Sector Insight: Liqueurs - Not just for Christmas

Liqueur brands must ditch their seasonal focus if they are to accelerate growth, writes Samuel Solley THE BACKGROUND

The liqueurs market is one of the more fragmented categories within the alcoholic beverages market. While the liqueur has historically been regarded as an after-dinner tipple, brands are keen to promote a wider range of drinking occasions. Some in the category are experiencing growth, but it is a market that is susceptible to fashionable fads. Recent Ofcom proposals governing alcohol advertising (Marketing, 21 July) present yet another challenge to manufacturers.

The UK liqueurs market will be worth an estimated £660m in 2004, according to Mintel, up from £627m last year. The sector is expanding at a steady, if not spectacular, rate, but brands have in the past suffered from a perception that liqueurs are not so much a regular tipple as a Christmas luxury.

Quentin Rappoport, director of the Wine & Spirits Association, believes that liqueurs are seen as 'quintessentially an after-dinner drink'. They are, he argues, very different from other alcoholic brands. 'They are often bought and kept for a long time in a way that other spirits are not,' he says.

Only 25% of consumers drink liqueurs, according to Mintel. Although this is split fairly evenly between age groups, there is a bias in terms of gender - about 30% of women drink them, compared with 20% of men.

In addition, liqueur drinkers have traditionally been associated with the ABC1 demographic, and brand owners are keen to shrug off this stuffy image as they seek to attract new drinkers.

Year-round drinking

The category believes it can grow by expanding the number of drinking occasions beyond Christmas - the strongest sales period - and convincing drinkers that cocktails and liqueurs are an ingredient of contemporary life.

Fiona Lovatt, director of marketing at First Drinks Brands, cites Father's Day, bank holidays, barbecues and summer drinking as examples. 'Although Christmas and New Year are key times, there are other seasonal peaks that represent significant opportunities,' she argues.

The market is broadly split into three sectors: cream liqueurs, of which Baileys Irish Cream is a prime example; traditional styles, including Cointreau, that are often thick and sweet; and shooters, a relatively recent phenomenon.

Creams, which tend to be favoured by younger drinkers, will account for 60% of volume sales in 2004, according to Mintel. Traditional styles, preferred by older consumers, will account for 33%; and shooters - despite a massive 671% growth in volume sales since 1999 - will make up just 6%.

In terms of value, however, the traditional styles lead the way with a 42% share, with creams on 40%. That said, the creams category is expanding more rapidly, as major product launches such as Allied Domecq's Tia Lusso have boosted sales.

Six companies, including Diageo, the world's biggest wines and spirits company, control more than 80% of the liqueur market's volume sales. The leading brand in the UK is Baileys Irish Cream - now the eighth-biggest spirit brand in the world, according to Euromonitor - followed by Allied Domecq's Tia Maria.

Advertising dominance Given that these six companies control so much of the market, it is little surprise that the same firms account for more than 99% of the sector's advertising. Total adspend on liqueur brands last year was £17.9m, up from £9.4m in 1999, according to Nielsen Media Research. There is also substantial sales promotion investment in pubs and bars.

Not surprisingly, advertising is skewed toward the Christmas period, with more than £9m spent in the final three months of 2003, compared with only £1.9m in the first three months.

The arrival of Tia Lusso, plus activity from Baileys extensions Minis (a 5cl miniature bottle) and Glides (a lighter version mixed with vanilla and sold in a 20cl bottle), has boosted expenditure in the creams category to 80% of the total sector's spend for 2003, with the Baileys portfolio accounting for more than half.

Recent initiatives have included tie-ups with television shows, such as Baileys' recent successful sponsorship of US TV series Sex and the City on Channel 4 - a programme that directly appeals to young women, a key target audience for the sector.

Shooter stars

Mintel growth forecasts predict that promotional expenditure will grow by 37% between 2004 and 2009, with the sector's sales reaching a value of £900m as brands convert consumers into year-round liqueur drinkers.

One area for growth is the small shooters market. Volume sales in 2002 stood at 1.8m litres, according to Euromonitor, most of which was consumed in the on-trade. By comparison, Baileys sold 5.6m litres in the same year.

After Shock is the leading brand in pubs and bars, drunk either as a chaser or as an alternative to a long drink.

These drinks, however, have been subject to public concern over claims they help fuel alcohol abuse by encouraging rapid consumption of drinks with a high alcohol content.

Given Ofcom's recent proposals for tougher rules governing alcohol advertising on TV, the sector will have to tread carefully if it is to persuade those who already drink liqueurs to do so more often, and those who don't drink them at all to pick up the habit

LEADING LIQUEUR BRAND SHARES ON-TRADE AND OFF-TRADE, 2003

pounds m Litres (000)

On Off Total % On Off Total %

Baileys Irish Crm 64 117 181 28.9 1250 11,250 12,500 40.6

Tia Maria 60 23 83 13.2 1100 2200 3300 10.7

Cointreau 18 12 30 4.8 330 770 1100 3.6

Drambuie 13 10 23 3.7 250 1050 1300 4.2

Disaronno 10 11 21 3.3 200 800 1000 3.2

Amarula 5 14 19 3.0 100 1200 1300 4.2

Tia Lusso 5 11 16 2.6 110 990 1100 3.6

Bols 11 4 15 2.4 200 550 750 2.4

Grand Marnier 10 3 13 2.1 180 370 550 1.8

Warninks 3 9 12 1.9 100 800 900 2.9

Others 207 7 214 34.1 4080 2920 7000 22.7

Total 406 221 627 100 7900 22,900 30,800 100

Source: Mintel

ADVERTISING SPEND ON MAJOR LIQUEUR BRANDS

2003 2001 1999

pounds % pounds % pounds %

000 000 000

Baileys Irish Crm 4173 33.7 4306 48.8 2719 28.9

Tia Lusso 2036 16.4 n/a n/a n/a n/a

Baileys Minis 1701 13.7 n/a n/a n/a n/a

Amarula 894 7.2 n/a n/a 470 5.0

Drambuie 776 6.3 41 * 602 6.4

Baileys Glide 632 5.1 n/a n/a n/a n/a

Disaronno 572 4.6 719 8.1 4 *

Dooley's 447 3.6 163 1.8 n/a n/a

Cointreau 389 3.1 552 6.3 885 9.4

Tia Maria 374 3.0 1991 22.6 2941 31.2

Benedictine n/a n/a 12 * 6 *

Glayva n/a n/a n/a n/a 383 4.1

Grand Marnier n/a n/a 106 1.2 347 3.7

Sebor Absinthe n/a n/a 124 1.4 n/a n/a

Sheridan's n/a n/a 4 * 955 10.1

Others 399 3.2 811 9.2 99 1.1

Total 12,393 100 8829 100 9411 100

Source: Nielsen Media Research/Mintel

*Less than 1%

ANALYST COMMENT

Jenny Catlin Consumer analyst, Mintel

The market is still dominated by drinkers who believe that liqueurs are only for Christmas or special occasions. The industry is doing its best to turn itself into a year-round business and make liqueurs part of more people's drinking repertoire.

But brand owners must be careful in how they encourage people to drink more for fear of official restriction, either at government level or from the local council via the Licensing Act, effective in 2005.

The future will see diversification of brands and ranges. There is also potential for expanding the liqueur ranges already available, a trend that has been under way since 2002.

Trade experts estimate that one-quarter of all liqueur volume is consumed in cocktails, so these too are key to driving future sales. But the industry must ensure that the concept of educating the public via 'mixologists' receives full support and backing. For example, bar staff must have the knowledge and expertise to mix and develop cocktail ranges. If this is successful, there is likely to be a trickle-down effect as this knowledge reaches the consumers, thus developing sales within the off-trade.

Younger generations are the most likely to experiment, especially when it comes to mixing liqueurs with other drinks. One in 10 liqueur drinkers mixes them in cocktails, but this rises to about 20% among 18- to 24-year-olds.

The industry might exploit this with bottled FAB (flavoured alcoholic beverage) ranges. A sweet, long drink may prove more appealing than a shooter. While the shooter is a novelty drink within consumers' drinking repertoire, a liqueur FAB in a glass bottle, for example, could become established as a drink for all occasions.

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