Talking Trade

Tim Simmons – “Irish distributors are very savvy”

Market analyst Tim Simmons has been with the International Wine & Spirit Research (IWSR) organisation for almost five years to the day -- and he’s coming up to his third year of looking into the Irish drinks market. Pat Nolan spoke to him about what he sees here.

Tim Simmons, Business Development Manger with London-based International Wine & Spirits Research, watches us from a distance. He’s the man one goes to in IWSR for market information about Ireland and the Irish drinks market.

He’s also the one who’ll contact local distributors here to compile a larger compendium of knowledge and finds most of them very helpful and insightful, “… although when times are tough, it can be difficult to get companies to open up when really that’s when companies need a bit of market information they can rely on,” he says.

So the view of such an impartial international observer is always worth listening to in relation to the Irish drinks trade and its current state of health – or otherwise.

“There’s no point in denying that it’s been incredibly tough for everyone” agrees Tim, “Most categories now are in decline or flat at best.”

The economic problems have been well-documented in Ireland – trading down, consumers cutting back, the drift from the on- to off-trade and unemployment – but these are all global phenomena that might just be more accentuated in Ireland, he says, “But considering all this, much like Irish consumers, I think the Irish distributors are very savvy and have learnt to cut their cloth accordingly”.

Consumers continue to drift to off-premise/at-home consumption, he says, so retailers have been discounting more than previously.

“Some distributors have managed to recover losses from the on-premise in the off- across some of their key brands through promotions. Heavy discounting across some categories helped boost the market and if the UK market is anything to go by, this will be repeated this Christmas.”

Indeed, the UK and Ireland are not so different in consumer purchasing patterns.

“If you were to take London out of the equation then the differences aren’t that great,” he agrees, “Everyone’s looking for value-for-money and reassessing their overheads and luxury purchases. UK consumers have been educated to buy only on promotion and this could be the way the Irish market is going.”

London distorts the UK market though, with such a concentration of high earners from mega-rich companies that it becomes an economy unto itself with various oligarchs and other billionaires and millionaires based here, “… unfortunately I’m not one of them,” says Tim, “But it’s easy to see why some of the top-end independent nightclubs in London have performed well of late. It’s a sign of the times when Barclay’s recently announced they were re-entering the 90 per cent loan-to-value mortgage market for first-time buyers”.

The IWSR’s domestic forecasts to 2016 are a lot flatter than they were a year ago. So much will depend on the performance of the economy and job creation. It could be that the market is bottoming out, but any recovery will be slow, he predicts.

“At present, trading conditions are incredibly tough and I’d be expecting much of the same for the foreseeable future if I was a local operator and I’d be focusing on surviving.

“It need not be all doom and gloom though: I think we might see brands becoming more creative with how they communicate with consumers whether it’s through social media or promotions. Consumer tastings can also create a buzz around a brand, if done properly.

“For the drinks producers based in Ireland, focusing on export markets is a crucial opportunity not to be missed. Irish whiskey is a hot category, particularly in the US. The trend is a result of the (perceived or real) relatedness of many Americans to Irish roots, history and culture. Connoisseurship is developing and in addition, the smooth, slightly sweeter taste attracts a broader consumer base. Jameson has been exceptionally successful thanks to strong brand-building and marketing sustained over a long period of time.”

He adds, “Globally, Irish whiskey was up 7.5 per cent in 2010 which shows there’s a demand there and new markets are opening up all the time. Irish whisky is tiny in Asia but it won’t always be that way. Even in Duty Free, the category grew by almost 7.5 per cent.

“Cooley’s have also been showing great potential and are definitely a company to keep an eye on in the future as their presence grows in places like the US, the UK and Benelux.

“Bord Bia are capable of opening doors so it’ll be up to producers to cement long-lasting relationships. As Irish whiskey soars in the US and elsewhere, all things Irish have the potential to also become ‘hot’.”

Back home, one would think that premium brands would be the hardest-hit but actually it’s not necessarily the case. Bargain-hunting consumers have bought many of these brands when they’ve been on promotion. Some have even traded-up to entertain at home and impress guests.

Tim has noticed one or two global developments of which the Irish drinks market should be aware.

“Other than Irish whiskey being hot, traditional spirits have been revitalised with innovative flavours driving growth including flavoured whiskies and rum,” he states, “Local products are fighting back with better packaging, price positioning and marketing, as well as the addition of premium lines.

“The RTD category is being revitalised with new flavours and packaging making it more appealing for consumers to experiment at home. Different flavoured cocktails in ready-to-serve packages are emerging.

“Prosecco and cava are spearheading growth in sparkling wine as consumers increase their understanding of the products. Low alcohol wines are currently growing at a rate of knots in the UK market.

Undoubtedly the on-premise globally has been hit.

“Ireland is probably one of the markets where the shift from one channel to the other has been the most pronounced. This is due, however, to the fact that the Irish market had been more on-premise-leaning to begin with, so the shift was always going to be more noticeable. Many top-end bars and clubs have been closing across Ireland with some of the local neighbourhood bars benefitting as a result, which can only be good for the local community if the pub becomes a local hub for people again.”
And he speaks for most in the industry when he says he’d like to see taxation revised – downwards.

“Ireland still has one of the highest tax rates on alcohol in Europe and I feel this should be redressed to support job creation and stimulate the economy. The price difference between the retailers and the on-premise does also need redressing but whether that’s a question of taxation is another issue.”

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