Duty driving down spirits volumes: suppliers
High duty is the main reason UK spirits volumes are declining, suppliers have said in OLN's Spirits Report.
Fifty-five per cent of spirits suppliers polled exclusively for the report blamed duty for the fall, while 40% pointed the finger at supplier tactics eroding markets and 35% said economic factors outside the drinks trade were to blame.
Bill Roberts, general manager and vice-president EMEA for Gallo, said: “Duty is probably the biggest driver. There’s a more limited assortment and less innovation – if you go into a major supermarket the sections are pretty defined to four or five brands in each category.
“I think more attention paid to how categories are merchandised, more creativity in how to bring the sections alive and how to inform and educate consumers could begin to reverse the decline.”
Cotswolds Distillery head of marketing and PR Rachel Tranter said: “The cost of duty pushes the price of spirits up and can be damaging to start-up distilleries and craft distillers.
“We should adopt a system similar to that of the US. They have lobbied for a tax break for craft distilleries whereby the first 100,000 litres distilled is duty free. Not only would it encourage economic stimulation, start-up businesses and employment rates, but not having to pay extortionate rates of excise would mean passing savings to the consumer and helping to increase the volumes sold in the off-trade.”
While suppliers noted that not all spirits categories are in decline, and that volumes are down more among entry-level and standard brands than premium ones, many believed retailers could reverse the decline.
Poor merchandising, a lack of space on retail shelves, a lack of choice in brands and pack size, a lack of imagination in retailing and poor retailing in general all got some of the blame for the slump in volumes.
Paul Isherwood, head of category development for the off-trade at Diageo GB, said: “We believe spirits sales can be driven by making the category easy and exciting to shop.
“Our My Store Matters forum and website is an example of partnering with retailers on optimising how the category shows up in outlet.”
Tranter said: “Better educated retailers who understand the importance of where a spirit comes from and how it is made rather than just focusing on getting the best possible price are key.
“In-store tastings and training, so the retailer can pass on knowledge of products to the consumer, only really happen in good independents and must be standard in the market.” The Drinks Company managing director Bill Oddy added that retailers should “retrain the consumer expectation to pay what a brand is worth rather than moving sales along the shelf ”.
The sales director of one major spirits company, who preferred to remain anonymous, said: “Suppliers and retailers must broaden the appeal of spirits to shoppers by making products more accessible, in terms of pack size, communication, merchandising and choice, while also helping educate consumers on how to drink, with [advice on] serve suggestions, serving vessels and occasion usage.”
Others welcomed the volume slump, saying it heralded a move towards more premium spirits.
Pernod Ricard channel director Chris Shead said: “Healthy lifestyles are impacting on the UK consumption of alcohol, but there is a trend that people are drinking better.”
Berry Bros & Rudd Spirits brands marketing director Luke Tegner agreed: “There’s a shift to less but better. So while volume is down, value is, in some areas, stable or up.
“For the super-premium sub- category of gin for example, it’s surging ahead. Spiced and premium rum has seen growth, so it’s a shift from category to category and from standard to premium that is more relevant to us.”
Read more in OLN's 2014 Spirits Report