RTDs: Survival of the fittest

Related tags Smirnoff ice Brand Brand management Diageo

What is the state of the current RTD market? The volume of RTDs sold in the on-trade in the year to May 2008 was 17 per cent lower than in the...

What is the state of the current RTD market?

The volume of RTDs sold in the on-trade in the year to May 2008 was 17 per cent lower than in the previous year, according to Nielsen, while its volume fell 15 per cent.

However, if you look at the sector month by month over the past year, its rate of decline has been slowing recently - something the brands point to, suggesting that the market is stabilising.

Consolidation means RTDs are being dominated by a few survivors. The Nielsen figures show the volumes of WKD being sold in the on-trade falling 10.5 per cent in the year to May, and those of Smirnoff Ice 16.9 per cent.

But these apparently-disastrous statistics look rosy compared to other brands - declines of over 40 per cent are not uncommon.

There is a strong correlation, meanwhile, between the marketing attention the brand owners are paying to their drinks and their sales. Diageo is investing £2m annually in promoting Smirnoff Ice, for example. The fact that Bacardi Martini couldn't spare the time to talk to The Publican for this feature suggests that perhaps Bacardi Breezer, which has slipped to number four in the top 10 brands, is not at the top of its priority list.

What are the key brands doing about it?

Smirnoff Ice is continuing to rely on piggy-backing the brand's above-the-line marketing (TV and print advertising, for example) on that of Smirnoff vodka. The pot of money specifically allocated to Smirnoff Ice is to be spent on below-the-line promotions (such as point- of-sale material).

"We have found the campaigns that resonate with consumers are those with relevant prizes that they can actually see in the bars," explains Smirnoff Ice brand manager Ellie Rogers.

"For example, where it's a competition to win a snowboarding holiday, have a snowboard in the bar for someone to take home at the end of the night.

"We feel strongly now that we have identified what works for our consumer, and we're very much behind the RTD category."

WKD estimates that over nine million viewers will have seen its cinema advert, launched in July, by the time it goes off screens in December. WKD promotional teams hit pubs in August, targeting 21,000 customers with sampling of the brand's Iron Brew variant and a 'Brew or False' game based around the drink.

"We are investing as much now as we were 18 months ago, when we were in growth by 18 per cent," says WKD marketing director Karen Salters.

Meanwhile, there are some who feel there is enough value left in the market to launch new entrants. Lorraine Griffiths had no experience of brand development when she came up with two new RTDs.

Having worked in the on-trade for several years, she formed the company Alcohol Brands last year specifically to sell Baby Blue and Baby Pink, which have fewer calories than any other RTD.

Will the category survive?

Stephen Clarke, director of spirits for drinks wholesaler Matthew Clark, believes it will.

"The answer for pubs is not to switch off RTDs completely, it's to have a clear offering as part of your overall range in the fridge," he says.

"Where they used to take up 70 per cent of fridge space, now RTDs are worth less. But they are still worth some space."

He's got a point. A category that, according to Diageo, was worth £444m to the on-trade last year and was bigger than gin in value terms, must surely be able to sustain a select number of well-marketed brands.

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