Brand loyalty is no longer a key driver in BWS sales, says expert

Retailers have proved that brand loyalty in BWS is a myth and it is more of a commodity category than suppliers like to admit, according to a leading analyst.

IRI’s head of BWS insights, Toby Magill, pointed to statistics showing that Tesco enjoyed continued growth despite hitting Carlsberg and Heineken with painful range culls.

He told DRN: “Retailers have proved that brand loyalty in BWS is largely a myth. Tesco removed Carlsberg, brought it back, kicked out Heineken, and Tesco is still growing. It hasn’t been affected. The brands are seeing significant decline, so is BWS more of a commodity market than people like to believe?”

Magill believes that no brand is safe, highlighting the examples of Kingsmill bread and Ambrosia custard elsewhere in FMCG as evidence that retailers can afford to be ruthless with brands that have enjoyed heavy investment.

He said: “I’m not sure everyone quite realises how much power lies with the retailers. The ball is very much in their court.

“[A delist] is a huge deal for the brand, but not a big deal for the retailer. I don’t think people want to acknowledge the commodity nature of alcohol.

“If retailers all realise they do not need too many brands, it could have huge implications and lead to significant changes.”

He forecasts further range rationalisation in future if retailers take a hard look at what is taking up shelf space and what is driving sales.

“Premium and mainstream are pretty interchangeable,” said Magill. “Lagers such as Stella, Budweiser and Kronenbourg are interchangeable with mainstream lagers such as Foster’s and Carling as they have the same formats and similar promotions.

“Shoppers have shown they will move between the two. They might decide they do not need both Peroni and Estrella on shelf and take one out.

“If you can take out Carlsberg and Heineken with all that investment in brand loyalty and not be affected much, who is the next one in lager to be taken out? How long before somebody tries it in spirits?

“We have only really seen them try it in a very limited way in lager, but it could happen in spirits. Even categories such as craft beer and fruit cider – how many strawberry and limes do you need on shelf?

“What happens when somebody wants to take out Brewdog or Camden Town? People buy craft because they specifically want to experiment. There is potentially even a risk of less loyalty. If retailers decide brands are largely interchangeable, what is the listing argument for those brands?”

When asked what brands can do to survive in this cutthroat world, Magill said: “You have to have strong category arguments. You need to be very specific about what role you’re playing. When the retailers say, ‘we want to do EDLP and we want you to take a price cut otherwise we are going to take you off shelf,’ you need to be able to say, ‘well if you do that, it’s going to cost you X amount of money’. You need to say your price premium has traded this many shoppers up or we appeal to a very niche demographic and that will sabotage it.

“It’s having a very clear argument about what you are delivering. You need to know what you are doing by channel and by region, who you are targeting versus others. You need more customer ideas.”

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