Independents are top prospect for spirits

07 November, 2014

Independents are the best prospect for the spirits market, with 29% of suppliers polled in OLN's Spirits Report saying they have the most potential for the coming year.

“Independent retailers are embracing variety and becoming a more appealing place to select wines and spirits,” said Brockmans gin marketing director Bob Fowkes, adding: “From the other side discounters will start to have more impact on the mainstream category.”

The Drinks Company managing director Bill Oddy said: “They have an advantage in speed of response to innovation and are happy to try new lines.”

Mangrove managing director Nick Gillett said: “Specialist retailers could do really well and are having success with our portfolio, but we need to help them more to really see the results.”

Indies were followed by supermarkets and the on-trade, both seen as top prospects by 24% of suppliers.

Gillett said: “For our portfolio the on-trade offers a real opportunity as we see a number of the bigger players trading up in tequila, gin, vodka and rum, where we are strong.

“Supermarkets could easily deliver more volume and across the portfolio but it depends on the buyers’ willingness to expand their categories and their reliance on price points. If they want low price points and huge amounts of financial support then smaller and often more eclectic suppliers will struggle to compete with big suppliers.”

But some criticised the major multiples, saying they lacked a clear strategy in spirits and weren’t listening to their customers.

This year’s results presented a different picture from last year’s, when convenience stores topped the poll with 33% of the vote, compared to just 12% this year, and independents were seen as the trade’s best prospect by just 12% of suppliers.

That could be to do with the growing importance of independents in the market, but also reflects a greater contribution from smaller and independent suppliers with eclectic and niche portfolios in this year’s Spirits Report.

Many of those polled felt the on- trade would continue to dominate the spirits market, especially for super-premium drinks.

Luke Tegner, brands marketing director for Berry Bros & Rudd Spirits, said: “The on-trade still represents huge opportunity for growth. The continuing trend in premium bars offering premium cocktails is perfect for Berry Bros spirits.”

But others were positive about the off-trade in general. The Drinks Company’s Oddy said: “The off-trade is an increasingly important segment with many retailers really acting as a pseudo wholesaler.”

And Mangrove’s Gillett summed up: “The off-trade is a great partner for us as consumers gain more knowledge and seek out more premium brands and some of the smaller producers who offer real value at a price point.”

But when it comes to launching and growing a spirits brand, the on- trade still trumps the off-trade.

In fact, 63% of spirits suppliers said they would choose the on-trade for product launches this year, compared to 54% last year.

James Wright, head of spirits and agency brands at Halewood International, said: “The on-trade remains key in terms of visibility and engagement with consumers – those who are supportive of the brand, but also those who are somewhat sceptical of a new drink but would like to try something new.”

Rachel Tranter, head of marketing and PR for the Cotswolds Distillery, said: “The passion of the on-trade makes it the definitive choice for launching a product. Telling the story of our spirits, how they’re made, the work that went into our recipe development and the reason for choosing the botanicals we did in our gin is really understood and appreciated by the on-trade.

“If a product is good enough, the on-trade then becomes your unofficial brand ambassador, selling the story of your spirit and recommending it to the public.

“The off-trade could become more exciting by adopting targeted launches to interested consumers, focusing on educating them about spirits and cocktails, how to enjoy the product and what to do with it.”

James Rackham, chairman of Emporia Brands, added: “The attraction of the UK for brands is our outstanding core of 3,000 cocktail bartenders. Independents in the UK perform the same role as they are hand-selling and, if convinced, are brilliant brand ambassadors. Online retail is the third route to market, offering social marketing as well as the opportunity to build a brand story. Retailers and specifically supermarkets are capable of being part of seeding a brand, but this requires a plan which they completely buy into and which fits the big picture for the brand.”

Bob Fowkes, marketing director for Brockmans gin, added: “It remains true for premium brands. The off-trade could provide more tastings by experts and ensure their staff are adequately trained to explain categories and brands to an increasingly knowledgeable consumer.”

The Drinks Company’s Oddy agreed: “Retailers could become more confident with premium product launches. They generally have the trust of the consumer and they are bold enough to try in other categories. Marks & Spencer is a leader in this area.”

Mangrove’s Gillett noted: “Until the off-trade invests in educational mechanics and dedicates space and time it will always be a challenge.”

Suppliers criticised the off-trade for being dull, unimaginative and not giving spirits enough space.

Bill Roberts, general manager and vice-president EMEA for Gallo, said: “Spirits merchandising is dull. If you look in Germany or France retailers are much more progressive in the way they merchandise spirits and wines. Here there is no floorspace, no room to do something exciting.”

Retailers need to be more flexible, offer more room to niche spirits compared to premium brands and do more to educate and enthuse consumers the way bartenders do, suppliers said.

Kirsty Loveday, managing director of Love Drinks, said: “The off-trade could be more exciting by allowing more affordable in-store activations which can include information barkers or tastings.”

But some said the sector is increasingly important for brand launches, with prestige retailers becoming a key platform alongside style bars for premium spirits.

Paul Isherwood, head of off-trade category development at Diageo GB, said: “While the on-trade still plays an important role in growing a brand’s reputation, we see both channels as great places to launch and grow brands. The two channels allow categories and brands to access different occasions, and are therefore both very important in driving growth.”

Christopher Beaumont-Hutchings, managing director of Chilgrove gin, said: “While the on-trade is still of paramount importance for a new spirits brand, the off-trade is not to be underestimated. Having launched in June we have found the support and enthusiasm of key players in the off-trade to be invaluable.

“Online retailer, for example, has built its model around getting fully involved with the brands it represents and working with them to drive awareness, which quickly converts to sales. On the high street we have found Harrods and our local Sussex partner Hennings Wine to have been equally important to rapidly build a profile.

“Particularly with retailers operating at this level, consumers are increasingly willing to take advice and recommendations from knowledgeable sales personnel.”

“A joined-up approach is important to ensure consumers can access the brand outside the on-trade,” added Berry Bros & Rudd Spirits’ Tegner.

Read more in OLN's Spirits Report 2014

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