First Drinks Market Report: part two

Thursday, 19 July 2012 13:56 
In the second instalment of the First Drinks Market Report, Harpers gets to grips with the off-trade channel and explores opportunities for growth.

Key findings

The average GB household shops for spirits 12 times a year and spends on average £180 per year, so there's money to be made by retailers if they get their offering right, believes First Drinks.

The key spirits categories by value are vodka (29%), blended whisky (23%) and gin (9%). By volume, they are also vodka (31%), blended whisky (23%) and gin (10%).

In total, the off-trade spirits market is worth £3.5 billion, up 5% on 2011. In the total GB off-trade BWS market, spirits is the leading value growth driver and holds 24% of off-trade value.

There are over 65,000 off-trade outlets in the UK, with multiple grocers accounting for 78% of the spirits market, down 2% on the previous year, although value continues to grow – up 5%.

In a recent Him! study, 26% of shoppers said they wanted local stores to sell more well-known brands and 15% stated they wanted more premium lines, according to sales and marketing director Tom Fender. "Don't be deluded in thinking that a recession leads to all shoppers wanting value lines," Fender said. "As customers cut back more on 'big ticket' lines, they're happy to spend more on life's affordable luxuries."

GB off-trade spirits brands top 10 by value

(source: Nielsen, year to April 28, 2012, supplied by First Drinks)

1. Smirnoff
2. Glen's
3. Bell's
4. The Famous Grouse
5. Gordon's
6. Jack Daniel's
7. Bacardi
8. Baileys
9. Grant's
10. High Commissioner

Gifting

Alcohol gifting is worth £572 million, with the majority taking place in supermarkets, reports the First Drinks research.

 Spirits account for more than one in three of all alcohol gift purchases and, broken down even more, whisky accounts for nearly half of all spirits gifts, with males being the main recipients. Other key sub-categories in gifting are Cognac and vodka.

 Birthdays are the number-one gift occasion for spirits, providing a year-round opportunity.

 While offering affordable gifts is vital, First Drinks believes the premium end of the gifting market is a key. "Spirits offer the perfect year-round gifting opportunity – quality packs and brands at different price points have proven to be a success with shoppers," said John Hyman, sales director at First Drinks.

 Online also represents a huge opportunity, with the internet destined to be the key gifting channel by 2015, according to forecasts.

 Convenience channel

There are around 48,000 convenience stores in Great Britain, with the sector worth £32.4 billion, up 5%, and growing ahead of grocery. Industry experts predict the channel is set to grow in value by more than £10 billion over the next four years.

 Helen Stares from Nielsen attributes the growth in popularity of the convenience sector to rising fuel costs. "Many customers are shopping locally to save money on petrol," she said, adding that convenience generated the highest growth last year, up 7.5%.

 In the convenience channel, BWS is a key category accounting for 13% of sales. Growth categories are non-cream liqueurs, American whiskey and vodka.

 Trips to the convenience sector are increasing in regularity, with close to one-third of convenience shoppers using the channel at least four times a week, First Drinks reported.

 Multiple channel

The average spirits grocery shopper shops 11 times per year and spends £173 on spirits.

 Smaller pack sizes are a key opportunity in this channel, with 50cl and 35cl formats continuing to grow.

 Growth categories are vodka, non-cream liqueurs, American whiskey, flavoured/spiced rum and golden rum.

 Together the top-four grocers account for 60% of all spirits value and 61% of all spirits volume.

 Overall, grocery multiples are worth £116 billion, up 4%. BWS in the multiple sectors is growing, up 3% and, within that, spirits is a core category worth over £2.7 billion, up 5%.

 The final word

Chris Mason, managing director of First Drinks Brands, said: "There is no doubt that we are all facing tough times, with wider economic challenges impacting our industry each day. Nevertheless, we at First Drinks and William Grant & Sons remain confident that by taking the right approach there are opportunities for us to continue to grow and develop."