It's not dead, it's resting
RTD category may be
about to surpris e everyone,
thanks to the commitment of the top sellers. Graham Holter reports
The following statement is not a hoax, a joke or a misprint, though it might require reading twice. The RTD market could be returning to growth.
Not immediately, and not to the extent that it will be a £400 million category again. For now, a sales plateau would be interpreted as a major victory. But there are signs, according to producers, that the sector's decline has bottomed out and this most maligned of drinks categories is ready to be taken seriously by its critics.
Debs Carter, brands controller at WKD producer Beverage Brands, offers some mathematical evidence. "At the moment the RTD category is 6% down," she says. "A year ago it was 10% and two years ago it was 13% down, so we're seeing a slow levelling-off of decline.
"That's being driven primarily by WKD but Smirnoff Ice is also solid at the moment. When the two biggest brands are in growth that has an effect - the top three brands between them are 65% of the category."
Ellie Rogers, brand manager for Smirnoff Ice, predicts that the coming year will probably see the RTD category "bang-on flat" with "slight growth" the year after. It will be, she says, welcome respite for a drinks category which regularly attracts harsh reporting.
"Considering that the category is still worth £200 million in the off-trade alone, some of what's been said has been a bit too much," she believes.
"We're looking at a flattening out of the market and I certainly think growth is possible. The big brands like WKD and Smirnoff Ice are performing ahead of the market and gaining share strongly, and the lesser performing brands are really starting to fall away. We're also going to benefit from the general trend from the on to the off-trade."
Jenny Allaway, off-trade sales director for Global Brands, agrees with her rivals. "The RTD market is far from dead. It might be suffering from some extremely bad press, but for Global Brands this area of our product portfolio is, without a doubt, one of the strongest.
"Year-on-year sales of our flagship brand, VK Vodka Kick, are up 24% in the off-trade, selling over 6.5 million cases worldwide every year. The introduction of VK Mojito, and most recently VK Pear, into the range have helped us further establish the brand and remain one of the biggest players in what is currently a very challenging marketplace."
Rogers adds: " The market is down 6% in volume and Ice is only 1% down, and
-2% by value, so we're very close to flat."
She points out that the downturn in sales witnessed by the category was only to be expected. "RTDs were an absolute phenomenon 10 years ago, the category came from nowhere. When a category takes off like that there's inevitably going to be a stabilisation."
Carter at Beverage Brands insists a falling
away of brands does not signal that the category as a whole is in poor health. "There's an awful lot of talk about the category dying but it's clearly not the case," she says.
in BWS which are dominated by a couple of brands. A category doesn't need to have a plethora of brands to be successful. A lot of brands came into the RTD market and because those brands have fallen by the wayside, there's been a lot of talk about the category being on its last legs."
Retailers, especially the multiples, have not always been sending out positive signals. Own-label RTDs are less prevalent than they were
and, more crucially, shelf space is shrinking as stores make way for the faster-moving cider brands.
"It is generally happening but we perform so well that when they're looking to go from three bays to two it's generally not Smirnoff Ice that's the casualty," says Rogers. "There were too many launches in the category and it needed some cleaning out.
I think own-label is falling away a little bit. We're really not seeing an awful lot of activity and it's polarising towards the key brands."
Arguably the biggest challenge is recruiting new consumers to replace those the category generally loses when they hit their mid-20s. On the positive side, relatively few RTD drinkers have mortgages and so they are less vulnerable to recessionary effects.
Carter says: "In the current economic climate we have to be very careful we don't spend all our resources on price promotions and end up losing relevance with consumers.
"What we're going to be doing moving forward - and don't take this as complacency - is saying it's
now even more important that our consumers
pay that little b it more for WKD than a private-label option, so we can continue to invest in reaching new consumers .
"This Christmas we've got a 10-pack going into the top-end impulse outlets. The multiples prefer a 12-pack which is too much for a convenience format." In the run -up to Christmas, WKD will also be supporting trade customers with a range of price-flashed case offers. Cases of all three flavours of 70cl stock will be price-marked at £10.79. Cases of 70cl Blue will also contain a free POS kit for use exclusively by independents. Cases of all three flavours of 27.5cl bottles will be flashed at £9.79.
Six weeks of national TV support for the brand will start on Nov 24 and current cinema advertising activity continues until the end of December.
Smirnoff Ice will, as usual, benefit from the huge sums Diageo spends on marketing its parent vodka brand. "We do a lot of on-trade below-the-line because we believe the on-trade leads the off," says Rogers. "We run
competitions and we've got a limited -edition on -trade variant coming out in November
"In the off-trade we'd like to work on visibility and also consumer perceptions of value. We do a lot of price-marked packs, which
well because people want to perceive they're getting good value in an off-licence. We've also invested in fridge trays because the sector's real advantage is the chilled solution.
"We are looking at doing some specific summer activity for off-trade accounts around April
or May next year."
Will the category be back in growth by then? Probably not. But it won't be for lack of belief from the leading brands that such a scenario is within their grasp.