Off-trade

Independents fail to capitalise on off-trade growth in 2013

In his Off-Licence Review, Nielsen’s Shane Daly brought NOffLA members attending a recent seminar up-to-date with the state-of-play in the Irish off-trade where a 4.1% decrease in volume was nevertheless accompanied by a 4.0% growth in value to €1.7 billion.

Overall alcohol sales grew by 2.5% in value in 2013 while volumes decreased by 2.6% according to Nielsen figures MAT to December which put the off-trade as being responsible now for 50.4% of total alcohol sales by volume and 37.4% by value.
In his Off-Licence Review Nielsen’s Head of Retailer Services Shane Daly presented an in-depth review of the off-trade to members attending a recent NOffLA seminar on The 21st Century Customer.

The place of the independent off-licence
The independent off-trade holds 24% of the off-trade market by value. That’s €408 million. Unfortunately the independent off-licence sector singularly failed to capitalise on the growth of the off-trade as a whole last year being the only sector to witness a decrease in value share.

“The 3% store closures during this period is a big factor in the decline,” commented Shane. However Shane pointed out that the independent off-licence decline of 0.4% had begun to show stability returning to the sector at the end of 2013. In the last 12-week period this figure narrowed to – 0.1%.

In the 12 months to last December the multiples off-licence section grew value by 1.3% to enjoy a 39% share of the overall off-trade and the symbol groups grew by 7.5% to hold a 17% share. Discounters had a particularly good year growing by 19.8% to hold 13% while forecourts grew 9.3% and now hold 7% of the off-trade market.

Seasonal sales
Independents seemed to have performed very well during the warm weather from May to September and again during the November-December Christmas period, highlighting the need to be ready to maximise these opportunities.
Beers and ciders enjoyed a lift in the hot Summer weather more than spirits with some consumers switching out of spirits and into beers.

These remain difficult times for Irish consumers. In a global online survey in the last Quarter of 2013 Nielsen found 30% of consumers cutting down on spending by purchasing cheaper brands of alcohol (down 2%) while 52% had cut down out-of-home entertainment (down 9%).

Sales in the independent sector

Beer sales in the independent/specialist off-licence sector grew 3.3% in value in the 12 months to December 2013 but sprits sales values through this channel declined 3.5% and wine by 3.6%.

This sector’s 0.4% value decline compares to the total full off-licence sectoral growth of 4% in 2013 which saw increases of 5.5% for beer, 4.4% for wine and 1.2% for spirits.

Still, off-trade beer volumes declined by 3.2% while wine declined by 6.3% and spirits by 7.2%.
As a result, the year saw beer increase its value share of the off-trade market from 38.4% to 38.9% while wine grew slightly from 38.0% to 38.1%. However spirits decreased share from 23.6%s to 22.9%.

Unfortunately the independent off-licence sector singularly failed to capitalise on the growth of the off-trade as a whole last year being the only sector to witness a decrease in value share. Unfortunately the independent off-licence sector singularly failed to capitalise on the growth of the off-trade as a whole last year being the only sector to witness a decrease in value share.

Focus on emerging consumer tastes
Shane Daly also highlighted new consumer tastes emerging over the course of 2013. Traditional categories such as Champagne, perrys and ports had been falling in value (by 22.1%, 6.0% and 3.4% respectively) as had Stout (-2.8%), whiskey and Vermouth (-2.3% each) “while innovation and ‘new life’ has been given to some of the smaller sectors such as Ale, Cider and Spirit Mixers”.
The ‘Ale’ category had shown the most promising value growth at 24.5%, followed by spirit mixers (13.4%) and sparkling wines (13.2%).

Focus on beer
Where the average price per litre in the off-trade beer market had fallen 1.1% between 2011 and 2012, this market had increased 8.5% in value from 2012 to 2013 to €5.83 a litre.

“The increased value and reduced volumes point towards increased price in the market,” explained Shane, “The average price going up 8.5% was due to increased excise duty, switching to smaller packs, increases on single purchases and reduced offers such as eight cans for €10 or €11 going up to eight for €13”.

The Lager and Non Alcoholic Beers/Low Alcoholic Beers category holds the lion’s share of the off-licence beer market by volume at 73% but volumes in the full year 2013 were down 4.9% for this category.

The Cider/Perry sector grew 4.9% to hold 17% of total off-licence ‘beer’ volume while stout volume declined by 7.9% to just 7% of the total off-licence beer market.

Ale volume increased 13.5% but still only occupies 2% of the total off-trade beer market. RTDs, which grew by 8.5%, hold just 1%.

“Stout and lager declined as shoppers switched to smaller packs amid price rises or reduced promotional offers to help manage budgets,” explained Shane.

Focus on wine
Overall, table wines grew 1.9% in value in 2013 with white growing at 2.2%. White wine (50% of volume) accounted for 49.2% by value in off-trade wine sales followed by red (44% volume) with a value share of 46.4%. Red showed the strongest value growth of 2.7%.

Rose wines decreased 7.8% in value and hold a 3.3% value share.

According to Shane, “The duty price increase has moved people into higher price bands like €10-€12”. Others have traded down.
This seems clear in that the €10-12 bracket witnessed an increase in share from 8.0% in 2012 to 15.8% in 2013. However the dominant wine bracket in 2013 was the €7-8 one which holds 21.7% (albeit down from 2012’s 22.4% share) while the previously dominant €6-7 bracket has been reduced from a 24.6% share to just 5.3%.

The €8-9 price bracket’s share has remained relatively stable at 19.5% (from 19.6% in 2012).
Wines ‘above €12’ doubled growth from 4.9% of the market to 9.5%.

Overall, table wines grew 1.9% in value in 2013.Overall, table wines grew 1.9% in value in 2013.

Shane explained that customers tend to trade up on pay-day or for special occasions like Valentine’s Day or Mother’s Day and at the weekend.

“In multiples, promotion levels vary,” he added, “They accounted for 15% of wine volumes sold in February and up to 47% in December, so stay vigilant of their activity.”

Focus on spirits
Total off-trade spirits volumes declined by 7.4% in 2013 according to Nielsen with the only growth coming from ‘dark rum’ at 3.6%.

White rum’s sales volumes fell 12.7% while brandy volumes decreased 12.3% and whiskey by 11.9%.

“Dark rum continues to be a strong performer, driven by Captain Morgan,” commented Shane.

Vodka continues to dominate market share by volume and value (41.8% and 38.1% respectively). This is followed by whiskey with market volume and value shares of 27.9% and 32.2% respectively.

 

‘Dark rums’ and cream liqueurs hold the next biggest volume segment at 5.5% each with dark rum holding a value share of 5.2% while cream liqueurs hold just 3.3%.

White rum enjoys a 4.8% share of the spirits market by volume and a 4.5% share by value.

The search for value – prices and promotions
Nielsen’s Shopper Trends Survey 2013 revealed a feeling shared by 78% of Irish consumers who consider Irish food prices are rising that, “Rising prices affects my purchasing of Beers, Wines & Spirits”.

Indeed alcohol and confectionary are the most affected by this with 74% agreeing that this affected their beer, wine & spirits purchasing.

77% felt that it affected their chocolate and biscuit purchasing while 73% believed that it affected their purchase of salty snacks.
The study also found consumers increasingly claiming to be highly sensitive to price in grocery purchasing, up from 59% in 2011 to 68% last year.

Focus on consumer behaviour
Consumers are open to trying new things and looking for variety. This is evident in the growth of the craft beer/ale segment and the trend towards flavoured offerings across all alcohol types.

But value and cost-saving behaviours remain prevalent as consumers continue to look to economise.

Consumers are looking to trade down to Private Label in the Economy Lager sector and are also looking at reduced pack size to reduce the overall cost, or only buying on promotion, said Shane.

Nevertheless, premium offerings are finding growth with consumers willing to trade up to treat themselves, but they’re buying smaller packs at lower rates.

“There is still growth to be found in capitalising on these trends,” commented Shane.

Ale & Craft Beers & Flavoured
The top three growth sectors identified overall by Nielsen here are craft beers, ‘dark rum’ and other types of spirits such as Jagermeister or other such spirit types.

Craft beer is driving the Ale category. Consumers may be buying smaller packs in this market but they’re buying more premium as a result. This has led to the average number of SKUs increasing from 155 to 296 in just one year with more products being given more space.

“But not all large retailers are targeting craft/speciality beers so this gives independent off-licences the opportunity to maintain the status of experts in this area,” advised Shane.

Flavour innovation accounts for around 80% of growth in both spirits and beers in the UK while there’s also strong growth of ‘flavoured’ in the US.

“Flavoured products are attracting much of the current innovation,”he concluded, “Traditional categories are ‘stagnant’ and will benefit from the new focus.”

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