Spirits - US - August 2009

SCOPE AND THEMES
What you need to know
Definition
Data sources
Sales data
Consumer survey data
Advertising creative
Abbreviations and terms
Abbreviations
Terms
EXECUTIVE SUMMARY
Overall growth flat but off-premise sales show growth
Vodka and rum performing well as cordials decline
Off-premise sales are driving market growth
Overall consumption rises as many young adults report drinking more
Diageo is the dominant player while Bacardi leads with iconic rum brand
A closer look at white spirits
Vodka
Rum
Gin
Tequila
On the dark side
Whiskey
Cordials and Liqueurs
Brandy and Cognac
Prepared cocktails
White spirits most popular
Liquor and grocery most commonly used channels
Many prefer mid-range and premium brands over value and super premium
Mixed drinks are hot but few like it “neat”
Recommendations key driver of experimentation
Concerns about weight gain relatively common
INSIGHTS AND OPPORTUNITIES
Consider online bartending tools
Help consumers get the party started
Coupons are a hot item
Using brand to create gourmet foods and exceptional dining experiences
INSPIRE INSIGHTS
 TREND: DEATH OF THE MIDDLE GROUND
Polarization appears to be relentless in its squeezing out of the middle ground
Not so fast
 TREND: CORNER STORE
Re-imaging the role of the corner store
The corner liquor store
From brand to bricks and mortar
MARKET SIZE AND FORECAST
Key points
Sales growth decelerates despite increased usage in 2009
Figure 1: Total U.S. retail sales of spirits, at current prices, 2004-14
Figure 2: Total U.S. retail sales of spirits, at inflation-adjusted prices, 2004-14
Off-premise sales driving category growth
Figure 3: Total U.S. retail sales of off-premise spirits, at current prices, 2004-14
Figure 4: Total U.S. retail sales of off-premise spirits, at inflation-adjusted prices, 2004-14
COMPETITIVE CONTEXT
Wine poses primary competitive threat
Figure 5: Type of alcoholic beverage consumed, by age, May 2009
SEGMENT PERFORMANCE
Key points
Vodka and rum still most popular
Figure 6: Sales of distilled spirits, segmented by type, 2006 and 2008
RETAIL CHANNELS
Key points
Sales at mass, club and drug rise as consumers seek better value
Figure 7: U.S. sales of distilled spirits, by channel, 2006 and 2008
RETAIL CHANNELS—ON-PREMISE
Key point
On-premise sales decline as Americans party more at home
Figure 8: U.S. on-premise sales of distilled spirits, at current prices, 2004-09
RETAIL CHANNELS—LIQUOR/PACKAGE STORES
Key point
Sales at liquor stores continue to grow as Americans entertain more at home
Figure 9: U.S. liquor/package store sales of distilled spirits, at current prices, 2004-09
RETAIL CHANNELS—DRUG, MASS AND OTHER OUTLETS
Key point
Mass, club and drug stores post strong growth in 2008, but declined in 2009
Figure 10: U.S. drug, mass and other outlet sales of distilled spirits, at current prices, 2004-09
RETAIL CHANNELS—SUPERMARKETS
Key point
Supermarket sales continued to grow in 2009
Figure 11: U.S. supermarket sales of distilled spirits, at current prices, 2003-08
MARKET DRIVERS
Key points
Young adults much more likely to report drinking more, despite recession
Figure 12: Incidence of consumption of distilled spirits relative to a year ago, by age, May 2009
Baby Boomer segments growing much faster than young adults
Figure 13: Population aged 21 or older, 2004-14
Demographic and cultural shift drives demand for new flavors
Figure 14: Population, by race and Hispanic origin, 2004-14
Obesity and health concerns motivate some to choose low-cal options
Figure 15: Age-adjusted prevalence of overweight and obesity among U.S. adults aged 20+, 1988-2006
Spirits consumption continues to rise
Figure 16: Number of gallons of distilled spirits consumed annually, 1978-2008
Figure 17: Effect of economy on drinking patterns, by age, May 2009
Trend toward at-home consumption may be driving sales
Figure 18: Number of alcoholic beverages consumed, by age, June 2008
Brand, availability, convenience and health—primary criteria
Figure 19: Factors influencing purchasing decision, summary of extremely and very important, by age, June 2008
LEADING COMPANIES
Key points
Diageo remains dominant, Bacardi sees slight boost
Figure 20: Select manufacturer sales of 9-liter cases of distilled spirits in the U.S., sum of leading brands only, 2007 and 2008
Figure 21: Select manufacturer sales measured in dollars and sales of 9-liter cases of distilled spirits in the U.S., all brands, 2008
BRAND SHARE—VODKA
Key points
Diageo dominates with Smirnoff and value-priced brands
Heaven Hill succeeds with positioning similar to Diageo
Pernod Ricard, Skyy and Constellation Spirits win with mid-range premium varieties
Figure 22: Selected brand sales and market share of vodka in the U.S., 2007 and 2008
BRAND SHARE—RUM
Key points
Bacardi and Captain Morgan remain the dominant rum brands
William Grant & Sons wins with a new twist on the Caribbean concept
Figure 23: Selected brand sales and market share of rum in the U.S., 2007 and 2008
BRAND SHARE—GIN
Key points
Pernod Ricard’s Seagram’s Twisted Gin shows impressive growth
Gordon’s Gin, Bombay Sapphire and Aristocrat also post growth in 2008
Figure 24: Selected brand sales and market share of gin in the U.S., 2007 and 2008
BRAND SHARE—TEQUILA
Key points
Diageo’s Jose Cuervo on top; Patrón strong in premium segment
Mid-range brands drive sales
Figure 25: Selected brand sales and market share of tequila in the U.S., 2007 and 2008
BRAND SHARE—WHISKEY
Key points
Mid-range and premium brands drive growth in whiskey segment
Success of Jameson and Glenlivet demonstrate demand for high-end and premium offerings
Figure 26: Selected brand sales and market share of whiskey in the U.S., 2007 and 2008
BRAND SHARE—CORDIALS AND LIQUEURS
Key points
Diageo achieves some growth with sweet premium/high-end liqueurs
Heaven Hill capitalizes on the Pomegranate craze
Jägermeister still among the most popular liqueurs in the U.S.
Figure 27: Selected brand sales and market share of cordials and liqueurs in the U.S., 2007 and 2008
BRAND SHARE—BRANDY AND COGNAC
Key points
Demand for premium declines as consumers embrace value brands
Figure 28: Selected brand sales and market share of brandy and cognac in the U.S., 2007 and 2008
BRAND SHARE—PREPARED COCKTAILS
Key points
Diageo furthers lead with new Seagram’s launches
Figure 29: Selected brand sales and market share of prepared cocktails in the U.S., 2007 and 2008
INNOVATION AND INNOVATORS
“Better for you” booze?: antioxidants and vitamins mitigate health concerns
Açaí fruit-infused vodka
Maximizing appeal with highly-targeted cultural messages
Caffeinated cocktails
BRANDS AND THE ADVERTISING LANDSCAPE
Familiar, trustworthy, affordable: key elements of recession-proof brands
Figure 30: Brand share comparison, 2008
Diageo and Bacardi maintain top slots with large ad initiatives
Figure 31: Leading brands ad expenditures, sales and agencies of record, 2008
Adding value to Smirnoff: Factual competitive analysis, and cocktail convenience
Figure 32: Smirnoff Triple Distilled NYT review ad, 2008
Figure 33: Smirnoff Vodka Mojito, 2008
Diageo’s Ciroc story: On differentiation and pitching the hip-hop community
The fantasy pitch: Connecting brands with aspirations
Grey Goose
Figure 34: Grey Goose vodka ad, 2009
Southern Comfort
Figure 35: Southern Comfort SoCo and Lime ad, 2008
WHO’S DRINKING WHAT?
Key points
Most drinking the same amount as last year; young adults drinking more
Figure 36: Incidence of consumption of distilled spirits relative to a year ago, by age, May 2009
White spirits especially popular, particularly among heavy users
Figure 37: Distilled spirits category usage, by age, October 2007-December 2008
Figure 38: Distilled spirits category usage, by household income, October 2007-December 2008
Vodka and rum usage in line with strong sales in these segments
Figure 39: Overall incidence and average number of distilled spirit drinks consumed in the last 30 days, October 2007-December 2008
Unflavored vodka more popular than flavored or most other distilled spirits
Figure 40: Type of distilled spirit consumed most often, by age, May 2009
Figure 41: Type of distilled spirit consumed most often, by household income, May 2009
WHERE CONSUMERS PURCHASE DISTILLED SPIRITS
Key points
Liquor, grocery and club are the primary channels
Figure 42: Distilled spirit channels for at-home consumption, by age, May 2009
Target affluents in the club channel
Figure 43: Distilled spirit channels for at-home consumption, by income, May 2009
PREMIUM VS. VALUE—THE ROLE OF LOCATION
Key points
Mid-range formulations especially popular, particularly for parties and restaurants
Figure 44: Types of spirits consumed at various locations/occasions, May 2009
Figure 45: Incidence of consumption of mid-range distilled spirits on particular occasions, by age, May 2009
Premium/high-end popular for at-home consumption
Figure 46: Incidence of consumption of premium/high-end distilled spirits on particular occasions, by age, May 2009
Figure 47: Incidence of consumption of premium/high-end distilled spirits on particular occasions, by household income, May 2009
Affluent respondents no more likely to consumer super-premium
Figure 48: Incidence of consumption of super premium/top shelf distilled spirits on particular occasions, by hh income, May 2009
Young adults more likely to use inexpensive brands, especially at parties
Figure 49: Incidence of consumption of value priced distilled spirits on particular occasions, by age, May 2009
DRINKING STYLES
Key points
Few consumers drink spirits “straight up,” preferring cocktails instead
Figure 50: Method of consumption for distilled spirits, by gender, May 2009
Young adults often prefer mixed drinks and shots
Figure 51: Method of consumption for distilled spirits, by age, May 2009
GENERATING TRIAL
Key points
Recommendations, free samples, low prices and packaging drives experimentation
Figure 52: Motivation for purchase of new distilled spirits, by age, May 2009
HEALTH-RELATED CONCERNS AND DRIVERS
Key points
Women more likely to be influenced by health and weight concerns
Figure 53: Attitudes towards distilled spirits related to health, by gender, May 2009
Appeal to young adults with better-for-you formulations
Figure 54: Attitudes towards distilled spirits related to health, by age, May 2009
THINKING OUTSIDE THE TWO-INGREDIENT BOX
Key point
Young adults interested in experimenting and learning how to create interesting cocktails
Figure 55: Behavior and distilled spirits, by age, May 2009
RACE AND HISPANIC ORIGIN
Asians less likely to drink liquor than whites, blacks and Hispanics
Figure 56: Net spirit category use, by race/Hispanic origin, October 2007-December 2008
Preferences reflect heritage, roots and relationship with pop culture
Figure 57: Overall distilled spirit usage, by race/Hispanic origin, October 2007-December 2008
Blacks tend to be somewhat less price sensitive
Figure 58: Purchasing motivation for new distilled spirits, by race/ethnicity, May 2009
CLUSTER ANALYSIS
Liquor Enthusiasts (28%)
Moderates (36%)
Light Drinkers (35%)
Cluster characteristics
Figure 59: Sprits clusters, May 2009
Figure 60: Incidence of consuming various types of alcoholic beverages, by sprits clusters, May 2009
Figure 61: Incidence of consuming specific types of distilled spirits, by sprits clusters, May 2009
Figure 62: Preferred method of consumption, by sprits clusters, May 2009
Figure 63: Spirits consumed at various locations/occasions, by sprits clusters, May 2009
Figure 64: Amount consumed compared to last year, by sprits clusters, May 2009
Figure 65: Channel liquor is consumed within, by sprits clusters, May 2009
Figure 66: Influence of recommendations and marketing on purchase, by sprits clusters, May 2009
Figure 67: Alcohol-related attitudes and behaviors, by sprits clusters, May 2009
Cluster demographics
Figure 68: Sprits clusters, by gender, May 2009
Figure 69: Sprits clusters, by age, May 2009
Figure 70: Sprits clusters, by household income, May 2009
Figure 71: Sprits clusters, by race/Hispanic origin, May 2009
Cluster methodology
CUSTOM CONSUMER GROUPS
Demand for distilled spirits higher among 21-34s and affluent Hispanics
Figure 72: Incidence of consuming various types of alcoholic beverages, by custom consumer groups, May 2009
Young males and single parents more likely to report increased drinking during recession
Figure 73: Change in drinking patterns during recession, by custom consumer groups, May 2009
Young males, affluents more likely to be influenced by advertisements
Figure 74: Influence of recommendations and marketing on purchase, by custom consumer groups, May 2009
APPENDIX: OTHER USEFUL CONSUMER TABLES
Differences in spirit consumption among men and women
Figure 75: Distilled spirits category usage, by gender, October 2007-December 2008
Figure 76: Overall distilled spirit usage, by gender, October 2007-December 2008
Figure 77: Trial and research of distilled spirits, by gender, May 2009
The lower-income like to experiment while affluents enjoy cocktail parties
Figure 78: Behavior and distilled spirits, by hh income, May 2009
APPENDIX: TRADE ASSOCIATIONS