Dark Rum and Brandy - UK - April 2007

ISSUES IN THE MARKET
Definitions
Major themes of the report
INSIGHTS AND OPPORTUNITIES
Food for thought
Fair-trade offers potential for rum…
…as do organic variants
Targeting the cocktail set
Smoking ban offers opportunity to extend on-trade dining
MARKET IN BRIEF
Growth is flat
Brandy and Cognac dominate the market
Premiumisation provides hope…
…as consumers want the real deal
Ad spend is often minimal
Future trends
FAST FORWARD TRENDS
 FLUX AND BLUR
What's it about?
Elasticity is all
Observations
Implications
 “X FOR EXTREME”
What's it about?
Observations
Market touchpoints/implications
INTERNAL MARKET ENVIRONMENT
Key Points
The number of drinkers is falling
Figure 1: Consumption of alcoholic drinks in the last 12 months, 2002-06
Shift from the on- to the off-trade…
Figure 2: Agreement with selected lifestyle statements, 2002-06
… is changing the way people socialise…
…and putting pressure on market values
But there are a few silver linings on the horizon
People are eating out more
Figure 3: Visiting of pubs/bars in the last 12 months, 2002-06
Cocktails and dreams
Premiumisation meets ‘masstige’
Desire for authenticity
Rum to make its mark
People are starting to see themselves as connoisseurs
Importance of indulgence and hedonism
Figure 4: Agreement with selected lifestyle statements, 2002-06
Christmas is key trading period
BROADER MARKET ENVIRONMENT
Key Points
Older population…
Figure 5: Age structure of the UK population, by gender, 2002-12
…. is driving a shift to the off-trade
The growing number of 25-34s augurs well for growth
AB socio-economic status growing
Figure 6: Changes in UK socio-economic status, 2001-06
Middle classification is having a major impact
COMPETITIVE CONTEXT
Key Points
Wine has been the big winner
Figure 7: UK sales of alcoholic drinks by volume, and value, 2001-06
Taking a close look at premium spirits
Figure 8: UK sales of whiskies, by type, by value and volume, 2001-06
Mixing is driving growth
Deluxe brands benefit from trading up
Figure 9: UK sales of white spirits, by type, by volume and value, 2002 -06
STRENGTHS AND WEAKNESSES IN THE MARKET
Strengths
Weakness
WHO’S INNOVATING?
Key Points
Premiumisation sustains value growth
Authenticity appeals to connoisseurs
Contemporary image has urban appeal
Gifting provides seasonal uplift
Possible future trends
MARKET VALUE AND FORECAST
Key points
Dark spirits reach plateau
Figure 10: UK retail sales of dark spirits, by volume and value, 2002-07
Volume growth supersedes value…
…due to the movement away from the on-trade
Every cloud has a silver lining
Brandy remains the far larger market
Figure 11: UK retail sales of dark spirits, by type, by volume and value, 2002-06
 FUTURE TRENDS
Indulgence occasions will continue to rise
Authenticity will provide a key marketing fulcrum
Although shifting demographic may prove favourable
A challenging market environment will constrain market growth
Figure 12: Forecast of UK retail sales of dark spirits, by value, 2007-11
Figure 2: Forecast of UK retail sales of dark spirits, by volume, 2007-11
 FACTORS USED IN THE FORECAST
SEGMENT PERFORMANCE
Key points
 BRANDY AND COGNAC
Figure 13: UK retail sales of brandy, by volume and value, 2002-07
Volume detracted as on-trade struggles
And value comes under pressure from price competition
Brandy segmentation
Cognac
Figure 14: UK retail sales of Cognac, by style and volume share, 2002-06
Armagnac
Brandy de Jerez
Other brandies
Organic fails to take hold
 DARK RUM
Figure 15: UK retail sales of dark rum, by volume and value, 2002-07
Dark rum
Golden rum
Rhum agricole
Fairtrade notable by its absence
MARKET SHARE
Key Points
 BRANDY
Courvoisier extends its lead
Figure 16: UK brandy brand shares, by volume, 2002-06
Leading Cognac brands dominate value sales
Figure 17: UK brandy brand shares, by value, 2002-06
Is own label poised for growth?
 DARK RUM
Captain Morgan at the helm
Figure 18: UK dark rum brand shares, by volume, 2002-06
Morgan Spiced leaves others behind
Figure 19: UK dark rum brand shares, by value, 2002-06
COMPANIES AND PRODUCTS
Key Points
 COMPANY PROFILES
Bacardi-Martini
Figure 20: Bacardi-Martini product portfolio, 2006
Strategy and performance
Promotional activity
Beam Global Spirits & Wine
Figure 21: Beam Global Spirits & Wine UK product portfolio, 2006
Strategy and performance
Promotional activity
Diageo
Figure 22: Diageo product portfolio, 2006
Strategy and performance
Promotional activity
First Drinks Brands
Figure 23: First Drinks Brands product portfolio, 2006
Strategy and performance
Promotional activity
Halewood International
Figure 24: Halewood product portfolio, 2006
Strategy and performance
Promotional activity
LVMH
Figure 25: LVMH product portfolio, 2006
Strategy and performance
Promotional activity
Maxxium
Figure 26: Maxxium product portfolio, 2006
Strategy and performance
Advertising and promotion
Paragon Vintners
Figure 27: Paragon Vintners product portfolio, 2006
Strategy and performance
Promotional activity
Pernod Ricard
Figure 28: Pernod Ricard product portfolio, 2006
Strategy and performance
Promotional activity
J Wray & Nephew
Figure 29: J Wray & Nephew product portfolio, 2006
Strategy and performance
Promotional activity
Others
BRAND ELEMENTS
Figure 30: Attitudes to DARK SPIRITS, APRIL 2007
 MARTELL
Figure 31: Words associated with Martell
Brand qualities
Recommendations
 COURVOISIER
Figure 32: Words associated with Courvoisier
Brand Qualities
Recommendations
 REMY MARTIN
Figure 33: Words associated with Remy Martin
 FIZZ CAN SPREAD THE WORD
Figure 34: Words associated with Havana Club
Brand Qualities
Recommendations
Usage of brands
Figure 35: Usage of brands
Attitudes towards brands
Figure 36: Attitudes towards brands
Brand Satisfaction and Performance
Figure 37: Brand satisfaction and performance
Brand Commitment
Figure 38: Brand commitment
BRAND COMMUNICATION AND PROMOTION
Key Points
Rum receives far less support
Figure 39: Main monitored media spend on dark rum and brandy, 2002-06
New advertising rules curb above-the-line promotion
Courvoisier earns it
Multinationals dominate ad spend
Figure 40: Leading advertisers of dark spirits, 2002-06
Direct Marketing beginning to play a greater role
Packaging now even more important
Advertising peaks at Christmas
Figure 41: Main monitored media spend on rum and brandy, 2004-06
Luxury brands get in on the act
Price promotion
CHANNELS TO MARKET
Distribution shifts towards the off-trade
Figure 42: UK distribution of dark spirits, by trade sector, 2002-06
Grocers taking share within the off-trade
Online retailers cater for connoisseurs
CONSUMER 1 – DARK AND GOLDEN RUM – WHO – USAGE AND FREQUENCY
Key Points
Dark and Golden Rum
Figure 43: Consumption of dark and golden rum in the last 12 months, 2002-06
Consumption patterns for rum are changing
Who is most likely to drink dark/golden rum and where?
Figure 44: key demographics: On-trade vs off-trade, 2006
Men more likely to drink
Drinking at home vs. drinking out of home
The Urban drink – London vs. Scotland?
CONSUMER 2 –BRANDY – WHO – USAGE AND FREQUENCY
Key Points
 BRANDY
Figure 45: Consumption of brandy in the last 12 months, 2002-06
Brandy dominates over dark/golden rum…
…but brandy experiences a steady decline
It remains a niche consumer product
Image turns off some consumers….
…not seen as hip or funky
On-trade brandy appeals to younger age group…
… and those who have children under one-year-old
Who is most likely to drink brandy and where?
Figure 46: Key target groups – in home vs out of home consumption habits, 2006
 BRANDY AND COGNAC – ON VS. OFF-TRADE
Dark rum and brandy are synonymous with the on-trade….
…. but not amongst those consumers who are eating
CONSUMER 3 – ATTITUDES TO DARK/GOLDEN RUM
Key Points
Barriers to drinking dark/golden rum
Figure 49: Motivations for not drinking dark/golden rum, November 2006
Perceptions of taste alienate potential drinkers
Taste tends to preoccupy the young...
…while maturity extends repertoire
Figure 50: Age of response rate indexed on average age of non-drinkers of dark/golden rum, November 2006
Education, education, education
Profile needs to be raised
CONSUMER 4 – ATTITUDES TO BRANDY
Key Points
 BRANDY
Figure 51: Motivations for not drinking cognac/brandy, November 2006
Taste puts off one in four
Is taste reputation deterring the young?
More mature drinkers deterred by competition
Figure 52: Age of response rate indexed on average age of non-drinkers of brandy/cognac, November 2006
Out of sight, out of mind
Preference for other drinks
CONSUMER 5 – REPERTOIRE ANALYSIS
Key Points
Who tends to drink what?
Figure 53: Demographics of key spirit drinkers by type of drink, 2006
How do the habits of dark spirit drinkers compare with white?
Figure 54: Drinking habits in context, 2006
Golden opportunity
Repertoire in the home
Repertoire analysis
Figure 55: Dark and white spirits repertoire, by types drunk, 2006
APPENDIX
 INTRODUCTION
Consumer research
ACORN
Advertising data
 ABBREVIATIONS
 INTERNAL MARKET ENVIRONMENT
TGI consumption data
Figure 56: Consumption of alcoholic drinks in the last 12 months, by type, 2002-06
Pub visiting for a meal/drink
Figure 57: Frequency of visiting pubs/bars for a drink only – day and evening, 2002-06
Figure 58: Frequency of visiting pubs/bars for a meal – day and evening, 2002-06
 BROADER MARKET ENVIRONMENT
Figure 59: Agreement with selected lifestyle statements, by demographic sub-group, 2006
Figure 60: Agreement with selected lifestyle statements, by demographic sub-group, 2006
Figure 61: Agreement with selected lifestyle statements, by demographic sub-group, 2006
Passenger survey
Figure 62: Passengers from the UK to selected destinations, 2001 and 2006
Home production and foreign trade
Brandy
Figure 63: UK imports and exports of brandy, by value, 2000-06
Rum
Figure 64: UK imports and exports of rum, by value, 2001-06
 COMPETITIVE CONTEXT
Figure 65: Consumption of alcoholic drinks in the last 12 months, by type, 2006
 WHO’S INNOVATING?
 SEGMENT PERFORMANCE
 BRAND COMMUNICATION AND PROMOTION
Brandy
Figure 66: Main monitored media spend on brandy, by major advertiser, 2002-06
Rum
Figure 67: Main monitored media spend on rum, by major advertiser, 2002-06
Consumer 1 – Dark and golden rum – Detailed demographics
Figure 68: Consumption of dark and golden rum in the last 12 months, by demographic sub-group, 2006
Figure 69: Consumption of dark and golden rum in home, in the last 12 months, by demographic sub-group, 2006
Figure 70: Consumption of dark and golden rum elsewhere, in the last 12 months, by demographic sub-group, 2006
Consumer 2 – Brandy – Detailed demographics
Figure 71: Consumption of brandy in the last 12 months, by demographic sub-group, 2006
Figure 72: Consumption of brandy in home, in the last 12 months, by demographic sub-group, 2006
Figure 73: Consumption of brandy elsewhere, in the last 12 months, by demographic sub-group, 2006
Consumer 3 – Attitudes to dark and golden rum – Detailed demographics
Figure 74: Attitudes to dark/golden rum, November 2006
Consumer 4 – Attitudes to Cognac and brandy – Detailed demographics
Figure 75: Attitudes to cognac/brandy, November 2006
Consumer 5 – Drinking repertoires – White and dark spirits drinkers