The drinks doctor: Show some spirit

Every so often the drinks industry is faced with a tough problem. Who're you gonna call? Why not The Publican's Drinks Doctor? He will endeavour to get to the bottom of these tough issues and come up with some workable solutions

The ailment​

The spirits market in pubs is boring. Plain boring.

If you look at style bars, there are huge varieties of products on the bar coupled with great innovation by brand owners. If you have a product and it's good enough, then it will get a chance to compete.

But this is not so in pubs, for while style bars are the Brave New World, pubs are Bleak House.

If you went into 10 pubs anywhere in the country the chances are you would find the same products on the spirits rail. The big brands dominate, and there is no way in for the little guy.

A drinks buyer for one of the top UK managed pub companies once told me: "The category is just not as sexy as it should be. No-one is really innovating. We have got increasing sales in spirits, but it is not product led."

And what innovation there is in the pub market tends to take the form of a brand extension. Over the last three years spirits giant Diageo has launched Smirnoff Norsk, Pimms Winter, J&B -6? and Baileys Glide. They hardly set pulses racing.

One interesting recent purchase of Diageo's was Bulleit Bourbon - a possible rival for the American whiskey market in pubs (an area of spirits in which Diageo lags behind the rest) and currently monopolised by Jack Daniel's.

And has the challenge to JD come? Not yet. And it may never come, because no-one - it seems - is really willing to take a risk in the world of pub spirits.

The evidence​

The vast majority of pubs stock the same brands. A look back at the last three Publican Market Reports shows how serious this problem is. An annual feature of the report is the Top of the Stocks survey, where respondents tell us what brands they stock. In spirits the figures are staggering (see below).

To put these numbers in some kind of context, Guinness, which most people would consider to be the only brand with a virtual monopoly in pubs, had a 67 per cent share last year.

The Publican Market Report - Top of the Stocks​

2005​

• Baileys 98%
• Bacardi 96%
• Jack Daniel's 93%
• Gordon's 93%
• Malibu 91%

2004​

• Bacardi 96%
• Baileys 95%
• Jack Daniel's 94%
• Malibu 92%
• Southern Comfort 91%

2003​

• Bacardi 97%
• Baileys 95%
• Jack Daniel's 94%
• Malibu 92%
• Southern Comfort 92%

Click here​ for your copy of the Market Report.​

Why has this happened?​

• Listings fees​ Nothing kills off competition better than pubs demanding an upfront fee to stock a brand. While it is well-known this practice goes on in supermarkets, it is less well-publicised that it happens with spirits in the on-trade all the time.

Nick Griffin, managing director of Pleisure Pub Company, says it is counter-productive. "Customers don't drink listings fees. I think they are done a disservice through the poor quality of choice that exists. All listings fees do is put money into the pub owners' back pocket. We need to put this money into training," he says.

Wholesalers​ In Waverley TBS and Matthew Clark the industry has two dominant national suppliers. When it comes to spirits, they have critics who cite them as part of the problem. Jason Danciger, head of food and marketing for Laurel Pub Company, says:

"These big guys grab all the big drinks companies and say 'if you want to be listed by us then give us loads of money'. Someone has got to crack the logistics. There are some amazing products around, but we are quite boring when it comes to bringing them to market."

Pricing​ The big brands tend to dominate markets and can use that position to bully new players out. In 2004 Phillip Bowman, chief executive of Allied Domecq, went on record lambasting Diageo for carrying out a price war against Allied's Tia Lusso, through massive discounting of its own brand Baileys.

Here was an innovative new cream liqueur expressly aimed at younger drinkers which simply could not cope with the pressure being applied by the market leader. On the high street there is a discounting culture and this generates huge pressure to drive throughputs - as things stand the high street is driven by price, not added value.

• Case Study​

Jon Lilley, director of Scream Retail, recently launched Thunder Toffee Vodka. He is having some success in the UK market, but the experience of bringing Thunder to market has not been a happy one.​

"The industry plays it very safe when it comes to spirits. Pub companies will only buy a product if they know it well and are sure it will make them money.

"To bring a new product to market these guys want the shirt off your back. They want free stock, thousands of pounds in listings fees and sale and return deals. It's so frustrating. And I feel sorry for the people going into pubs who have to suffer such limited choice.

"Sometimes business is about taking risks but the major players are not interested. Big wholesalers just don't seem to take players who are new to the industry seriously at all. There are no sour grapes here - we're doing well. But it annoys me the way they speak to you. I don't think they like anything new, they're scared of it."

Diageo's view​

"We only launch a new innovation when we know that we are giving the consumer an innovation they want. "Our research shows that consumers trust recognisable premium brands and pub visitors are more likely to stay in an outlet longer and revisit the pub again if recognised brands are served.

"History shows us it takes a longer time to develop and nurture new spirits brands than, for instance, beer or RTDs, so brands such as Smirnoff Norsk, Bulleit Bourbon and J&B-6? aren't going to change things overnight.

"However, they do have a distinct role to play for licensees and we are confident in their long-term strengths. We will continue to maintain our focus on educating consumers and driving trial with these brands."

The wholesaler's view​

• WaverleyTBS​

"WaverleyTBS features over 300 premium and non-core spirits brands and in the last nine months alone has introduced 101 new spirits into the business. The broadening of the spirits range is very much led by the city centre bars but once the products are in the business they are available to all customers. "What may be significant is that the licensee support received by the leading suppliers is unbeatable by small suppliers. The risk for licensees is increased with the less well known brands as they require additional staff training and knowledge, there is less consumer awareness and more persuasive marketing tactics are required."

Matthew Clark​

"We carry over 4,000 different products that our customers can choose from. We also launched our iIon range 18 months ago which has allowed retailers across the UK to gain access to a large number of niche/smaller p