Let the festive numbers games begin

02 November, 2007

Nielsen consultant graham page reveals how to cope this christmas

Last year, about this time, I wrote about the crucial importance of Christmas to the drinks trade. Given that the festive season is rapidly approaching, I thought it appropriate to look at last year's article again. The idea was to see if my comments then are still relevant, given Christmas 2006 and the dreadful non-summer this year.

Seasonal sales peak at Easter (be it early or late), Whitsun, summer and crucially Christmas and New Year. The latter is the ultimate sales period, impacting on marketing, production, distribution (logistics), retail, wholesale and sales volumes, and finally, profits.

As a result, even more planning goes into Christmas than ever.

Failure to plan for the core festive season market, means sales budgets and annual profits can be shot to shreds, especially if stock is not in retail outlets at the crucial times.

It is interesting, therefore, to look quickly at some statistics from our Scan*Track service from Nov/Dec 2006. This information outlines the degree to which Christmas/New Year is either the icing on the cake or the break period of the year for drinks suppliers and drinks retailers' sales volumes and profits.

Of course, the Christmas break in 2007 will not have the same peaks as the 2006 season.

This year, the core selling days are different, with a long weekend before the break and a likely extra day or half day off for some on the Monday's Christmas Eve, with Christmas and Boxing Day on Tuesday and Wednesday. A similar profile occurs a week later over the New Year's break on the Monday and Tuesday.

We can expect some heavy discounting, a focus on multipacks and multibuys, in part created by massive trade stocks not sold this summer and maximum use of 24-hour trading by the grocers, who got 75 per cent of the 24-hour licences issued under the new Act.

It has always intrigued me that so many drinks categories rely so heavily on Christmas/New Year for their success. It's a bit like knowing that your last batsman, in a crucial test match, has to hit a six off the last ball to win the game.

Take advocaat, for example: 66 per cent of its GB off-trade sales were in the last two months of the year.

Now that is extreme, but let's look at other liquor categories. For example, sales of sparkling wines are up 27 per cent, perry 19 per cent, and cider 17 per cent over those two months

While they are not so extreme as advocaat, they show that there is still a massive reliance on the last two months of the year to hit sales targets, and I suspect volumes and profits for the year, whether for the brand owner, distributor, agency, wholesaler or retailer.

From this, it shows alcoholic drinks product categories can be significantly reliant on two months of the year for sales. This is a bit like a gambler putting all his money on one number at roulette - that's great when it comes off with long odds, but it's bloody risky. Can all suppliers and retailers rest on their laurels with so much at stake?

Not having stock is no excuse

Not having enough stock is simply inexcusable, even given constraints on cash flow, as few periods of the year turn stock into cash so quickly.

Many drinks companies have been negotiating with retailers on listings, stocking fees, advertising, promotions and special packs for months, the latter being something retailers are increasingly looking for.

This is the time of year when logistics have to be "fine tuned" to the day and the hour, as failure to be on shelf, at the right price, in the right place, at the right time, costs you sales. What's worse is that if you don't make the sales in those two months, you can't recoup them later in the year.

I'm sure marketing, sales and logistics teams in drinks companies have been working flat out to ensure maximum sales over this crucial period.

Yet what work is going on to spread the risk if Christmas bombs? Should there be any at all?

I recognise that many of the smaller, less fashion-conscious liquor categories are where sales are focused on parents, grandparents or older relatives, or in niche markets. Repeat sales are very low and stock sits around for a long time. Efforts to drive repeat purchase, via other drinks occasions for consumption, are critical for these categories.

Wine rises from the flat line

Wine, after a flat 2006, returned to growth in 2006-7, driven by new brands and heavy promotion. With 20 per cent of wine and 37 per cent of Champagne bought pre-Christmas, it's a core period, but how much sticks around long after Christmas and New Year have gone?

Beer sales in January and February are usually very low, until Easter kicks in. But there is little doubt the increasing use of heavily promoted multipacks pre-Christmas, does restrict repeat beer sales in the early months of the New Year, as garages and cupboards get filled with Christmas multibuys, even if some lagers are cheaper than bottled water.

Spirits sales are very reliant on Christmas/New Year. Whisky and malt whisky, Cognac, rum, gin and liqueur sales are helped by gifting and consumers trading up, but surely there are other occasions, even outside of Father's Day, otherwise repeat purchase does not occur throughout the year. It's also a period where fewer consumers are holidaying abroad and bringing back cheaper duty-free drinks.

We can expect to see keen retail liquor prices again for all categories this year, possibly keener than ever thanks to our non-summer. Whether someone tries to get some value back into drinks categories remains to be seen. Though there is evidence it's happened on soft drinks, I doubt it will happen in alcohol drinks, certainly not in beer.

This could herald slow sales for the early months of 2008, as many garages, spare rooms and cellars will be rammed with liquor bought on Christmas's low promotional prices, but not consumed over the festive period.

The off-trade will hope to benefit from the effects of the smoking ban in the on-trade.

Then it's time to start worrying about early sales for the coming year and planning for and praying that Christmas 2008 is good, unless of course, we might just have a decent summer, to drive back some volume for long drinks.

The data quoted is from the Nielsen Scan*Track Off Trade, Nov and Dec 2006, covering the eight weeks of Christmas and New Year.




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