Retailers use premium own-labels to up sales
It may not be sending sales values soaring just yet, but more and more premium products are finding their way into the spirits aisles - and that includes retailers' own-labels.
But there is also a big market for bottom-end own-labels, which retailers can use to undercut leading brands on price at the same time as boosting their own margins.
Some suppliers are growing concerned that own-labels will take share from their brands.
Own-label has around a one-third share of the off-trade spirits market, and is gradually growing that share, according to Beam Global.
General manager Drew Munro comments: "In certain categories, including French brandy and cream liqueurs, own-label is seeing massive growth - whereas in other categories, such as standard blended whisky, it is actually declining.
"Retailers seem to be focusing more recently on premium own-label, which is growing faster than standard. In most categories, premium own-label seems to be helping retailers
persuade shoppers to have more confidence in buying own-label. The question is whether this can work in the spirits category, which is a high-spend, and therefore high-risk, purchase. It is possible that premium own-label could serve as a stepping stone to brands. It is quite early days but it's something we will be keeping an eye on."
Chris Mason, of First Drinks Brands, says: "Own-label spirits have taken considerable shares of many
spirit categories, including blended whisky and vodka. The advent of 'premium private label' in many retailers has contributed further. Excess of demand over supply in certain categories - especially where
spirit maturation is needed -
is likely to increase own-label supply prices at a faster pace than brands, which may slow the growth over the next couple of years."
For Simon Oldham, UK off-trade sales director at Whyte & Mackay, the future lies with the branded offering. "With the smoking ban potentially driving increased consumption at home with friends, conspicuous consumption is going to become increasingly popular, especially among
the younger 18 to 35 -year -olds who may be more inclined to purchase a 'named' brand," he says.
But for most retailers, own-label and brands work together to build the category. A Tesco spirits buyer sums it up: "In general Tesco's brand complements our branded sales rather than stealing from
them. I am dedicated to driving both."
How are own-label spirits ranges developing?
The Co-op has been repackaging its own-brand spirits in lighter-weight bottles and bringing out its own-label branding. The new-look portfolio is to be launched in October, and will see The Co-operative Finest Blend Whisky relaunched in a 298g 70cl bottle - which the retailer believes is the world's lightest spirits bottle of that size.
Tesco has relaunched its Tesco brand spirits range and has seen a big sales boost. Flagship line Tesco 12 Year Old whisky increased sales by 800 per cent, according to the supermarket's spirits buyer.
Waitrose has seen growth in its more premium own-label spirits, particularly the Armagnac and single malt whiskies.
The spirits industry is under mounting pressure from the government to trade responsibly - so what are suppliers doing to show their high-alcohol products are really responsible?
Diageo ran a responsible drinking TV ad campaign earlier this year
Pernod Ricard is rolling out a warning not to drink when pregnant on the labels of all its products this year
Diageo has been educating under-18s about alcohol through a theatre programme for 11 to 13
olds, by supporting Mentor UK, a charity working to prevent the misuse of legal and illegal drugs, and by backing an alcohol education initiative for 10 to 14 -year -olds
Beam Global has launched its own marketing code of practice
Putting alcoholic units and ingredients on labels
Sticking to marketing codes of conduct from Ofcom, the British Beer & Pub Association and the Portman Group
Supporting the Drinkaware Trust
Encouraging trading up and going for value-added promotions instead of discounts.
Suppliers have their say ...
Simon Thomas, commercial
director, Pernod Ricard UK
"There is a macro trend of premiumisation across many consumer areas - cars, holidays and alcohol. We expect to see this trend continue, certainly in the premium vodka and golden rum categories, so an emphasis on driving volume for premium spirits in the off-trade will drive overall category value."
Chris Mason, managing director, First Drinks Brands
"To put value back into the off-trade spirits market, retailers should finally recognise that inflation exists and costs increase, hence manufacturers sometimes need to pass on increases to customers and consumers. While saying that, the UK is a free market and with retailers grappling for market share, regretfully, price is a key weapon in their armoury."
Andy Adams, channel director for grocery, Diageo
"One of the biggest challenges for Diageo, retailers and other spirit companies is that we need to make a clear link
between spirits and the occasions for which they can be purchased . The wine category is an example of how this works well - linking different types of wine with food, and when it can be enjoyed. Retailers should use POS materials to bring the category to life."
Simon Oldham, UK off-trade sales director, Whyte & Mackay
"Rather than continually trying to compete on price, retailers should
find other ways to encourage customers to purchase. This could be through a value-added pack with a free gift. Alternatively, try
something that is unique to them, such as a free gift-wrapping service or a themed link-save promotion around a particular event, such as
the Rugby World Cup ."