Pernod Ricard urges retailers to focus on premium and not discounts this Christmas
Pernod Ricard has warned that focusing on discounts on standard spirits rather than championing premium lines would spell bad news for the drinks trade this Christmas.
The Absolut and Jameson supplier has long been chanting the premiumisation mantra and has been encouraged by the performance of more expensive spirits during the festive period in recent years.
In 2014 premium spirits – which Pernod defines as those that sell for 20% or more than the average price – accounted for £1 in every £4, but at Christmas 2014 this rose to £1 in every £3 (Nielsen), a trend that had persisted for years.
But during Christmas 2015 it witnessed a shift in strategy whereby the focus was placed on discounts on standard spirits on gondola ends rather than driving value into the market and earning a higher margin on more expensive lines.
Commercial director Chris Ellis told OLN: “Last Christmas spirits grew not by premium but by deals on litres of standard spirits. That is bad news for consumers and for the trade, because it encourages value reduction into lower margin lines.
“We would encourage all of the retailers out there to focus less on driving those litre deals. Let’s go back to what we have previously been doing well, focusing on the premium options.”
Ellis believes backing standard products rather than premium ones flies in the face of an established trend that has developed in the UK over several years.
“Spirits has been the real driver of growth in BWS in the last few years,” he said. “Wine has either been flat or in decline. Beer was in decline and has now moved into growth and that’s coming from the premium end – craft and prestige – which is really a parallel to what has been happening in spirits in the last three or four years.
“It’s a real consumer trend and brands like Absolut are able to trade people up. It’s very positive for the category.
“Last Christmas we witnessed a structural change in the spirits market. We saw the introduction of litre deals on standard spirits.
“They have been around for years, but typically as a November payday thing for a week. Those deals increased in their frequency. Instead of one week it’s six weeks. The visibility of those deals in-store has increased. It has gone from one weekend in a gondola end to six weeks.
“Consumers have been saving up and they want to buy a gift. If they go into a store and are disrupted by litre deals you are not allowing them to get to the spirits fixture and make that trading up purchase they are looking for. It’s a structural change and it’s bad news.”
When asked what his message would be to the impulse channel, Ellis said: “Often what the supermarkets do one year is repeated the following year in impulse, so it’s important that we break the trend that appeared last year. The impulse channel is a bit more of a right here, right now purchase need. If you go in you are not browsing, you really need to buy a gift, getting the gifting range right is so important. Christmas is a trading up occasion – you go somewhere for dinner and you want to bring a nice bottle of wine – so having them available, well merchandised and chilled for white, sparkling and rosé is important.”
Pernod Ricard has identified five key occasions on which consumers drink at home during the festive period: Christmas dinner, Christmas get together, the “wrapping moment” of having a beer or a glass of wine while wrapping presents, the cocktail moment and gifts.
“You have a range of these moments and retailers need to have the right products at the right times, and interesting cross-merchandising can allow them to address those moments,” said Ellis. “Rather than doing litres at certain price points, doesn’t it make sense to address those moments?”
Secret Santa seems to be growing in popularity and Pernod Ricard is launching 5cl bottles of Absolut and Malibu that can dangle from trees as decorations to tie in with that, and it has a variety of bespoke gift packs across its luxury spirits portfolio to meet the needs of people buying presents for loved ones and friends.