. Spending a lot of money isn’t a guarantee either,” she says.
Earlier this year, Beverage Brands launched Caledonian Cooler, a lower-calorie RTD targeted at female drinkers. The brand is now in Asda, Tesco and Sainsbury’s. “We would really ask for the trade to be patient with us and help us to build brands,” says Carter.
Beverage Brands has the leading alcoholic RTD in WKD, which is still growing in a market that has been in decline for several years. “We understand our consumer,” says Carter.
“I think we know our consumer better than any other RTD brand. We work very hard to know what makes them tick.”
“Significant support” is going behind WKD this autumn, including TV and poster advertising. Between June 2006 and June 2007, WKD was the sixth biggest alcohol advertiser. “We are punching way above our weight in terms of investment in the brand in the media,” says Carter. “We haven’t seen anything from Smirnoff Ice or Bacardi Breezer so far this year.”
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SOURCE: Checkout October 2007
