The
credit crunch might be hitting the licenced trade, but what is bad for
the on-trade is actually quite good for the off-trade.
Despite
media coverage of binge drinking, which often imply that consumption
rate is spiralling out of control, there has, in fact, been a decline
in overall alcohol consumption in the UK in recent times.
Difficult environmental factors, such as the increased costs of alcohol
combined with the economic slowdown, the smoking ban, and changes in
consumer demands present a challenge for drinks brands – a challenge
that the off-trade has not been immune to.
Despite an alarming drop in on-sales over recent months, off-trade
sales continued to rise with a 3.8 percent increase in the summer.
However, in the most recent figures revealed by the drinks industry,
the on-trade witnessed its first fall in sales in over a year, with a
six percent drop in the three-month period to September.
A sign of wider economic and social issues, perhaps, but, despite this
wobble, the off-trade remains increasingly important as the long-term
trend towards home drinking continues, fuelled further by the current
recessionary forecasts. As such, this presents a huge opportunity for
brands to take their battle for sales to the shop floor.
“You have to recognise that drinks companies actually do quite well
during recessions,” says Campbell Laird of Edinburgh-based design
agency Threebrand. “That and the fact that whatever the sector, brands
are still having to compete for marketshare – and design plays a
significant part in helping companies achieve this.
Silent Sales Person
“Packaging is often seen as the silent sales person, as is ‘in store
theatre’. Innovation in packaging design, bottle shapes, label stock,
materials, textures and feels all embellish and create awareness,
sophistication and most importantly shelf stand out. Identification and
distinctiveness have always been two pillars of branding.
“We recently completed a global campaign for Smirnoff, for the latest
James Bond film, Quantum of Solace. The product was exactly the same,
but sales went up 300 percent in the first week after the campaign was
launched.”
TNS research recently highlighted figures that showed people are still
buying food and drink, but are ‘trading down’, continues Laird: “This
means that consumers are eating and drinking out less and consuming
more at home. This trend mirrors the characteristics of the last
recession where sales of alcohol for home consumption increased... as
did sales of lipstick – both seen as an ‘affordable treat’.”
So, if alcohol remains steadfastly on the shopping lists of the
consumer, competition on-shelf among brands remains correspondingly
tight.
“This time of year there are many ways of creating brand stand out on
cluttered shelves,” says Vaughan Yates of Contagious. “The main
standout within this climate seems to be the price reduction stickers
below the brands, and less the brand packaging on the shelves. You only
have to look at an empty shelf in Tesco or Sainsbury’s and you can
guarantee there is a discount sticker offering a price reduction below
the shelf.”
Of course, price driven offers will always be the purchasing motivators
for some consumers, but not all, says Craig Mackinlay, founder of
Breeze.
“Even in the toughest economic environment, there are those that
prosper and for whom purchasing what they desire will remain a constant
– whether they are motivated by a certain badge or logo, product
promise or innovation. To create standout on shelf, the product’s
packaging needs to be true to the product itself. It must reflect that
particular brand’s values whether it is about quality, rarity,
innovation or price.
“For consumers not driven by price, their purchasing decision is more
emotive and the packaging has to engage with them on that level. It
stands to reason also that a quality product should be given the best
packaging so that it really does stand out on a busy shelf.”
Price related promotions now rule the take-home market, but getting
cut-through amongst the clutter is increasingly difficult, claims Derek
Sneddon of Pocket Rocket. “If you can negotiate good shelf facing,
clever design can really push your brand out from the crowd.
Price Driven
“If a price-driven offer is concerning because it may devalue the
brand, it is worth remembering that about 30 percent of alcohol
purchases during this festive period are specifically for gifting. So
the other way to gain standout is to actually turn up the premium cues
on the brand and consider anything from a GWP [gift with purchase] or
exclusive seasonal packaging. Offer a relevant package during the
Christmas period and it is a very compelling proposition.
“If you can convince consumers that your brand is worth paying more
for, you’re half way there. Powerful advertising works, and it can get
your brand to a place where consumers feel comfortable with you.
“Packaging then has to live up to these expectations and deliver
something special. It is not enough to merely garnish your product.
What you convey is part of the whole brand experience and it has to fit
with every other consumer touchpoint you have.”
This is a point that Yates agrees with: “To establish a brand image you
have to look at packaging, sponsorship, promotions and advertising.
It’s a simple formula, and if you have a clear strategy, a clear target
market and you work with the right people, you can grow your brand.
“We are seeing continued investment by our drinks clients across the
board. In October we worked with the Beefeater team to launch a new
super-premium gin, Beefeater 24 in London. You do not launch a new
brand in this climate unless you are confident about the future. Gin,
for example, is still an undervalued sector at the premium end,
compared to vodkas. On average you may pay up to £20 for a super
premium gin, where the average price for a premium vodka can be twice
as much. Considering the complexity of gin compared to vodka, gin is
still great value.
“We are also noticing more brands investing in their environments. We
are currently working on five brand homes for some of the world’s
leading spirit companies. Visitor education and entertainment leads to
word of mouth communication which is key to helping a brand grow.”
Threebrand’s Laird is also noticing a number of key trends developing in the drinks trade.
Confidence
The first is ‘premiumisation’. “With people aspiring to a better
lifestyle, and while the current recession may suggest consumer
confidence is low and consumers reigning back, the reality is that
while sales of houses, cars, holidays and other expensive items are
being hit, affordable personal treats or gifts for friends – such as
gifted alcohol – are doing very well,” he says.
The second is the growth in BRIC markets, these are the markets of
Brazil, Russia, India and China. “While these areas provide big
opportunities for brands, they need to understand the market dynamics
of these differing markets,” Laird adds.
However, at the end of the day, the current economic climate is really
unchartered territory, says Craig Mackinlay. “Some politicians have
claimed that the darkest period for 60 years is right round the next
corner but society has changed so much since that time that purchasing
behaviours may be different too.
“There are other social factors other than money which dictate where
and how consumers purchase alcohol (eg drink driving, smoking ban etc).
It would seem logical that people would tend to drink more at home in
tough economic times... but for some, escaping out of the house to go
to the pub is what makes life worth living.”
