A tax hike and an outdated image are to blame for waning sales of
flavoured alcoholic beverages (FABs) in the UK, according to
Euromonitor International’s new report, "Alcoholic Drinks in the UK".
Between 2003 and 2004, sales of spirits-based FABs declined by more
than 11%, causing total sales of FABs to decline by more than 10% in
volume terms. Euromonitor’s research shows that the story was very
different for wine-based FABs, which recorded impressive volume growth
of 28% over the same period, yet as wine-based FABs only comprise 2% of
total FABs value sales, their strong performance is of little help to
the ailing sector as a whole.
Tax hike hurts sales
When FABs were first introduced in the mid 90s, their high alcohol
content, bright colours and sweet flavours appealed to a younger
generation of drinkers. From the onset, the Government and media blamed
FABs manufacturers for encouraging underage drinking, tarnishing their
image significantly. Over the next five years, FABs managed to
re-establish themselves in the market, until binge drinking emerged as
the latest social problem. Once again, FABs found themselves at the
centre of the scandal.
With the aim to curb excessive drinking, the Government implemented a
tax hike in 2002, linking duty to abv. This resulted in an increase of
approximately 12p to the average unit price of a standard spirits-based
FAB, which hurt sales significantly. To offset the tax impact, some FAB
manufactures reduced the abv of their products. Bacardi Breezer, for
example, reduced its abv from 5.4% to 5.1% in 2002 and a year later
Smirnoff Ice followed suit.
The typical FAB consumer belongs to the 18-24 demographic that is
notorious for binge drinking. As such, reducing their abv proved to be
another deterrent to FAB sales. In fact, many brands suffered a drop in
sales of over 50% in 2003. Euromonitor International’s research shows
that sales of spirits-based FABs steadily declined following the tax
hike, with value sales in the UK dropping from ?1,353 in 2002 to ?1,153
in 2004.
Image crisis calls for desperate measures
Government measures to control binge drinking have not been the only
damper on FAB sales. An outdated image is partially to blame for their
decline, as FABs are not perceived to be as cool as they once were.
Core consumers five years ago have outgrown FAB’s and are seeking more
sophisticated beverages. The new younger drinkers that have replaced
this core consumer group are more inclined to choose fashionable
shooters and cocktails over FABs and consequently, are proving to be
difficult to attract. Further, price promotions in bars and pubs, which
once lured new consumers, are being heavily discouraged.
FAB manufacturers, faced with dropping sales, have attempted to develop
new products and variants to recapture the waning interest of
consumers. Women between the ages of 18-24 have typically been the
target market for FABs, but surprisingly only a few new product
developments were designed to cater to this demographic. Breezer, for
example, launched a low-calorie Diet Lemon variant in 2003 and, in the
same year, Halewood created a new pink variant to its Red Square range
to appeal to women.
Instead of focussing on their core 18-24 female market, manufacturers
attempted to target both older drinkers and male drinkers. Diageo for
example, tried and failed to bring older drinkers on board with
Gordon’s Edge – a gin-based FAB introduced in 2002 - which disappeared
without a trace by 2004. 2003 saw manufacturers attempting to tap into
the male market with the launch of Smirnoff Ice Black and WKD’s daft
lad advertising. Ironically, these two products were the year’s most
successful in terms of sales and growth – an interesting development
given FABs long-standing reputation for being a women’s drink. However,
such efforts were not sufficient to revive the FABs market and,
according to Euromonitor International, it is unlikely that FABs will
ever repeat the kind of growth seen in the late 1990s.
What is the future of FABs?
FABs are expected to decline in the next five years, as consumers
continue to choose more fashionable beverages, such as beers and
cocktails. Accordingly, Euromonitor’s research shows that between
2004-2009, spirit-based and wine-based FABs will decline by an average
of 7.9% and 4.8% in volume terms, respectively. The question now is can
the image of FABs be revived and what, if anything, can provide the
overhaul necessary?
"Alcoholic drinks in the UK" is a new report from Euromonitor
International. This report provides the latest retail sales data
(1999-2004), allowing you to identify the sectors driving growth. It
identifies the leading companies, the leading brands and offers
strategic analysis of key factors influencing the market - be they
legislative, distribution or pricing issues. Forecasts to 2009
illustrate how the market is set to change. Product coverage includes
beer, wine, spirits, FABs and cider/perry.
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