Pressure to reduce spirits promotions

Suppliers have warned that retailers

need to run fewer price promotions on spirits

to get some value back into a virtually stagnant market .

Spirits sales crept up 2.9 per cent in the year to Aug 11 2007, according to the latest Nielsen figures in OLN's annual Spirits Report.

This may be an improvement on last year's standstill, but it still means the market has grown just 3.3 per cent since 2005 - well below inflation.

The silver lining is that volume sales lagged slightly behind the value increase, growing 2.3 per cent - which could be evidence of a trend towards trading up.

But spirits sales are still deeply dependent on price-cut promotions - and that could spell trouble in the future, according to suppliers.

United Brands director Rob Preston told OLN: "The window of opportunity for the industry to take control of its own destiny is rapidly closing. Volume and market share issues from

retailers and suppliers mean deep discounting is likely to continue until it is taken out of our hands with duty rises and promotion caps."

Beam Global general manager Drew Munro said the spirits category "faces significant challenges as a mature sector with relentless pressure on prices, and the government wants everyone to drink less". He added: "Draconian regulation is one of the biggest challenges we face and the industry needs to pull together to self-regulate.

"The erosion of value is not sustainable over the long term for either suppliers or retailers and we would like to see a reduced reliance on price to drive sales."

Retailers too are feeling the pressure. Waitrose spirits buyer Giles Fisher said: "With test purchasing, labelling changes, the media focus on binge-drinking and the associated social issues, we take our responsibilities in this area seriously. Personally I feel that it's only a matter of time before the trade is more regulated by central government."

But Stelios Eliades, of Soho spirits staple Gerry's, said much of the threat to self-regulation is

media hype. "Apply the licensing laws sensibly to drunk, drugged-up, under-age and aggressive customers - just do your job properly," he said.

OLN Spirits Report 2007, page 17.