RTDS UPDATE: Ready and willing

The market may have changed for alcopops and RTDs, but brands are embracing change with a host of trend-conscious new offerings, writes Alice Lascelles

Over a decade after the introduction of the alcoholic phenomenon known as Hooch, the alcopop market is looking distinctly less sparkly – at the last count, combined on- and off-trade sales were down 13% by value (ACNielsen MAT 31.12.06). And only last month one of the most iconic RTD brands, Bacardi Breezer, announced it was ceasing production at its plant in Southampton with the loss of 200 jobs, thanks to the slump in alcopop sales.

But despite this decline, a number of brands, both old and new, are putting a surprisingly brave face on it, bolstered by the fact that, month on month, the downward spiral is gradually slowing up.

“We weren’t too surprised by the slow-down as that often happens to new categories,’ says Debs Carter, brand controller for WKD owner Beverage Brands, who predicts that the market will have flattened out by 2008. “In the last two or three years you’ve seen the market settling down as consumers become less experimental, but more savvy, which inevitably leads to a shake-out.’

Unlike Hooch, WKD has clung on for a decade, and recently took the number-one spot in terms of overall RTD sales volume, with on-trade sales up 5% and off-trade up 12% (ACNielsen, MAT 12.08.06). Perhaps even more significantly, it is now the second best-selling brand in packaged drinks – a much larger category that includes Corona, Magners and category leader Budweiser.

According to Carter, any similarity to these lighter beers and ciders is entirely intentional: “The RTD category is traditionally quite a female market, but we have stuck strongly to our male positioning. When we launched 10 years ago, it was with WKD Irn Bru, which was very much an offering for males – even the orange colour made it look more like a cider or beer. Girls are more likely to buy into a male concept than the other way round, as you can see with a brand like Corona – so we’ve been very single-minded about our target consumer, which is primarily males aged 18-24.’

Healthy competition

With its male positioning and unapologetically artificial colours and flavours, WKD is a world away from one of the RTD market’s newest entries, Sabai. Sourced from Thailand by Red Bull UK, this flamboyant-looking product has the appearance of an RTD, but is actually a premium spritzer drink made with hibiscus wine, designed to be drunk over ice or from the bottle. But despite having more in common with a spritzer or an RTD, Sabai is, like WKD, taking many of its cues from the light lager and cider market, says product manager David Healey. “The growth of categories such as bottled lager and cider shows there will always be demand for drinks that are portable, perhaps lower-alcohol.

“In an ideal world we would like to see Sabai in a bar next to imported beers like Peroni, which shares a lot of features, like strength and traditional recipe. In supermarkets we’re still in the RTD aisle, but we’re only one product-facing away from beer.”

Sabai is aimed at female drinkers in their mid-to-late 20s, a sector which is key to the current growth in premium-quality, lower-alcohol products, says Healey. Not only is it pretty and pink, but Sabai also hopes to get the vote of more health- and diet-conscious women, thanks to a calorie content almost half that of Smirnoff Ice. The addition of a pomegranate variant this spring – backed by a £2.5 million marketing spend – will also help Sabai to build a useful link with the trendy world of super foods.

Not that the brand can make these health claims explicit, however. Only three years ago Bacardi Breezer launched its first low-cal line extension “Diet Lemon”, but by 2005 it had come under pressure to change this to “Half Sugar”, to ensure the product was not linked with health benefits. The official line is that the product “steers clear of any health messages”, according to Bacardi’s senior trade marketing manager Fraser McGuire, and that Half Sugar is more about catering for a “different palate” of slightly older female consumers.

Half Sugar now accounts for 15.7% of total Bacardi Breezer sales, but the fact remains that Breezer is still in decline in the on-trade and only just hanging on to its position as the number one RTD among multiple grocers, with growth of 3.6% (ACNielsen MAT 30.11.06). And while McGuire maintains that the company is in “a better place than we were in 2005”, the closure of the Southampton plant tells a resoundingly different story.

Over at Diageo, meanwhile, the RTD department has been a hive of activity in the last 12 months with the launch of “fruit ferment” Quinn’s, bourbon-based Slate and the Classic Mix range for homebodies who are too lazy to mix their own gin and tonic. “The RTD category is not all doom and gloom,” says Diageo’s innovations commercialisation manager Adam Irvine. “We believe it still has a key role to play for both consumers and customers – it’s still worth around £800m annually to the combined on- and off-trade.”

Diageo is proudest of all of Quinn’s, which takes the RTD further into female-friendly, health-conscious territory with a product that is designed to be exactly one unit of alcohol, and made from 100% fruit juice.

“We developed the fruit sugar concept because people are becoming a bit more conscious of provenance, they are more interested in products that are keeping it real and natural,” says Irvine. “We also tried to take it away from the traditional RTD category by developing a serve which is in a glass over ice – it’s not really ready-to-drink because you actually have to serve it.”

Are you being served?
All of which sounds a bit like semantics at first, but it’s all part of a strategy to develop what Diageo describes as the “mid-tempo” drinking occasion: this could be after work, or on the way to the cinema, when consumers are looking for something relatively low-alcohol, to be consumed sitting down and having a chat, rather than dancing on a table.

Slate, by contrast, has been developed for male fans of dark spirits, and embraces a number of serves – from the bottle, over ice, or with a slice of lime – putting it firmly in competition with the lighter lagers and ciders. “The fall in RTDs’ on-trade value has been partly due to the quality of draught products now available,” says Irvine. “The advantage of RTDs used to be their consistency, you knew what you were getting, but the trade has worked very hard on quality of draught and people are now getting a lot more consistency. Packaged beer is also showing a lot of innovation,” he adds.

Irvine is more reticent on the subject of the iconic RTD Smirnoff Ice, which recently lost its crown as number one on-trade brand to WKD, with sales declining at a (slowing) rate of 16% (ACNielsen MAT 30.11.06). “It’s still seen by a lot of people as the original,” says Irvine, adding that the brand’s consumer age group has broadened of late from 18-25 to 18-30. In other words, the die-hard fans are getting older, which is no doubt an anxiety for Diageo. Hence a further offering for those getting to old to go out, in the form of Classic Mix.

“People are still interested in having drinks that are portable, refreshing and designed to suit different occasions,” says Irvine, “but it’s about adapting to these changing needs and occasions, and I expect to see more products like Classic Mix and Quinn’s, that need to be served, rather than drunk from the bottle.”

Pulled up

But, despite all the attempts to make a fresh start, RTDs are still having a hard time shedding associations with binge and underage drinking – Patricia Hewitt’s recent threat to increase taxes on alcohol to discourage underage drinking was widely reported as an “alcopop tax”.

It’s a strategy that David Poley, chief executive of The Portman Group (which, it should be noted, counts Diageo, Beverage Brands and Bacardi Martini among its members) is sceptical about: “When one looks at what under-18s are drinking, among 11-16 year olds its beer, lager and cider that are drunk in the greatest volume and by the greatest number of consumers, so there is no grounds for making a special case for RTDs. If you do differentially tax RTDs all that is likely to do is make under 18s switch to another drink. RTDs are not the root cause – it is about effective law enforcement and education first and foremost.”

Nonetheless, a look at the Advertising Standards Authority website shows RTDs getting into hot water more often than most on account of their advertising: WKD has been pulled up on its ads five times in the last four years, and Smirnoff Ice twice, with the most common complaint relating to messages that might target underage drinkers.

According to Carter, however, the most recent WKD complaint pre-dates the new advertising regulations introduced in 2005 – and from now on the brand’s wicked side promises to stay firmly on the right side of the law.

© db April 2007