The UK Alcoholic Drinks Market - Report Example

REPORT On BAZARRO AND THE UK ALCOHOLIC DRINKS MARKET Introduction The alcoholic beverages or the ready-to-market (RTD) market is highly competitive and mature market. According to a report by Mintel (2000), consumer expenditure on alcoholic drinks had risen from £22.78 billion in 1991 to £31.84 billion in 2000 (cited by Jones, Clarke-Hill, Hillier, & Shears, 2001). The report also suggests that drinking trends in UK shows that frequency of alcohol consumption has steadily increased over the years. This increase has been associated with increase in consumption within the home. In 2004, the market for alcoholic and non-alcoholic drinks bought by UK consumers was worth an estimated £51.85bn (Just-Drinks, 2006). Shift from pure alcohol to RTD Consumption of alcohol in public houses was the main social activity for men (Pratten, 2006). Country Inns were the only place where people could meet socially. Pubs were the local centers for sports and entertainment, and a meeting place for groups and societies and its chief source of revenue was from alcohol. Alcohol related problems cost the NHS £3bn a year. Occurrence of early deaths has also been attributed to people starting to drink at an early age. Domestic arguments, violence, absenteeism from work, criminal damage, theft, drinking and driving, unwanted pregnancies are some of the social problems that excessive usage of alcohol created. While the pubs and the government (by way of taxes) may reap economic benefits, noise and litter pollution aggravated. Drink discounting and promotions encouraged heavy drinking. Such alcohol related crime has receive much press coverage. The scenario now is different with heavy competition in the entertainment and leisure industry. Home entertainment has become popular, with take-away foods and ready-to-drink (RTD) products being easily available at affordable prices at the supermarkets. With crime rates growing up in pubs and cafes, and governments regulations becoming strict, home drinking has forged ahead. Social Awareness The Portman Group was set up in 1989 to promote sensible drinking. It was believed that people who drink alcohol enjoy it without causing harm to themselves or to others. Alcohol Concern was established to reduce the incidence and costs of alcohol related crime. A new charitable trust, Drinkaware Trust has been formed, which is funded by the drinks industry and backed by the Alcohol Concern (LDAN, 2006). The alcohol industry, charities, and the medical profession work together in this project to promote responsible drinking. Competition and targeting Very recently, UK drinks company Diageo has announced the launch of a new line of pre-mixed drinks (BRL, 2006). The RTD is steadily declining and this launch is with a view to increase sales although they are apprehensive about the consumers’ response. They are primarily targeting the women aged 25 to 50 years and their beverages are available in 70cl glass bottles. They have an advertising budget of GBP1 million to increase their share of the RTD market. They are focusing their efforts to target the off-trade rise in consumption. Since home consumption is on the rise, they want to target those who enjoy a drink at home. According to Datamonitor, the RTD market had peaked in 2002, after which there has been a decline. Diageo expects to have a monopoly in the RTD market. It all depends upon the right mix of ingredients within the beverages, which ensures both quality and taste, as the consumers are unable to alter the strength of the drink. Their drink known as Quinn’s has an ABV of 4% (Reed, 2006). They are promoting the product via cinema, television, and digital advertising and they are segmenting the market, which consumes immediately after work or over weekends. Market segmentation: Women – the biggest consumers European women drink much less than men in pubs, bars, cafes and restaurants (BRL). Due to changing demographics and increased attractiveness of on-trade drinks offerings to female drinkers of all ages, the gap between the drinking pattern of men and women is fast narrowing. According to Datamonitor forecast, women drinking at home make up the biggest growth in the UK’s alcoholic beverages market (Beveragedaily, 2006). In 2005, women accounted for just 32% total UK on-trade alcoholic drinks consumption but this is expected to go up to 38% by 2010. Datamonitor forecasts the off-trade consumption of alcoholic drinks in the UK will rise by about 15 per cent, to £12.3bn (€17.9bn) in 2010. While men remain the biggest consumers, women consuming RTD is having a significant impact on the volume of the off-trade. Women are the biggest consumers in off-trade and it is likely that with their consumption the overall market for home consumption would go up by 25%. Drinking at home has picked up because women can enjoy the social bonding in a safe and relaxed atmosphere. People are integrating entertainment options into their homes. Competitive pricing and extensive choice offered by the supermarkets is promoting home consumption. Home consumption helps people to keep away from binge-drinking culture and drink-related violence and disorder. Market position Just-Drinks (2006) reports that young people prefer fashionable new drinks over the traditional ones but sales of ready-to-drink (RTD) spirits, such as Smirnoff Ice and Bacardi Breezer have declined after a five-year boom period. Alco-pops or flavored alcoholic beverages have also sales declining by 22 percent according to a Mintel Report (Mercer, 2005). The producers have not been quick enough to bring in some change and the youth find it expensive for the price. Even though youth market has declined, Mintel report is optimistic that women would continue to choose alco-pops. At the same time, Datamonitor reveals that off-trade consumption of flavored alcoholic beverages is increasing at a rate more than 1.5% per year for the last two years while the pre-mixed spirit market shows a reduction in the last three years. (BRL). Marketing environment Various studies and researches demonstrate that while different brands have suffered sales decline, the overall alcoholic and non-alcoholic consumption in the UK market has been steadily increasing. The decline in individual brands could be due to several reasons – lack of innovation and change in product, government regulations, price rise caused due to taxes, change in social attitudes and culture, or faulty promotional strategies. Market for RTD in UK is expanding in which women are expected to be the highest consumers. Home entertainment is gaining importance and people prefer to relax at home after longer working hours. Ease of purchase through supermarkets, consciousness to spend more time with the family have also contributed to the popularity of alcoholic beverages. Under the circumstances, AM Beverages Ltd should take up the launch of Bazarro in UK. Marketing mix plan According to the Business Knowledge Center, “the Marketing Concept is the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs better than the competition” (cited by Novak, 2004). AMBL should hence, look for the right marketing mix to launch Bazarro. Marketing Objectives Companies keep experimenting with their marketing strategies from time to time. Short-term promotions are opted for, because of fierce and ever-changing business environment. There is very high potential for growth in the RTD sector. Diageo has just entered the market and AMBL can penetrate although Diageo has a huge advertising budget. But this huge advertising budget is no reason to step back as AMBL has the advantage of a product tried and tested in other parts of the world. AMBL is well established and is marketing a tested product. The product should carry sustainable competitive advantage. Stimulating and creative ideas should incorporated about target markets. We need to integrate their needs, culture, and behavior to design the promotional strategies. Since Diageo has already launched, they have already created a market for this product. Growth prospects are promising in the industry. Market Segmentation and targeting The UK alcohol RTD market is mature and highly concentrated. To penetrate such a market several difficulties could arise. Due to increasing home consumption and women being high consumers, grocery chains have taken a large share of the business. Our target should be to reach the sophisticated and quality conscious consumers so marketing efforts have to commensurate. Most of the leading brands in the market come from some multinational group. Positioning Extensions of an existing brand is far simpler and cost effective for launching new products than a new brand creation. Since AMBL has its own set up, it is not advisable to sell through the groceries stores. We have to identify, create and develop a niche market. There has to be a distinct retail market mix. In-store environment, advertising campaigns, network of outlets, expansion of geographical coverage are important considerations. Product AMBL can include some additional convenience with the product to attract consumers. Unless there is a distinct advantage, why should people come to us? Drinks from a variety of foreign origins are well established in the British market (Just-Drinks). There is no reason why Bazarro, a product already successful in other parts of the world should not take off. Price Pricing is the most important element in the retail marketing mix. AMBL may not be able to offer the lowest price but it should incorporate daily promotional offers and on every occasion. On every holiday there should be some attraction attached to the product. Discounting should be avoided as it reflects on the product and may take away the sophisticated consumers, which is the main target. Place Channels of distribution to reach the consumers should be carefully selected. Supermarkets seem to the ideal place as home consumption is on the increase. Both on-trade and off-trade outlets have to be considered. Of late, the off-trade outlets have captured the market and since home consumption has increased, and super markets have new offers, we could consider selling through these outlets. There is price war amongst the grocery stores, with discounts for bulk-purchasing (Just-Drinks). Promotion Implies communicating and selling the product to the end consumers. Advertising comprises only a small part of the marketing mix. Since Diageo has a high budget, we have to keep in mind not to succumb to their tricks. Responsible advertising would have to be done so as not to lure the youth. Since people are finding different channels of entertainment, away from pubs and cafes, AMBL could link Bazarro promotion with entertainment. Such drinks are generally taken by people over weekends and after work and is usually associated with a relaxed evening. Hence, home entertainment should be closely linked with such promotions. Internet could also be used as promotion with free home deliveries against large orders. Gift coupons could be attached with every purchase to be redeemed within a certain period. ABML can think of some off-beat strategy for promotions like the Australian brand Absolut which did not spend a single cent on traditional advertising to launch its RTD, Cut (Lee, 2005). They relied on point of sale, event marketing, online sales and word-of-mouth publicity. Since the various market research studies show that women are the most promising segment, our promotions should aim to lure men into the RTD sector, away from pure alcohol. Hence, our promotion should concentrate on linking Bazarro with home entertainment. Brand loyalty plays a significant role and as Bazarro is already successful in Central and South America, AM Beverages Ltd (AMBL) should take advantage of this. Conclusion Consciousness about drinking with home dining and changing attitudes towards healthy living is promising for the ready-to-drink sector for alcoholic beverages in UK. Drinking at home provides personal freedom. Off-trade purchases result in reduced prices, especially with price war in the sector. Longer working hours have also contributed to lesser visits to the pubs and cafes. Foreign brands are already well established in the British market. Bazarro is a well known product. AMBL is established and is a popular brand name. Conscious and responsible drinking is being promoted by different organizations. Women are the key growth in the off-trade sector. Thus, with the right promotional efforts and channels of distribution, Bazarro should be launched in the UK market, which is already a mature market. References: BRL (2006), Diageo: the right mix? Business Review Online, 20 Aug 2006 Beveragedaily (2006), Women drinking at home target of alcoholic beverage market, 20 Aug 2006 Jones, P. Clarke-Hill, C. Hillier, D. & Shears, P (2001), A case of Bargain Booze, British Food , Journal, Vol. 103 No. 7, 2001, pp. 453-459 Just-Drinks (2006), Drinks Market - UK, 20 Aug 2006 LDAN (2006), Drinkaware Trust Raises Dilemmas For Providers, 20 Aug 2006 Lee, J (2005), Word-of-mouth campaign a Cut above the rest, 20 Aug 2006 Mercer C (2005), Alco-pop drinks lose out to wine and cocktails, 20 Aug 2006 Novak, J. A. (2004), ALCOHOL PROMOTION AND THE MARKETING INDUSTRY, 20 Aug 2006 Pratten, J. D. (2006), The reputation of the UK licensee: an attempt to offer a balanced view, International Journal of Contemporary Hospitality Management, Vol. 18 No. 3, 2006 pp. 260-268 Reed (2006), Fermented fruit invigorates the ready to drink market, Food manufacture, http://www.foodmanufacture.co.uk/news/fullstory.php/aid/3154/Fermented_fruit_invigorates_the_ready_to _drink_market.html> 20 Aug 2006 Read More