Battle of the bottle

Related tags Smirnoff ice Bacardi breezer Alcopop

In the face of steep decline, suppliers of ready-to-drinks (RTDs) are desperate to come up with the next innovation to capture consumer interest

In the face of steep decline, suppliers of ready-to-drinks (RTDs) are desperate to come up with the next innovation to capture consumer interest. Dizziana Rossi reports on the beleaguered market

Few drinks sectors have risen and fallen as dramatically as ready-to-drinks (RTDs). For a decade they were seen as the drink of choice for young people, but in recent years RTDs have fallen out of fashion.

In the last 12 months, sales of RTDs have continued to drop, down in value 11% on 2003 to £843.5m, according to AC Nielsen.

The top five brands ­ Smirnoff Ice, WKD, Bacardi Breezer, Reef and VK ­ account for approximately 90% of the market.

But only two of these ­ WKD and VK ­ have achieved growth in the last year.

Outside of the top five, Vodka Mudshake is this year's star player, breaking into the top 10 from its 22nd-place ranking in 2003. Although it has come from a low base, the milk-based innovation has managed to create a new sub-category for RTDs.

Regan Truong, Mudshake's brand manager at Independent Distillers UK, says: "Milk-based RTDs are going to be a growing trend, with more consumers looking for indulgence products. Our route to market in January 2003 was nowhere near what it is now ­ Mudshake has really taken off in the last six or seven months."

Picking up on Mudshake's success, Anglo Drinks is launching Brown Cow, a chocolate-milk-based drink made using real cocoa powder. The company describes it as "a chocolate milkshake with vodka as opposed to a flavoured milk-chocolate drink with vodka" and hopes to trial it with the SFI Group, whose branded bars include Slug & Lettuce, Havana, Litten Tree and Bar Med.

In contrast, the manufacturers of the top five brands, which were previously well-known for feverishly testing new lines, now view the sector as a "maturing market" where keeping the core brand strong is more important than introducing "me-too" products.

Despite a slowdown in sales, Smirnoff Ice remains leader of the top five, mainly as a result of suffering less than the market as a whole.

Jane Sutcliffe, marketing manager for RTDs at Diageo, says there has been a shake-out in the category and buyers are now looking towards big brands with big investments behind them.

Diageo continues to support Smirnoff Ice, having launched a £7m campaign in March this year to revamp Black Ice. It is also running a £1m poster campaign intended to reach 53% of consumers at least 23 times before Christmas.

But some buyers doubt whether Smirnoff Ice can regain growth without a higher level of innovation. One buyer at a leading pub chain explains: "Smirnoff Ice has reached its peak and it's hard to innovate with such a familiar product. Bringing out a flavour variant like Smirnoff Black Ice hasn't worked ­ it's far less successful than the original."

Archers Aqua has also experienced a decline in sales. But Sutcliffe is confident that Diageo can turn Aqua's fortunes around. "We have had success behind the Exotic Passion and Fruition flavour and will continue to grow Archers Aqua through the limited-edition flavours."

But buyers are less convinced. Julia Rowlinson, purchasing manager at Mitchells & Butlers, says: "Aqua is not getting the sales it used to. At one point it had a 4% share of the RTD category and now it had less than 1%.

"A lot of consumers ask for products by colour, not by flavour and VK has recognised this with the strong colours they produce," she adds.

She says M&B plans to cut the amount of space it gives to Aqua, adding that former market leader Bacardi Breezer is also being cut back.

Bacardi admits that Breezer is less popular in pubs, a fact reflected by its position in the top 10 where it is now ranked third after WKD.

Nick Hunt, senior trade marketing manager at Bacardi, attributes the brand's poor sales in pubs to the fact that it is no longer fashionable to the market's core audience.

"Bacardi Breezer has lost its appeal to the on-trade and is faring better in the take-home sector, where the target market is slightly older than 18 to 24-year-olds," he says.

Buyers agree that Breezer has lost some of its appeal.

Rowlinson says: "Bacardi Breezer has lost its credibility and is selling more in community areas than in the high street. I'm not sure it can make a comeback now."

Although Breezer was one of the few brands to have a TV presence this year, its decision to re-run the "Boss" commercial, first used in 2003, rather than shooting a new creative, is a symptom of the brand's performance and the less-profitable state of the market.

Coors believes the market is set to get worse and, despite the fact that Reef has clung on to its position as the fourth-best-selling brand, is cutting funding behind the range.

David Preston, Coors' director of marketing, says: "We expect much bigger growth from Carling, Grolsch and Coors next year, rather than from Reef. This is reflected in the amount of money we are pouring into each category ­ the marketing spend for Reef has fallen from £8m a couple of years ago to under £3m."

In contrast, Coors launched a £6m TV campaign for Carling earlier this month and plans to invest a further £40m next year.

But buyers warn that suppliers who fail to invest in brands are sealing their fate, predicting that they will ultimately fail.

Ray Weeks, marketing operations manager of TGI Fridays, says: "Only the strong brands will survive the decline. The ones with no support or investment behind them will go."

Singling out WKD, Weeks adds: "WKD has done really well this year because it (Beverage Brands) has put a lot of money and energy behind the brand. It has stayed at the front of the consumer's mind."

Karen Salters, marketing manager at Beverage Brands, says: "Over the last three years we have increased the brand awareness among our target male audience through placing the right adverts in the right places. For example, during the football."

With £25m earmarked for marketing next year ­ including plans for four new TV ads ­ WKD is one of the few brands still investing heavily in advertising.

Halewood is using TV to alleviate consumers' confusion about Red Square.

Admitting that the brand's extensive range of coloured variants had undermined any understanding about the drink's ingredients, Richard Clark, brands marketing controller, hopes a new £5m TV push will help simplify Red Square'soffering.

Clark adds: "Consumers are becoming more astute. They want to know what the drink is and why it's different. We've responded by highlighting Red Square's key ingredients ­ vodka, taurine and caffeine."

But television isn't the only way to stem slowing sales. VK Vodka Kick has used a mix of marketing tools to maintain its fifth place in the top sellers' list.

Steve Perez, managing director at Global Brands, says: "We need to keep our advertising spend up, but we won't be getting involved in a heavyweight TV campaign.

"We will continue to invest through our associations with football and motor sports and through new product launches, like VK Cherry this year."

Perez plans a new flavour variant for next year and is increasing advertising spend by 10% from last year's total of £10m. But brands with enough innovation don't need advertising spends at all, as Vodka Mudshake has proved.

Independent Distillers' Regan Truong says: "We have only advertised in trade press to penetrate the marketplace. Our strategy was simply to get it in as many outlets as possible, to get the drink into as many people's hands as possible."

Related topics Wine Ready to Drink

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