RTD feature (February 07)

DRINKS FEATURES

READY-TO-DRINK BRANDS BITE BACK?

LIQUID ASSETS, FEATURES, FEBRUARY 2007, COMMENTS

Battered, beleagured and bowing out to the superior marketing power of resurgent ciders? Not if these brands have anything to do with it. NIGHT meets the people in charge of reinvigorating the RTD (ready-to-drink) category and asks where Britain’s most resilient drinks category will go from here.

ADAM IRVINE
Innovation Commercialisation Manager, Diageo Great Britain (GB)

2007 holds both challenges and opportunities for RTDs. The category is maturing and consolidation continues, with the top three brands now accounting for 80 per cent of volume sales.

“A key challenge for the RTD category is to maintain interest with consumers, as the decline in performance has raised questions from the industry about its longevity. With the total category worth more than £580million in annual On Trade retail sales, it still has a solid consumer base. The refreshing taste and the convenient and portable packaging of the products, including the availability of PET bottles, ensure they remain very relevant to busy nightclubs and to consumers on late-night occasions.

“Diageo is committed to the category and will continue to invest behind its leading RTD brand, Smirnoff Ice, as well as launching new innovations such as Slate 20, to assist late-night outlets to drive profitable sales of RTDs. Smirnoff Ice, the number one RTD in the GB On Trade, is currently worth £170million in retail sales value.

“There are still opportunities to further attract new consumers into RTDs and Diageo is committed to driving innovation into the category. Because of changing consumer trends, there is space for new innovation to drive sales and boost the category. Diageo will continue to monitor performance and talk to consumers and commercial partners to identify new opportunities.”

STEVE PEREZ
CEO of Global Brands, producers of VK Vodka Kick

“Contrary to media coverage, RTD drinkers are not deserting the category in droves. If we look at the stats there are a number of brands that are having a hard time, but other brands such as VK Vodka Kick and WKD are doing pretty well. Like many new product categories, RTDs have peaked. But our sales figures arent showing any discernable decline - if there was a decline, it has now stabilised. Christmas sales figures are on a par with last year and one of our major operators was actually up on VK sales within their estate by 7%.

“Operators can maximise value out of the RTD category by keeping up with drink trends as they do with fashion and music. The RTD market is a fast moving market, like the wider nightclub industry. Operators need to need to stop hanging onto old brands.”

KAREN SALTERS
Marketing Director of Beverage Brands, producers of WKD

“The ready-to-drink market is not in the same growth as it was because it has reached a level of maturity - but WKD continues to perform well. We’re often asked why there has been a decrease in overall category sales. RTDs burst onto the scene over a decade ago, and we’ve since seen consolidation and a slowing of sales. The initial level of growth simply wasn’t sustainable. The fact is, the RTD category - at over £850 million - is still bigger than gin and white rum combined plus other grocery categories such as crisps, bread and yogurt.

This year, it is more important than ever that bars rationalise their range by getting rid of poor performing brands to free up space for brands that are spearheading sales development such as WKD. The key to maximising profits is to stock the market leading brands and to allocate space according to sales.

“It is vital to ensure the chiller can be seen by your customers while they are making their purchase decisions. Make sure your best-selling products with strong margins are positioned in the sales ‘hotspot’: customers scan the chiller from left to right, pausing on the top right shelf, so this is the hotspot and you must use it to display major brands. You should stock categories vertically in the chilller and brands horizontally for the best results. Allocate the best-selling lines more facings in the chiller and place all flavours of the same brand together to maximise impact. Keep chillers fully stocked with brand labels facing the customer. It is very important to avoid duplication so that there are not two of the same flavours in the fridge because this simply wastes valuable chiller space.”

RICHARD CLARK
Marketing controller for Halewood International, producers of Red Square

“The RTD drinker that started the phenomenon in the late 1990s has moved on and is now able to enjoy the resurgence in cider and cocktail drinks. This means the repertoire of the consumer has increased, so it’s not just about the numbers drinking RTDs, it’s more about repeat purchase.
“I think eventually we’ll end up with four or five brands in the on and off trade which will all have different brand proposition, target audience and taste delivery. As for producers and operators, we have to look at what consumers aged between 18 and 25 want and we have to consider occasionality and taste delivery. It’s also about research and new product development.

“As for Red Square, we need to make sure we own the original vodka energy drink and that we continue to drive that brand proposition and continue to invest consistently in the brand and the message.”

From: February 2007 Issue

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