Rough with the smooth

22 February, 2008

Some raised a glass in celebration, others cried into their beer. Graham Holter looks at the winning and losing drinks categories in this year's OLN Brands Report

Beer sales growth may have juddered to a halt in the past 12 months, but retailers can take comfort in resilient performances from light wine, sparkling wine and spirits - and another boom in cider.

This year's OLN Brands Report highlights the winners and losers in the year to Jan 26 - a period characterised by appalling summer weather and growing economic unease.

Yet off-trade sales marched on slightly ahead of inflation, demonstrating either the drinks industry's ability to operate at maximum efficiency when the going gets tough, or the British public's unwavering desire to drown its sorrows. Perhaps it was a bit of both.

Light wine, up a reassuring 6 per cent in value and 4 per cent in volume, ­appears to have shrugged off its recent sales plateau - even prodigious performers are entitled to a gap year. That so many brands are achieving sales uplifts without crucifying margins speaks well of the health of the category.

Own-label wine found the going much tougher, though it continues to edge closer to a market value of £1 billion.

Mixed year for spirits

The spirits category is more of a mixed bag, and in some cases volume gains are bigger than sales increases. But the sector as a whole was up 4 per cent in value, with vodka continuing its growth at the expense of blended Scotch.

It's hard to believe that, in 1988, blends accounted for half of all volumes in off-trade spirits. Now it's just a quarter, and blends are already behind vodka in ­volume terms. Twenty years ago the talk was of vodka perhaps managing to overtake gin - today it is almost three times as successful, and seems almost certain to overtake blended Scotch at some time in 2008.

Golden rum was another star performing category, with strong sales growth despite a tiny market share. Imported whiskey also motors on and stands a reasonable chance of overtaking malts in the not-too-distant future. In volume terms, they are already neck and neck.

Moët & Chandon's pride has been dented by a 5 per cent sales fall but it continues to lead the Champagne and sparkling wine sector by a comfortable distance. The category is growing slightly faster than light wine, with Champagne marginally outpacing fizz from other regions.

Cider, which only recently made headlines by overtaking ale, is now almost £100 million ahead of its rival and those who predicted an end to its boom have been proved wide of the mark. But the beneficiaries are the Big Three brands and own-labels. For the rest, the category is in as much trouble as it ever was and white cider in particular has work to do if it is to reinvent itself, both to arrest its sales decline and to maintain respectability at a time when problem drinking is under such scrutiny.

Price cuts hit fortified

Fortifieds had a rotten year - hardly surprising, some might argue, when the category leader is flogged off for £3 a bottle during its peak Christmas sales period. Harveys Bristol Cream saw sales slip by 1 per cent, but sherry's sales did not see the declines that have been happening in the recent past. Fortified British wine - which sold as strongly as its Jerez rival in 1988 - continues its slide down the sales rankings, though port enjoyed moderate success. It remains £20 million or there-abouts behind sherry, but perhaps the gap might be closing.

Stormy year for beer

And so to beer. The "glass half full" camp will doubtless point to the increasing and welcome success of premium bottled ales and Britain's resurgent craft brewers, but none of this is yet impacting on the Brands Report league tables.

The weather will have hit beer sales harder than many other sectors, but the "glass half empty" camp might rightly remind us that a) this was the year when the smoking ban sent thousands of beer lovers scurrying from pubs and b) cider didn't seem to mind the rain. Beer has got a problem, and nobody can yet be certain whether this is a temporary blip or if the sector is set for further decline. Brands like Carlsberg, up 18 per cent, will justifiably claim that success need not be elusive.

RTD producers can write the book on sales collapses, but even in this supposedly moribund category there are winners (including, interestingly enough for such a brand-conscious sector, own-labels). The glory years have surely gone, but the obituaries were premature.

Drinks categories: overview

Category Sales £m % Change % Change

by value by volume

Light wine 4,611.3 6 4

Beer 3,315.6 0 1

Spirits 2,778.8 4 5

Cider 538.4 25 19

Sparkling wine

396.0 7


Fortified wine 314.8 -2 -4

RTDs 207.4 -6 -9

Nielsen year to Jan 26 2008

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Is blended Scotch overshadowed by single malt in retailers?

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