Supermarket deals damaging alcohol brand building

Cheap supermarket deals on alcohol are short-termist and damaging to alcohol brand building, while helping to reduce the value of Christmas to the alcohol industry.

That's the view of research company Mintel as a new study showed that spending on alcohol in the fourth quarter declined from £11.5bn in 2009 to £10.4bn in 2009, costing the industry over a billion pounds in lost revenue. It forecasts a bigger drop this year.

Over three-quarters of consumers look to take advantage of the Christmas deals in the off-trade. "While food prices rise each December, capitalising on people's greater desire for home-entertaining, alcohol prices go down — even though a quarter of people are looking to buy better quality alcohol than usual to celebrate," said Mintel senior drinks analyst Jonny Forsyth.

"Not only is this damaging and short-termist when it comes to alcohol brand-building, but it is also leading to diminishing returns for supermarkets and alcohol producers alike as the population buys less alcohol and at cheaper prices."

Tough times​

Mintel's research also showed that just three in ten (30%) Brits are in a "good" position to spend on discretionary items over Christmas 2010, while a further three in ten (31%) can only afford to spend "very cautiously".

Forsyth added: "Over the past decade, Christmas has become steadily less profitable for the alcohol industry. However, since the economic downturn, sales have plummeted further and Mintel forecasts that Christmas 2010 is likely to see this downward trend continue.

"The VAT increase and above inflation excise duty increase planned for 2011 will also raise the cost of most alcohol drinks by as much as 8%, which will be a hard pill for consumers to swallow as they continue to feel the pinch."

Changing attitudes​

While alcohol sales traditionally see a distinct uplift in the fourth quarter of the year, Mintel said attitudes are definitely changing. Over a third of the population (35%) now disagree with the notion that "Christmas would not be the same without drinking."

"While over-indulging on alcohol used to be synonymous with Christmas tradition, alcohol drinkers can no longer easily rationalise such excesses, as they become increasingly aware of the adverse effects of alcohol," said Forsyth.

"Not only that, money is tight. Research shows that apart from the optimistic young adults, the bulk of consumers are decidedly pessimistic about their financial situation improving over the next six months, suggesting that the alcohol market is in for a difficult Christmas."

When it comes to Christmas spending on alcohol, wine is top of the list (65%), followed by lager (51%), Champagne and spearkling wine (33%) and spirits (24%).