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White Spirits and RTDs - UK - March 2011

  • Premiumisation within the vodka category will be vital in growing revenue over the next few years, especially with vodka volume sales falling by 3.5% in 2010 after a period of sustained growth. Mintel’s research shows that three in five vodka drinkers think it is worth paying more for premium vodka despite the current climate of austerity.
  • However, Smirnoff Red’s introduction of a 10 cl bottle at £2.89 is also an example of how being more flexible can influence consumers to buy premium brands. In contrast, Absolut’s sales have halved due to stubbornly retaining its premium price-point. With inflation and VAT outstripping wages in the past few months, many mainstream consumers do not always have the luxury of trading up for large one-off discretionary purchases.
  • Spirits companies such as Diageo are increasingly developing ready to serve cocktails and spirits with mixers at the expense of innovating around white spirits. With alcoholic drinks taxed by ABV (Alcohol by Volume), they can make a healthier profit margin by producing ready mixed alternatives, and it is also recognition that growth in markets such as vodka has peaked.
  • Increasing trial of the new ready to serve cocktails (ie Bacardi Classic Mojito) in bottles can help dispel the assumption that they are a poor substitute for a freshly made cocktail. Currently only one in ten of the UK population have tried the product but three quarters of those who have would do so again.
  • Traditional ‘alcopops’ can still be profit drivers given the right kind of marketing support, particularly as the coalition has confirmed it will not tax these drinks more punitively than other alcohol types. Although brands such Bacardi Breezer have been in sales freefall for a decade, WKD reversed its long-term decline with a slight increase in value sales in 2010, and is the fifth biggest selling brand in the white spirits and RTD category.
  • Gin brands can do more to turn their heritage to their advantage among white spirits drinkers. Currently, over half of white spirits drinkers who do not drink gin negatively view the product as old fashioned. However, there is increased interest in locally made British drinks, something the Sipsmith brewery has tapped into by becoming the first new London gin maker for around 200 years.

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Issues in the Market

            • How much potential do the new breed of RTDs have?
              • Has the vodka market peaked?
                • Is gin really experiencing a renaissance?
                  • Has consumer behaviour changed since the economic downturn?
                  • Future Opportunities

                      • Secret, Secret
                        • Snack Society
                        • Executive Summary

                            • The market
                              • Figure 1: Volume and value sales for white spirits and RTDs, 2005-15
                            • Market factors
                              • Companies, brand and innovation
                                  • Figure 2: Market share in value sales for white spirits and RTD brands, 2010
                                • The consumer
                                    • Figure 3: Occasions for buying the new RTDs over the past 12 months, January 2011
                                  • What we think
                                  • Internal Market Environment

                                    • Key points
                                      • Rapidly rising drinks prices are having a knock-on effect on behaviour…
                                        • Figure 4: Annual % change in RPI (Retail Price Index) of wine and spirits*, 2000-10
                                      • …taxation is helping drive shift towards a new generation of RTDs…
                                        • Figure 5: Proportion of retail sales prices which are taken up, by excise duty and VAT, February 2011
                                      • …as is the continued migration to in-home drinking
                                        • Figure 6: Annual UK expenditure on spirits at constant 2006 prices, by on- and off-trade, 2005-09
                                      • Purity versus flavour
                                        • Spirits are driven by perceptions of premiumisation
                                          • The return of cocktail culture?
                                            • Figure 7: Consumer attitudes towards trying new drinks, by drink type, July 2009
                                        • Broader Market Environment

                                          • Key points
                                            • Consumers remain worse off than before…
                                              • Figure 8: RPI and average weekly earnings, 2005-10
                                            • …resulting in a declining consumer confidence
                                              • Figure 9: GfK NOP Consumer Confidence Index, January 2005-January 2011
                                            • Tapping into the growing proportion of 18-34s
                                              • Figure 10: Total adult population trends, by age, 2005-15
                                            • Will the rise in ABC1s continue?
                                            • Competitive Context

                                              • Key points
                                                • Spirits in decline but signs of a steady recovery
                                                  • Figure 11: Quarter-on-quarter percentage change in value sales for major alcohol types, at constant (2006) prices, Q1 2009-Q3 2010
                                                • Gin, white rum and vodka perform above average
                                                  • Figure 12: Trends in drink types consumed in the past 12 months, 2006-10
                                              • Strengths and Weaknesses in the Market

                                                • Strengths
                                                  • Weaknesses
                                                  • Who’s Innovating?

                                                    • Key points
                                                      • RTDs are now out-innovating vodka
                                                        • Figure 13: Proportion of new product launches for white spirits and RTDs, by category, 2008-10
                                                      • Vodka brands play around with flavouring and colour
                                                        • Vodka brands innovate with more flexible packaging
                                                          • While Smirnoff produces an ‘augmented reality’ bottle...
                                                            • ...gin plays the number game
                                                              • Sipsmith launches the first new London-made gin in almost 200 years
                                                                • Can draught cocktails deliver greater on-trade volumes?
                                                                  • Premium tequila is coming to the UK
                                                                  • Market Size and Segmentation for White Spirits and RTDs

                                                                    • Key points
                                                                      • Vodka has expanded its share of the market
                                                                        • Figure 14: Value sales and share of total white spirits and RTD market, by product, 2006-10
                                                                      • The next five years will see a mixed performance for the total market
                                                                        • Figure 15: Volume and value sales for white spirits and RTDs, 2005-15
                                                                        • Figure 16: Forecast of value sales for white spirits and RTDs, 2005-15
                                                                      • Latest RTD innovations have massive revenue potential
                                                                          • Figure 17: Volume and value sales for RTDs, 2005-15
                                                                        • Maturation of the vodka market underscores importance of premiumisation
                                                                          • Figure 18: Volume and value sales for vodka, 2005-15
                                                                        • Gin’s lack of mainstream appeal means its volume sales will fall
                                                                          • Figure 19: Volume and value sales for gin, 2005-15
                                                                        • Tequila and white rum are on an upward curve
                                                                          • Figure 20: Volume and value sales for other white spirits, 2005-15
                                                                        • Forecast methodology
                                                                        • Market Share

                                                                          • Key points
                                                                            • Diageo capitalises on opportunity to increase its market share
                                                                              • Figure 21: Value sales and share of top ten UK white spirits brands in the off-trade, 2009 and 2010
                                                                            • Major brands profit at the expense of own-label
                                                                              • Russian Standard doubles its sales
                                                                                • Traditional RTDs are still ‘cash cows’
                                                                                • Companies and Products

                                                                                  • Key points
                                                                                    • Bacardi-Martini
                                                                                      • Brown-Forman
                                                                                        • Diageo
                                                                                          • First Drinks Brands (owned by William Grant & Sons)
                                                                                            • Glen Catrine
                                                                                              • Global Brands
                                                                                                • Pernod Ricard
                                                                                                • Brand Elements

                                                                                                      • Figure 22: Attitudes towards and usage of white spirit and RTD brands, December 2010
                                                                                                    • Brand attitudes
                                                                                                      • Figure 23: Attitudes, by white spirit and RTD brand, December 2010
                                                                                                    • Brand personality
                                                                                                      • Figure 24: White spirit and RTD brand personality – macro image, December 2010
                                                                                                      • Figure 25: White spirit and RTD brand personality – micro image, December 2010
                                                                                                    • Correspondence analysis
                                                                                                      • Figure 26: White spirit and RTD brand usage, December 2010
                                                                                                      • Figure 27: Satisfaction with various white spirit and RTD brands, December 2010
                                                                                                      • Figure 28: Consideration of white spirit and RTD brands, December 2010
                                                                                                      • Figure 29: Consumer perceptions of current white spirit and RTD brand performance, December 2010
                                                                                                      • Figure 30: White spirit and RTD brand recommendation – net promoter score, December 2010
                                                                                                    • Brand index
                                                                                                      • Figure 31: White spirit and RTD brand index, December 2010
                                                                                                      • Figure 32: White spirit and RTD brand index vs. recommendation, December 2010
                                                                                                    • Target group analysis
                                                                                                      • Figure 33: Target groups, December 2010
                                                                                                      • Figure 34: White spirit and RTD brand usage, by target groups, December 2010
                                                                                                    • Group one – The Conformists
                                                                                                      • Group two – Simply the Best
                                                                                                        • Group three – Shelf Stalkers
                                                                                                          • Group four – Habitual Shoppers
                                                                                                            • Group five – The Individualists
                                                                                                            • Brand Communication and Promotion

                                                                                                              • Key points
                                                                                                                • White spirits/RTD market continues to see strong investment
                                                                                                                  • Figure 35: Media advertising spend on gin, rum*, vodka and RTDs, 2006-10
                                                                                                                • Diageo spends heavily to maintain market dominance
                                                                                                                  • Figure 36: Share of media advertising spend on gin, rum*, vodka and RTDs, by top-spending brands, 2008-10
                                                                                                                • Smirnoff beats Absolut at its own game
                                                                                                                • Channels to Market

                                                                                                                  • Key points
                                                                                                                    • Supermarkets are now the biggest driver of value
                                                                                                                      • Figure 37: Value sales and share of total white spirits and RTD market, by on- and off-trade, 2005-10
                                                                                                                      • Figure 38: Sales and share of total white spirits and RTD market, by channel, 2010
                                                                                                                    • Mixologists and high-end bars remain the brand ‘king-makers’
                                                                                                                      • Online is becoming an increasingly important channel
                                                                                                                      • Consumer Usage for White Spirits and the New RTDs

                                                                                                                        • Key points
                                                                                                                          • Gin attracts a very different audience from other white spirits
                                                                                                                            • Figure 39: Volume Importance Index* of gin consumption, in home and elsewhere, by gender, age and socio-economic group, 2010
                                                                                                                            • Figure 40: Volume Importance Index* of vodka consumption, in home and elsewhere, by gender, age and socio-economic group, 2010
                                                                                                                            • Figure 41: Volume Importance Index* of white rum consumption, in home and elsewhere, by gender, age and socio-economic group, 2010
                                                                                                                          • New RTD drinkers now account for one in six of the population
                                                                                                                            • Figure 42: Consumption of the new RTDs in the past 12 months, January 2011
                                                                                                                          • RTDs are cannibalising the vodka market more than other white spirits
                                                                                                                              • Figure 43: Proportion of spirits consumed by vodka drinkers, January 2011
                                                                                                                            • New RTDs are more premium-positioned but still have a young bias
                                                                                                                                • Figure 44: Index of penetration of RTDs and vodka, by gender and age, January 2011
                                                                                                                            • Consumer Attitudes towards the Potential of the New RTDs

                                                                                                                              • Key points
                                                                                                                                • RTD cocktails, in particular, have significant growth potential
                                                                                                                                    • Figure 45: Consumer attitudes towards the new RTD spirit mixers and RTD cocktails, January 2011
                                                                                                                                  • Convenience and cost are impressing RTD cocktail drinkers the most
                                                                                                                                    • Figure 46: Attitudes towards the new RTD cocktails – drinkers of these products versus general alcohol drinkers, January 2011
                                                                                                                                  • RTD spirits and mixers are also proving a hit
                                                                                                                                    • Figure 47: Attitudes towards the new RTD cocktails – drinkers of these products versus general alcohol drinkers, January 2011
                                                                                                                                  • The rising importance of the ‘in between’ occasion
                                                                                                                                      • Figure 48: Occasions for buying the new RTDs over the past 12 months, January 2011
                                                                                                                                  • Consumer Attitudes: Vodka versus Gin

                                                                                                                                    • Key points
                                                                                                                                      • Vodka drinkers are demanding premiumisation
                                                                                                                                          • Figure 49: Attitudes towards vodka, January 2011
                                                                                                                                        • Purity still trumps complexity
                                                                                                                                          • Gin is still seen perceived as ‘of a bygone age’
                                                                                                                                            • Figure 50: Attitudes towards gin, January 2011
                                                                                                                                            • Figure 51: Attitudes towards gin – gin drinkers versus all alcohol drinkers, January 2011
                                                                                                                                          • Premium gin can capture the new generation
                                                                                                                                          • Appendix – Broader Market Environment

                                                                                                                                              • Figure 52: Forecast adult population trends, by socio-economic group, 2005-15
                                                                                                                                          • Appendix – Brand Communication

                                                                                                                                              • Figure 53: Media advertising spend on gin, rum*, vodka and RTDs, by brand, 2008-10
                                                                                                                                              • Figure 54: Media advertising spend on gin, rum*, vodka and RTDs, by advertiser, 2008-10
                                                                                                                                          • Appendix – Consumer Usage for White Spirits and the New RTDs

                                                                                                                                              • Figure 55: Consumption of white spirits, January 2011
                                                                                                                                              • Figure 56: Consumption of the new RTDs, by demographics, January 2011
                                                                                                                                              • Figure 57: Consumption of white spirits, by demographics, January 2011
                                                                                                                                              • Figure 58: Consumption of flavoured and unflavoured vodka, by demographics, January 2011
                                                                                                                                              • Figure 59: Drinkers of vodka and other white spirit drinkers but not gin, by demographics, January 2011
                                                                                                                                              • Figure 60: Frequency of drinking vodka in home, by demographics, 2010
                                                                                                                                              • Figure 61: Frequency of drinking vodka elsewhere, by demographics, 2010
                                                                                                                                              • Figure 62: Frequency of drinking gin in home, by demographics, 2010
                                                                                                                                              • Figure 63: Frequency of drinking gin elsewhere, by demographics, 2010
                                                                                                                                              • Figure 64: Frequency of drinking white rum in home, by demographics, 2010
                                                                                                                                              • Figure 65: Frequency of drinking white rum elsewhere, by demographics, 2010
                                                                                                                                          • Appendix – Consumer Attitudes towards the Potential of the New RTDs

                                                                                                                                              • Figure 66: Agreement with statements on ‘ready-to-drink cocktails’, by demographics, January 2011
                                                                                                                                              • Figure 67: Agreement with statements on ‘ready-to-drink spirits with mixers’, by demographics, January 2011
                                                                                                                                              • Figure 68: Analysis of occasions for drinking white spirits and RTDs, and which drinks were most likely to be bought on which occasion over the past 12 months, January 2011
                                                                                                                                          • Appendix – Consumer Attitudes: Vodka versus Gin

                                                                                                                                              • Figure 69: Most popular attitudes towards gin, by demographics, January 2011
                                                                                                                                              • Figure 70: Next most popular attitudes towards gin, by demographics, January 2011
                                                                                                                                              • Figure 71: Most popular attitudes towards vodka, by demographics, January 2011
                                                                                                                                              • Figure 72: Next most popular attitudes towards vodka, by demographics, January 2011

                                                                                                                                          Companies Covered

                                                                                                                                          • Absolut Spirits Company (USA)
                                                                                                                                          • Bacardi & Company Limited
                                                                                                                                          • Cadbury Schweppes Plc
                                                                                                                                          • Diageo Plc
                                                                                                                                          • Diageo UK
                                                                                                                                          • Finlandia
                                                                                                                                          • Gin & Vodka Association
                                                                                                                                          • Loch Lomond Distillers
                                                                                                                                          • Pernod Ricard
                                                                                                                                          • Sipsmith Independent Spirits
                                                                                                                                          • V&S Vin & Sprit AB
                                                                                                                                          • William Grant and Sons Distillers Ltd

                                                                                                                                          White Spirits and RTDs - UK - March 2011

                                                                                                                                          £1,750.00 (Excl.Tax)