Released on = April 16, 2007, 3:55 am

Press Release Author = Bharat Book Bureau

Industry = Marketing

Press Release Summary = After some decline in the mid-1990s, the off-trade spirits
sector has performed well in recent years, seeing growth of 15.1% by volume and
11.2% by value between 1999 and 2003.

Press Release Body =
Off-Trade Spirits

After some decline in the mid-1990s, the off-trade spirits sector has performed well
in recent years, seeing growth of 15.1% by volume and 11.2% by value between 1999
and 2003. This contrasts with a decline of around 11% by volume in global spirits
sales over the same period.

During 2003, the off-trade spirits market in the UK increased by 3.7% and 3.4% by
volume and value, respectively, compared with the previous year. Growth continues to
be driven by those products which have a strong appeal to younger drinkers. Vodka
sales grew substantially by volume between 1999 and 2003, while bourbon sales also
sustained healthy growth, due to the popularity of Jack Daniel\'s. Sales of cream
liqueurs also grew strongly, albeit from a small base, primarily due to the launch
by Allied Domecq of its Tia Lusso brand in 2002. Traditional products, such as
scotch whisky variants, continued to decline due to the perception of them as being
old fashioned. Nevertheless, overall growth within the take-home alcoholic drinks
sector is being driven, to some extent, by other off-trade products, such as beer
and wine.

The higher rate of volume than value growth has been attributed to high-street price
wars, a problem compounded for spirits producers by the low frequency of repeat
purchases. Christmas has traditionally been a period of heavy discounting, a time
that is particularly important for sales of certain types of spirits, such as
liqueurs. As much as three-quarters of all brands of blended scotch sold in the UK
are sold on promotion; the figure is slightly less for white spirits. This reflects
the power of a small number of grocery multiples within the off-trade.

At present, however, there are three basic strata of spirits in the UK off-trade. At
the bottom are the tertiary brands or \'cheapest-on-display\' lines, followed by own
label and, above that, the more premium, mainstream brands. Cheaper brands have
pushed up the image of own label, which has become a huge market in spirits. In the
premium sector, however - where buying for gifts is important, especially with
single malts - people are reluctant to purchase own-label brands.

Growing consolidation has also occurred as a result of mergers and acquisitions,
such as the merger of Grand Metropolitan and Guinness in 1997, ultimately resulting
in the creation of Diageo and that company\'s subsequent purchase of certain Seagrams
brands in 2000, as well as the creation of major marketing and distribution
companies such as Maxxium Worldwide and First Drinks Brands. Companies such as
Allied Domecq have become more focused on wines and spirits, thereby increasing
their influence in these areas.

A relatively small number of brands account for a significant proportion of sales.
In 2003, the top ten brands made up nearly a third of total off-trade sales in value
terms. Private label is also an important player - especially in gin, vodka and
French grape brandy.

These companies have managed to maintain their significant presence by huge
marketing support for their brands, as well as promoting wider usage occasions for
them. Some suppliers have sought to capitalise on what they see as the untapped
opportunity of ready-to-drink (RTD) cocktails. Targeting certain key audiences, such
as youngsters and upwardly mobile women in their mid- to late-20s, has increasingly
been seen as vital in securing a higher rate of market growth. This has been
particularly successful in promoting sales growth of vodka.

Whisky is the largest sector, amounting to 59.8 million litres in 2003, a 1.5% drop
on the previous year due to lower sales of blended whiskies. Single malts and
imported whiskies continue to experience some growth. Independent whisky distillers
in Scotland have had to reassess their strategies in light of the power of the
multinationals - which account for between 65% and 70% of the global scotch market
in volume terms.

Increased demand for premium products has been responsible for some growth in
certain spirits categories, notably vodka.

Greater segmentation between premium and standard brands has injected some growth
into off-trade gin sales following several years of business being static at best.
The wider selection of gin brands in the on-trade has gradually made its impact felt
in the take-home sector.

The impact of on-trade outlets has also influenced sales growth for a number of
other white spirits and tequila. In the rum segment, although premium products have
become more popular, there has been little overall growth. White rum accounts for
two-thirds of off-trade rum sales and has been the main source of any growth that
has occurred.

Liqueurs and specialities represent the single largest source of growth in the UK
off-trade spirits market. Sales of other brown spirits, such as brandy and cognac,
have remained static. This has been partly due to their old-fashioned image and to
the increased popularity of wine as an aperitif drink.

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