A new player?in the mix

12 November, 2010

Pre-mixed drinks are star players in the spirits market this year. Sales grew 47% to £39.4 million in the year to September 4, according to Nielsen – making it one of the fastest-growing categories in BWS.

Mintel, which values the market at

£25 million, says it could grow to £140 million in the next five years. With plenty more distribution to roll out, suppliers are confident pre-mix will continue to be the big winner for many months to come.

But what are pre-mix drinks, and why is everyone saying they’re different from RTDs? Kiren Phul, client manager at Nielsen – which tracks pre-mix cans separately from RTDs – explains it this way: “A pre-mixed drink is generally a ‘bar-call’ drink in a can – a typical drink you will request at a bar, such as gin and tonic or Jack Daniel’s and cola.

“They differ from traditional RTDs in that pre-mixed drinks could typically be made up by a consumer if they bought the ingredients separately – a bottle of gin and a bottle of tonic, for example.”?Then there are ready-to-serve cocktails, such as the Bacardi Mojito and Halewood’s Caribbean Twist, which are getting plenty of marketing support and growth.

These innovations have helped revitalise the RTD category, which after some months of decline is now increasing again in the off-trade.

Sales grew 9% to £217 million in the year to August 7, while volumes climbed 8% to 56 million litres, according to Nielsen. The on-trade however has continued to decline, with sales down 12% to £417 million and volumes down 14% to 44 million litres.

“The expansion in pre-mix and ready-to-serve offerings has brought some great, well-supported brands, such as Jack Daniel’s and Pimm’s, into the fixture, which has been good news for the wider category,” says Debs Carter of WKD owner Beverage Brands. “The can format offers another convenience-based pack type for consumers and has thereby opened the category up to new usage occasions.”?But for Maxxium UK’s commercial operations director Mark Riley, the only difference between the various different products is the end user. “Despite the perception of RTDs being in huge decline, the category remains relevant and popular among younger consumers, albeit that fewer of them are drinking them than when they were at their peak.

“Consumers of pre-mix cans are generally younger than parent brand buyers, but still older than the typical RTD consumer, with price, portability and convenience being the main attractions for purchase.”?Asda has heavily invested in pre-mix cans – it doubled the space it had in-store by taking share from RTDs in its range review in April. It had what it says was the UK’s first gondola-end promotion for the category, introduced free cardboard can carriers at the till and tried out RTD cans in the chiller – which pushed sales up 30%, says spirits buyer Chris Brooks.

“These steps have meant our pre-mix range has had a halo effect on the rest of our RTD range and re-introduced interest,” he says. “We’ve seen some fantastic growth figures of more than 50% year on year, making Asda the fastest-growing multiple in this sector. There is a low barrier in terms of price and the brand names involved are already very familiar to customers. We have a lot of activity pushing the category as we believe there are real growth opportunities.”?Diageo now has nine pre-mix cans in its range and wants to see retailers stocking all of them to “create a category” – especially in chillers. It also says its customers are clamouring for more varieties.

Sales director David Smith says: “The opportunity is still absolutely immense. What is great is that 85% of the sales have been incremental to the spirits category, and 70% of sales are incremental to beers, wines and spirits – so it is really good for the overall category.”?Diageo GB’s route-to-market and convenience channel director Paul Downing adds: “People have started talking about this as being a grocery brand, but it’s about convenience, impulse, something for tonight. We have sold more than 1 million cases through this channel, and it has massive potential and is perfect for occasions over Christmas.”?Susie Modhawadia, brand manager for Jack Daniel’s, is also keen to push the drinks in impulse. “We know, especially in the independent sector, that many of the pre-mixes and beers are bought to consume within the hour,” she says. “For retailers to get the most out of this product it should be in their fridges. We believe it involves a similar consumer to beer, so placement near the beer section is wise.”?Both Maxxium and Diageo suggest four-for-£5 promotions to encourage consumers to mix and match across the category.

One area drinks companies haven’t exploited much is team-ups with leading soft drinks brands. Diageo has secured Schweppes to provide the tonic for its Gordon’s pre-mixes, but so far no one has managed to get Coke or Pepsi on board.

While Smirnoff, Jack Daniel’s and Jim Beam are no doubt keen to strike a deal with a major name, regular government and media attacks on alcohol as a whole – particularly on the notorious “alcopop” category – could well be frightening off the soft drinks companies. Could this negative image – the “pop” name that propelled RTDs to their phenomenal success in the 1990s – be a danger to the concept of pre-mix cans in more puritanical times??Diageo’s Smith doesn’t think so. “The comparison is not really with RTDs, but spirits,” he says. “It allows really accessible price points to the spirits category and is a convenient way to drink spirits at home. I don’t think people who drink RTDs will suddenly drink pre-mix.”?Some elements of the health lobby have been campaigning for higher taxes for RTDs because of their perceived association with alcohol misuse. Are they likely to accept the trade’s arguments that pre-mix cans and ready-to-serve cocktails are something else altogether??Christina Brown, marketing director at G&J Greenall – which has seen the rate of sale on its pre-mix cans more than double since the beginning of this year – unsurprisingly argues that there shouldn’t be a punitive tax on RTDs.

“Evidence suggests the RTD market share is only about 0.8% of the total alcohol consumed in the UK and consumption levels are also on the decline, so to cite RTDs as a cause of binge-drinking in the UK is detrimental to this category. The abvs on these products are variable and can be lower than a glass of wine,” she says.

Maxxium’s Riley adds: “From a taxation view I don’t see how this can be applied without penalising all RTD consumers – how do you legally differentiate between RTDs and pre-mixed drinks?”

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