08 May 2008


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Don't bait the government into legislation

TNS Worldpanel

alcohol

beers

wines

spirits

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Kevan Mulcahey, group account director at TNS Consumer, shares his insights on the changing face of the alcoholic drinks market and the danger of price promotion.

TNS: Retail & Shopper Insights

Prior to the budget there was speculation that government would further tighten legislation around supermarket alcohol sales.

This didn't materialise – and many now question whether the across-the-board rises in alcohol tax will have any meaningful impact.

I don't doubt the much-feared additional legislation will come at some point. And, when it does, the industry could only have itself to blame.

To put this in context, we can look at some of the factors influencing the UK's alcoholic drinks market:

We are all getting older (41% of the UK population is aged over 45) and despite being cash rich, we are time poor.

While we spend around £70 a week on leisure, our homes continue to be the centre of our activity – boosted by record levels of home ownership.

The result is a move away from pubs and clubs. The frequency of visiting pubs/clubs is at an all time low, with only 7% of adults going more than twice a week – a decrease from 12% six years ago.

This is largely blamed on consumers feeling the pub offer is simply 'not for them'. Despite pubs' drive towards enhanced food offerings, consumer needs are better met by restaurants.

As on-trade establishments continue to disappoint, alternatives are winning share. TNS has found one in five pub visitors now visit coffee bars on occasions that would historically have been on-trade territory.

However, the biggest challenge to pubs and clubs comes from home. 'Staying in' is the new 'going out'.

The home is where we choose to socialise and create experiences that historically would have only been available away from home, such as home cinema and gaming.

Today's in-home environment allows consumers almost complete freedom of choice. Unsurprisingly, consumers drink alcohol more frequently at home.

Sixteen per cent of adults drink more than twice a week at home, which has increased the off-trade's volume share of all alcohol consumption from 57% to 62% since 2003.

This change in consumption location has accelerated changes in consumer tastes.

Wine, a category underperforming in the on-trade segment, now overtakes beer in overall popularity.

As the price of alcohol in pubs and clubs continues to rise, we are seeing off-trade price deflation – especially in the case of beer.

The exceptional off-trade deals offered to consumers are moving them away from pubs to explore alternatives.

We find that almost half of all pub visitors claim they drink more often at home because it is much cheaper than going out.

But price is not the only reason people are migrating from the pub to the home. So why do retailers feel the need to price promote so excessively?

This level of promotional activity is dangerous for the industry, potentially devaluing the marketplace and the brands within it.

Our research shows the supermarket offer is so good one in five alcohol shoppers say the cost of alcohol is less than they expected – something consumers rarely confess to.

Another concern is more consumers are buying alcohol to drink at home.

The average alcohol shopper now buys every other week to drink at home, and two in every three households buy wine for home consumption – a rise of over one million in the last five years.

Not only do we purchase wine more frequently, we also buy in greater quantities.

Promotional activity means the volume bought per shopping trip is rising, particularly for beer and wine – impacting home stocking. In 2006, we found that the average lager buyer had 18 cans in their fridge.

Worryingly, this trend may be to blame for the rise in heavy drinking occasions at home.

Heavy drinking occasions in pubs are in decline – but we see an increase in the number of people participating in their own home. 13% admitted to heavy drinking occasions at home in 2007*.

This is music to the ears of lobby groups.

Finally: for many years, much of the off-trade has claimed alcohol is a footfall driver and encourages loyalty.

In fact, our extensive research indicates alcohol is not as effective a footfall driver as retail buyers seem to believe.

Retailers and suppliers are in danger of over promoting alcohol, which could goad government into action.

The fact is the on-trade sector is not meeting consumer needs, so they do their drinking at home.

If this is the case, why do we still insist on giving alcohol away, setting ourselves up for accusations of encouraging 'binge drinking'?

Lighten the promotional activity, allow your margins to grow and support a real market trend.

kevan.mulcahey@tns-global.com

Source: data from TNS Worldpanel, TNS AlcoVision and TNS's Turning On Turning Off study was referenced in this piece

*The heavy drinking occasion, is based upon the ONS definition, of an occasion when a man has drunk more than 8 units of alcohol (4 pints of standard lager) or a women has drunk more than 6 units (2 large glasses of wine).

Kevan Mulcahey: retailers over promote alcohol


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