Sector Insight: Liqueurs - Not just for Christmas

Liqueur sales have remained fairly static, despite attempts to drive year-round drinking. Jane Bainbridge reports.

THE BACKGROUND

Liqueurs have traditionally been stymied in attempts to boost their value by their public perception as a Christmas tipple. To shake this off, brand owners have been introducing variants that aim to encourage year-round consumption. The most recent company to enter the fray is going even further down the populist route; in June, Charteredbrands unveiled Pama, a pomegranate liqueur that taps into the health pull of the super-food, which has a higher antioxidant capacity than any other fruit juice, red wine or green tea, helping to protect against heart attacks.

Whether it is a dust-covered bottle of cherry brandy from duty free or Baileys bought for Christmas, liqueurs tend to be a sporadic rather than regular purchase for most UK households.

Traditionally regarded as a yuletide treat, the sector has worked hard to alter the seasonality of sales by introducing products that are intended to be drunk throughout the year.

The market has been boosted in particular by the popularity of cocktails, which have encouraged experimentation in both the on- and off-trade, and account for an estimated quarter of volume sales.

This helped drive growth of the sector to £639m in 2005 and it is expected to reach £655m this year, according to Mintel. This represents an increase in sales of just 2% since 2003, while volume sales are slightly stronger, up 4% between 2003 and 2005.

A liqueur is defined as being sweet and containing at least 2.5% sugar. The sector is split into cream liqueurs such as Baileys Irish Cream, with an ABV of up to 20%; traditional liqueurs, which are thick, sweet stronger spirits, with a 40% ABV such as Cointreau; and shooters, a more recent addition intended primarily for the on-trade, including drinks such as After Shock.

Liqueurs appeal to a diverse range of consumers; while women tend to drink cream-based options, men and older drinkers are more partial to traditional liqueurs. Shooters remain very much the domain of 18- to 24-year-olds.

ABC1s are the biggest drinkers of liqueurs, although the bestselling Baileys is most popular with C2s, according to Mintel.

Category performances

Cream liqueurs is the biggest of the three subsectors, accounting for about 40% of value sales. Its performance has been boosted by year-round sales, and although it has been hit by price-cutting and there are signs that it has peaked, this has created space in the market for the launch of premium products.

The shooters sector debuted in the late-90s with the launch of brands such as cinnamon-flavoured After Shock. It grew between 2002 and 2004, increasing by 25% in value, but more recently sales have faltered following negative publicity about binge drinking.

Brands are vital in this market as consumers invariably ask for liqueurs by brand rather than type. There has been considerable consolidation among the manufacturers, resulting in a few key players controlling the leading brands.

Diageo is the kingpin, owning Baileys Irish Cream, which held two-thirds of the cream liqueur market in 2005. However, its Baileys Glide ready-to-drink product - a lighter mix of Baileys and vanilla targeting the 21- to 40-year-old market - did not perform as well as hoped and was withdrawn last summer. As well as launching Baileys Minis to stimulate trial, it has experimented with smaller 200ml bottles designed to fit in the fridge.

Pernod Ricard's takeover of Allied Domecq in 2005 added coffee liqueur Tia Maria, the second-bestselling liqueur, and Kahlua to its portfolio. In 2002, Allied Domecq attempted to challenge Baileys in the cream liqueur sector with Tia Lusso, a lower-fat offering aimed at health-conscious young women. But Diageo fought back with fierce price cuts on Baileys and Tia Lusso was forced out of the market earlier this year.

Other companies in this sector include Maxxium with Cointreau, Galliano with its Bols range and First Drinks Brands with Amarula and Disaronno.

Although the leading players have all added formats or flavours in a bid to stimulate market growth, it seems they are failing to entice new consumers. This could be down to changes in consumer habits, according to TGI, which indicates a decrease in light users and those drinking at home.

As liqueurs generally appeal to either pole of the age spectrum, they need to turn their attention to 25- to 44-year-olds. But for future growth, the shooters sector must be revived to keep younger drinkers interested.

Consistent consumption

Extending their reach is particularly important, as while efforts have been made to encourage year-round consumption, a third of consumers still associate liqueurs with Christmas and more than a quarter relate them to special occasions.

Indeed, overall penetration of liqueurs is falling as factors such as increased choice in alcoholic beverages and greater health concerns are affecting the market - not to mention the drinks' perceived expense.

While the use of liqueurs in cocktails has helped boost the market there is further scope for brands to market themselves alongside mixers to encourage consumers to consider buying them for longer drinks rather than simply as small shots after a meal.

Mintel predicts that the next five years will see a drop in sales of 7% in real terms and that by 2011, the market will be worth £692m.

LIQUEUR BRANDS BY SALES AND MARKET SHARE, 2005

On-trade Off-trade Total Market
(pounds m) (pounds m) (pounds m) share(%)
1 Baileys Irish Cream 70 110 180 28
2 Tia Maria 85 25 110 17
3 Cointreau 20 11 31 5
4 Disaronno 13 14 27 4
5 Amarula 7 15 22 3
6= Drambuie 11 9 20 3
6= Bols range 19 1 20 3
8= Grand Marnier 13 1 14 2
8= Warninks 4 10 14 2
10 Tia Lusso 2 4 6 1
Others 176 19 195 31
Total 420 219 639 100

Source: Mintel


LIQUEUR SALES BY TYPE (POUNDS M)

Traditional Cream
2001 208 184
2002 257 212
2003 264 262
2004 265 252
2005 275 256
2006 (est) 282 262

Source: Mintel


LIQUEUR SALES SHARE BY DISTRIBUTOR TYPE (%)

2005 2003 2001
1 Multiple grocers 43.2 39.7 35.8
2 Off-licence multiples 27.9 29.3 30.6
3 Pubs 8.4 8.8 9.4
4= Clubs 5.0 6.8 8.5
4= Hotels and restaurants 5.0 5.9 6.8
6 Other on-trade 4.4 3.9 3.3
7 Co-ops 3.9 3.6 3.3
8= Independent grocers 1.1 0.9 1.0
8= Independent off-licences 1.1 1.1 1.3
Total 100 100 100

Source: Mintel

ANALYST COMMENT - SAMANTHA BLIGHE, ANALYST, CANADEAN

Baileys has been the number-one liqueur brand in the UK for many years and it has outpaced its competitors thanks to its palatable taste and promotional drives by its owner, Diageo. In the first six months of 2006, it invested £2m in advertising in the UK.

Baileys has strived to remain contemporary through innovation; two additional flavours - Creme Caramel and Mint - were rolled out in Duty Free in autumn 2005, while Baileys & Chocolate Cups - a single serving of Belgian milk chocolate and 35ml of Baileys - was introduced 18 months earlier.

Yet this activity has culminated in static, rather than rising, sales. While popular in the off-trade - Baileys ranks as the UK's number one take-home spirit - the liqueur attracts more female than male drinkers in the on-trade.

Chipping away at Baileys in the on-trade is a new breed of liqueur with much broader consumer appeal: shots or shooters. Typically drunk in bars and clubs, shots now occupy a niche for younger generations once filled by RTDs and, most recently, vodka.

Cocktail liqueurs, such as Long Island Tea, sold in pitchers, are also providing a challenge. Baileys, with its creamy texture, is not a popular cocktail ingredient, but brands such as Southern Comfort are, and in June the whisky's producer Brown-Forman launched a £3m ad campaign in the UK.

While these shot and cocktail brands are unlikely to topple Baileys from the top spot, they are likely to outperform the overall liqueur market and jostle for market share. Their growth will be market-driven, with consumers increasingly demanding alternatives to the traditional line-up of spirits.

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