Will PPSs ever be taken seriously?

PPSs are growing up but will they ever be taken seriously? Ben McFarland sees what lies in store.

Time flies when you're having fun. It will come as a surprise to many who dismissed premium packaged spirits (PPS) as a passing fad to hear that it's been more than a decade since they first arrived on the scene.

It was in 1990 that Bacardi-Martini introduced the Breezer brand into the US market, but back then not even the most optimistic boys and girls could have predicted its unprecedented success.

Like all the best ideas, it was extraordinarily simple.

Take an easy-tasting white spirit and some fruity liquid, mix them together in a bottle, slap a funky looking label on the front and stick them in the fridge where bottled lagers normally reside.

Not exactly rocket science, but 10 years ago, it looked like showboating in a drinks industry that was a lot more regimented than today's marketing-fuelled bun fight.

Bacardi-Martini, for example, had spent the best part of 130 years being successful at spirits and vermouth and, like many of its rivals, split the industry into spirits, wine and beer - all of which had very different rules and players.

"We realised this was a manufacturer's view and not a consumer view," said Maurice Doyle, marketing director at Bacardi-Martini. "We recognised that we were actually in the premium alcoholic drinks business and the manufacturing segmentation of the marketplace among our competitors allowed us to sneak up unannounced".

The brand first made the trip across from the States in 1992 when it was trialled and test marketed in various guises. A 350ml bottle was shelved for price reasons while a 200ml bottle just didn't fit in with the all-important "badge drinking," ethos. So in 1996 Bacardi-Martini came up with a new 275ml beer-shaped bottle and an aggressive strategy aimed unashamedly at the on-trade.

Being in the right place at the right time also helped. The move fortuitously coincided with the well-documented demise of the alcopop phenomenon spearheaded by the likes of Hooper's Hooch and Two Dogs. While other brands bore the brunt of a huge media backlash, Breezer's premium parent brand credentials helped distance it from the controversy and it emerged as the frontrunner in a new, more sophisticated, PPS sector.

Six years on and the flood of new products that characterised the late 1990s seems, at last, to be slowing down. More than three-quarters of new products hit the wall within the first three months and it's proving increasingly difficult to compete with the distribution and investment of Bacardi Breezer and Smirnoff Ice, which together command 60 per cent of PPS sales.

Signs of a brands shake-out have appeared in the last 12 months, with a number of peripheral products being withdrawn. Bacardi-Martini has delisted Bacardi Rigo from the on-trade and dropped its Still and Black Metz offshoots, while PPS specialist Beverage Brands has called time on the tequila-based Ca'Quila, and Vodka Reaction, declaring that premix alcoholic energy drinks have run out of steam.

According to Nick Hunt, senior on-trade marketing manager for Bacardi Breezer, the number of brands will be further reduced as the market polarises. "Over time there will be a major shake-out and three or four brands will dominate," he said. "Flavoured alcoholic beverages are still growing as a significant category in their own right, but in comparison with draught beer it's still tiny and there is still a great deal of growth to be had."

With potential remaining untapped, the major drinks companies are continuing to innovate and invest heavily.

Bacardi-Martini has invested £20m in a Breezer marketing campaign fronted by Tomcat, a frisky feline who dances, watches football and is a bit smooth with the ladies. It has also given its Breezer range a new funky look and expanded it with the launch of two new flavours, cranberry and ruby grapefruit.

Having branched out into the PPS sector with its Archers schnapps and Smirnoff vodka brands, rival GuinnessUDV (GUDV) is reported to be test marketing Gordon's Edge, a gin-based lemon and lime flavoured concept, in the hope that it succeeds where the parent brand has so far struggled and recruits a new generation of gin drinkers.

GUDV is also looking to sidestep the battle for fridge space by trialling a draught version of its Smirnoff Ice brand in Ireland. However, the company has played down speculation that it is earmarked for release in the UK.

Elsewhere, Coors Brewers has thrown its Stetson firmly into the ring with a £9m investment in its still Reef brand while the dual-flavoured WKD from Beverage Brands continues to thrive on the back of a popular "laddy" advertising campaign, proving at the same time that a credible parent brand is not necessarily a prerequisite for success.

Other new products likely to be there or thereabouts include FCUK Spirit - a joint venture between wholesaler and cider maker Matthew Clark and fashion retailer French Connection.

Even premium packaged lager brands are getting in on the act. Having had its Holsten Pils brand nudged out of many fridges during the PPS revolution, Holsten has resorted to a "If you can't beat them join them," strategy and is set to launch Holsten Fusion - a range of flavoured lagers designed to bridge the gap between the two sectors.

Despite the fistfuls of marketing spend and influx of new products, few have managed to successfully penetrate the strict fridge door policies of some of the more upmarket style bars and judging by the reaction of some bar owners, their names will never be down and they're never coming in.

"I'd rather chew my own foot off than stock any of them," said Match bar owner Jonathan Downey. "They are the drinks equivalent of a frozen microwave meal from Iceland. Why drink a green coloured Bacardi Breezer when you can have a fresh Lime Daiquiri made right in front of you by trained barstaff?"

The clear differentiation in profit margins and the perceived lack of PPS credibility means that consumer demand is going to have to reach insatiable levels before the situation changes.

But Paul Newman, director of sales and marketing at Living Ventures, concedes that there is a role, albeit minor, for PPS brands to play.

The Living Room concepts in Islington, Manchester and Liverpool all sell Smirnoff Ice at £3 a throw. "We stock it solely for the people, mainly female, who like to have something in their hand," said Paul. "Smirnoff Ice is a little more credible and has that little bit more class."

Hardened attitudes among the style bar fraternity might soften, however, if some of the new brands currently blazing a trail in the United States make the trip across the pond.

Unwilling to let the likes of Smirnoff Ice blow the froth off their beer business, several US brewers have joined forces with spirit companies and created what is being dubbed a "malternative" market.

"There's a lot happening over in the States," said Karen Salters, marketing manager of Beverage Brands. "It all started there and they seemed to have leapfrogged into the premium category and missed the evolution that has shaped the UK market."

Anheuser-Busch has joined forces with Bacardi USA on a drink called Bacardi Silver, while Miller is linking up with the makers of the premium Skyy vodka for Skyy Blue as well as teaming up with Allied Domecq on other spirits-branded beverages thought to be based on Stolichnaya vodka and Sauza tequila.

Similar products such as Coors Brewing's fruit-infused Vibe, a Jack Daniel's brand co-marketed by Miller and Brown Forman, and Captain Morgan Gold from Diageo have also been unveiled