Whiter than white

Competition in the white-spirits market is fierce, with ultra-premium brands getting in on the act and cocktails growing in popularity. Nigel Huddleston looks at the trends

While the white spirits category provides a range of versatile and interesting drinks for the licensee's armoury, it's worth remembering that the mainstream categories and big brands still pretty much rule the roost.

Growth across white spirits may be coming from premium brands, but Smirnoff, with on-trade sales of just over 1.5 million cases a year, accounts for just under half of all white spirits sales on its own.

Of the 3.2 million cases of white spirits sold in the on-trade in the year to December, more than 2.2 million cases were vodka, with gin accounting for 520,000 cases, and white rum, still dominated by Bacardi, taking the lion's share of the rest.

Vodka's volume sales were actually down by 2% over the year, the blow softened somewhat by a similarity in the value of sales.

Indeed, gin and vodka both saw better value than volume performance, indicating a trend towards premium brands. Vodka prices rose by 4.1% in the on-trade last year and gin by 3.3%.

Diageo GB marketing director for vodka

Anita Robinson says: "Smirnoff Red was just slightly down, by about 3% in volume, but we're seeing premiums doing very well. Smirnoff Black, our main focus in premium vodka for the on-trade, is up 26%. It's really to do with some of the trends in premiumisation we're seeing in many other markets and people looking for a different experience.

"Cocktails are generally becoming more popular because people are looking for more quality experiences, and the positive thing

for the licensee is that cocktails can drive a higher price."

Robinson says that an average shot price

for Smirnoff Red in the on-trade is £1.39, whereas Smirnoff Black normally goes out at about £2.

Cocktails can be daunting

"Cocktails can be quite daunting," she adds, "but something simple such as a Moscow Mule, where all you need is vodka, ginger beer and limes, is very easy to make."

Effen vodka supplier Hi-Spirits managing director Jeremy Hill says the smoking ban is going to impact on the way spirits are served.

"After July, a lot of licensees will have to move into the cocktail arena," he says. "It doesn't have to involve difficult, complicated cocktails - this is more about drinks that can be made in the time it takes to pour a pint of Guinness. Plenty of very tasty cocktails can be produced in that time."

"Multiple operators are experiencing quite a lot of success with pitchers, which are

much easier to make than four individual cocktails - and in turn, this produces more

opportunities."

But as far as brands go, those opportunities will be limited to a small number of players. With market-leading brands so dominant in their sub-categories, only scraps are left for many of the new entrants to fight over.

Robinson at Diageo says: "The market has become a bit cluttered. Something we're keen for the trade to understand is that they should look at quality and what's actually driving the premium price. Is it just about image or that it originates in a different country, or is there something of substance behind it?"

Bacardi-Martini marketing controller for Grey Goose and 42 Below Sophie Bowers says: "The winners will become clear very quickly. Many brands are launched but fall down on quality, which is what they really need. The fact that your product is distilled 27 times or filtered through crystal may be of interest, but the really important thing is the purity and quality of the water source and how carefully the ingredients are selected.

"We wouldn't necessarily want to over-filter Grey Goose or 42 Below because it would remove the delicate flavours that we've gone to the trouble of adding in the first place."

But Hill at Hi-Spirits argues: "From a consumer's point-of-view it's certainly not too cluttered, because they get more choice

and more competition. But from a trade

perspective it's very tough - new vodkas are being brought out every week and there are only so many that the national wholesale groups can list."

Über-premium products

Hill describes Effen as "über-premium", distinguished by its "i-Podesque packaging", but adds: "As an industry, we can't carry on bringing out increasingly-premium vodkas. There's a ceiling to this and there aren't really any opportunities for a vodka that's even more expensive or more complicated to produce than the current crop. Fortunately, we were in at a time when an opportunity for new premium vodkas still existed."

There are even some vodkas whose marketing people will tell you are just too premium for the mainstream pub market, but Hill thinks that's misguided.

He says: "We're trying to seed it in bars at the top of the pyramid and filter it down, but we've built our business on brands for multiple operators. I'd never say that any product was too good for a particular venue - it's more a case of the right timing."

Maybe it's the brands that support rather than shun the pub market which will rise above the rest.

Key trends in white spirits

Vodka remains by far the biggest sub-category, accounting for 2.2 million cases of the 3.2 million-case market

Smirnoff is the largest white spirit, its sales

alone making up half the market

Vodka prices rose by 4.1% in pubs last year and gin by 3.3%

Gin is the second-largest category, followed

by white rum, dominated by Bacardi

Red Bull and vodka's match could be over

There are signs that the vodka and Red Bull phenomenon is running out of steam.

A fall in on-premise vodka volumes by 2% has been accompanied by a downturn in the fortunes of the leading energy drink, with the AC Nielsen figures in the Britvic Soft Drinks Report declaring sales were down by 7% in the on-trade. Energy drinks in total were down by a similar amount.

At the same time, the value of vodka sales actually increased by 2.1%, suggesting that consumers are spending more money on better-quality spirits. Sophie Bowers, marketing controller for Grey Goose, adds: "It's not really very surprising. People are probably starting to look for the next big thing, just like Magners is the big thing happening now in cider. There's always a fashion thing with certain brands in that part of the market."

Diageo says it is not aware of significant change in the popularity of Smirnoff and Red Bull. Anita Robinson, vodka marketing director at Diageo GB, says: "That market is obviously still there, but the vodka market isn't driven by it. There has been a shift towards mid-tempo drinking occasions anyway.

"It's not the only way to enjoy vodka and it's licensees who can exploit vodka's versatility and serve it in a range of great ways who'll make the most of premium opportunities."