Premiumization strategies in alcoholic drinks: innovating to drive value through brand and product enhancement
Due to rising affluence and increasing levels of health consciousness, growth in alcohol consumption has slowed in Western markets in recent years, while the sales of brands perceived as ‘premium quality’ have risen. Meanwhile in the developing world, wealthier consumers are following the same trends, whilst lower-income consumers are increasing their consumption of beer and other branded alcoholic drinks as they are increasingly able to afford them. Consumption occasions have has also changed. In markets that traditionally have a strong on-trade focus such as the UK, people are drinking more at home than in bars, restaurants and clubs – a trend that was established by the time of the 2007-2010 global financial crisis, but that was also exacerbated by its impact on incomes.
This report evaluates the growth and importance of premium alcoholic drinks across beer, cider, flavored alcoholic beverages (FABs), spirits and wine. It provides insight into effective premiumization strategies and makes recommendations on how premium brands can succeed in an economically challenging and competitive market.
Over the next 10 years, 1.2bn people in Asia- Pacific will be born into or move into the global middle class, representing the largest single expansion in consumer spending power ever recorded.
Using unique flavors and ingredients has become a focus area for differentiating products and adding perceived value, as they can enhance a drink’s positioning of authenticity, heritage, quality, or exclusivity.
Consumers increasingly want to know the story behind a brand, as part of the discovery that sets them apart from others and giving them ‘insider’ status into a perceived exclusive world.
As consumers seek out masstige products due to the challenging economic environments, manufacturers and retailers are looking beyond price to image, packaging, and marketing to deliver an affordable premium experience.
Dos Equis premium beer has grown in the US based on a positioning as ‘interesting’, meeting consumers’ self-expression needs. Heineken and Samuel Adams have struggled in the same market, as competition has eroded their uniqueness and points of difference.
Use this report to...
• Understand the underlying economic, social, and psychological consumer drivers of premiumization and how they have evolved.
• Review case studies highlighting strategies that manufacturers are using to drive consumers to their premium brands, reclaiming premium status and defending against masstige brands.
• Learn how product attributes (e.g. sensory features) and brand attributes (e.g. ego gratification) can be used to drive up the price of alcoholic drinks.
• Identify the fastest growing alcoholic drinks segments and sales channels and learn the long term impact of the recession on consumer behavior.
• Compare the opportunities for premiumization by market and assess the future challenges and opportunities for developing high-end products in the future.
• Gain insight into the intelligence on changing economic and market forces and how they are influencing premiumization strategies.
Premiumization involves persuading consumers to pay more for the same volume of alcohol, by providing them with product and brand attributes that fit with their desire to improve their lives, or their perception of their lives.
The key consumer-level factors that drive premiumization are the desire to improve social status, the desire to improve taste experience, and the desire to have a better understanding of the products they consume.
The global financial crisis has slowed the trend towards greater going-out spend in total, while continuing to hit on-trade drinking behaviors. This has reduced the opportunity for premium drinks launches, which have tended to start in the on-trade.
Due to the recession and low consumer confidence, going-out spending has fallen in developed markets and there is evidence of consumers switching to cheaper brands of alcohol. However, growth remains strong in the developing world.
The concept of ‘masstige’ and democratized luxury has affected consumers across all income groups. Going forward, consumers will continue to expect to pay bargain prices for high-quality products, and retailers will force manufacturers to oblige.
Your questions answered...
• How has the recession impacted consumer behavior with regards to purchasing premium alcoholic drinks and how will this influence future consumer trends?
• What obstacles do marketers face selling Western-style premium alcoholic drinks in China and India, and how can they be overcome?
• What challenges will premium brands face in the future and how can they maintain or enhance their premium positioning?
• What are the key consumer drivers of premiumization in alcoholic drinks and how have they changed over time?
• How have specific brands used premiumization strategies to drive sales?
• How big of a threat are private label and masstige brands to premiumization?
• How can marketers deal with declining onpremise sales and what new opportunities for premium brands exist in this channel?
Table of contentsExecutive summary
Consumer drivers of premiumization
Premiumization through product attributes
Premiumization through brand attributes
The evolution of premiumization strategies
Chapter 1 Introduction
The scope of the report
Chapter 2 Market overview
The evolution of premiumization
Growth trends in premium alcohol
Value and volume trends
Growth variations within categories
On-premise versus off-premise
Upscale NPD analysis
Premium development fell in 2009 due to the downturn
Premium NPD is focused on spirits and RTDs
Chapter 3 Consumer drivers of premiumization
Consumer confidence is still low
Personal income has been hit by the recession
Alcohol spending is lagging behind incomes in developed markets
Spending on alcoholic drinks is concentrated among the wealthy
The developing world middle class is poised for massive growth
Middle-class values support premium alcohol purchasing
‘Luxury’ products are increasingly available to mass consumers
Individualism presents a valuable marketing target
The importance of descriptors
Three key attributes are associated with premium alcohol consumption
Chapter 4 Premiumization through product
Unique flavors and ingredients
Unique shapes and materials
Chapter 5 Premiumization through brand
Value for money
Chapter 6 The evolution of premiumization
Case study 1: Courvoisier-Repositioning by leveraging brand heritage
Case study 2: Cîroc - Reviving growth through celebrity endorsement
Case study 3: Jameson Irish whiskey – Focus on ‘younger’ on-premise consumers
Case study 4: Russian Standard – Global expansion based on heritage and craft
Case study 5: Dos Equis – Inspiration through advertising
Case study 6: Heineken and Samuel Adams – Maturity leads to loss of cachet
Case study 7: Patron tequila – Creating a super-premium niche segment
Case study 8: Svedka –Offering quality for a lower price
Chapter 7 Future outlook
Volume growth and premiumization will clash
Continued lagging in on-premise sales
Re-creating on-premise experiences at home
Enhancing the on-premise experience
The consumer focus will shift towards value for money
Self-expression will partly displace conspicuous consumption
‘Cheap chic’ will gain momentum
The democratization of luxury has devalued ‘premium’
Delivering on brand promise
China and India offer opportunities, but present major obstacles
List of Figures
Figure 2.1: The evolution of premiumization
Figure 2.2: Value and volume growth in the global alcoholic drinks industry, 2004-09
Figure 2.3: Global alcoholic drinks price growth by category, 2004-2014
Figure 2.4: Global alcoholic drinks volume growth versus price growth, 2004-2009
Figure 2.5: On-premise and off-premise category trends, 2004-2014
Figure 2.6: Share of upscale launches as % of total alcoholic drinks launches, 2006-2009
Figure 2.7: Sector share of upscale alcoholic drinks launches (%,) 2006-2009
Figure 3.8: Key consumer drivers of premiumization
Figure 3.9: Consumer confidence 2006-2010
Figure 3.10: GDP at purchasing power parity (PPP) in $ per capita, selected major economies, 2004-2014
Figure 3.11: US alcoholic beverages over/under-spending by household economic status, 2009
Figure 3.12: Trends in global middle class growth
Figure 3.13: Maslow’s hierarchy of needs
Figure 3.14: How the hierarchy of needs determines consumption behavior
Figure 3.15: How the trend towards individualism encourages premium product consumption
Figure 3.16: Key attributes of upscale alcoholic drinks launches, 2006-2009
Figure 3.17: Key product attributes in upscale alcoholic drinks launches, 2006-2009
Figure 3.18: The three key attributes associated with premium alcoholic drinks consumption
Figure 3.19: Ego gratification product attributes in upscale alcoholic drinks product launches, 2009
Figure 3.20: Naked Chase Pure English apple vodka from Chase Distillery
Figure 3.21: Aka Budo variant of TaKaRa Oishii Chu-Hi from Takara Shuzo
Figure 3.22: Jefferson’s Presidential Select Bourbon from McLain & Kyne Ltd
Figure 3.23: Pleasurable experience product attributes in upscale alcoholic drinks product launches, 2009
Figure 3.24: L'Amateur David Leclapart Champagne and The Glenlivet XXV Scotch whisky
Figure 3.25: Educated choice product attributes in upscale alcoholic drinks product launches, 2009
Figure 3.26: Zaya Gran Reserve Rum and Finsbury Grain Vodka
Figure 4.27: Product-level aspects of premiumization
Figure 4.28: Belvedere Intense vodka from Moët Hennessy and Ravenswood Winery’s slogan
Figure 4.29: Samuel Adams Utopias
Figure 4.30: 10 Cane rum and Tanqueray Rangpur
Figure 4.31: Bulldog gin
Figure 4.32: ORO Brut Reserva Cava and Gold POP Disco
Figure 4.33: O2 sparkling vodka and Krait Prestige champagne lager
Figure 4.34: Le Rituel par Christian Louboutin de Piper-Heidsieck
Figure 4.35: U'Luvka vodka, Crystal Head vodka, Absolut Masquerade vodka and Solerno Blood Orange liqueur
Figure 4.36: Summer Draft beer
Figure 4.37: Stella Artois pouring ritual and glass
Figure 4.38: Veuve Clicquot DesignBox and Full Circle wine in a plastic bottle
Figure 4.39: Coors Light cold activated can from MillerCoors
Figure 4.40: Ty Ku liqueur
Figure 4.41: Tito's Handmade vodka
Figure 4.42: Hendrick’s gin and Pur Spirits
Figure 4.43: Last Drop Finest Aged 1960 Blended Scotch Whisky
Figure 4.44: Prairie Organic vodka and Purus vodka
Figure 4.45: Benromach Speyside organic single malt scotch
Figure 4.46: Biodynamic Beta-Delta wine
Figure 4.47: Stampede Light Plus and Select 55 beer
Figure 4.48: White Lotus vodka
Figure 5.49: Brand-level aspects of premiumization
Figure 5.50: Suntory The Owner’s Cask
Figure 5.51: Glenmorangie Single Malt Scotch Whisky varietals
Figure 5.52: Blackbird Vineyards’ wines
Figure 5.53: Danny DeVito limoncello and Trump super-premium vodka
Figure 5.54: Celebrity Cellars wines
Figure 5.55: Johnnie Walker Striding Man Society
Figure 5.56: Three Olives vodka
Figure 5.57: Colorado Native beer and Snap Tag
Figure 5.58: Nuvo L'Esprit de Paris sparkling liqueur and p.i.n.k vodka
Figure 5.59: Thomas H. Handy Sazerac rye whiskey
Figure 5.60: Double Cross vodka
Figure 5.61: Sam’s Club Rue33 vodka and Costco’s Kirkland tequila
Figure 5.62: Rodney Strong sustainability practices
Figure 5.63: 360 vodka
Figure 5.64: Stiletto Vodka
Figure 6.65: Pass the Courvoisier record cover
Figure 6.66: Courvoisier the future 500
Figure 6.67: L’Essence de Courvoisier
Figure 6.68: Courvoisier Exclusif and Courvoisier cocktails
Figure 6.69: Le Nez de Courvoisier at Charles de Gaulle airport
Figure 6.70: Sean Diddy Combs for Cîroc
Figure 6.71: Cîroc advertisements and Cîroc Nights on Facebook
Figure 6.72: Jameson Irish Whiskey
Figure 6.73: Jameson outdoor projection advertisement and television advertisement
Figure 6.74: Jameson silver bottle
Figure 6.75: Russian Standard bottles
Figure 6.76: Russian Standard beauty pageant promotion
Figure 6.77: Russian Standard Nightlife Tour promotion
Figure 6.78: Dos Equis “Most Interesting Man” advertisement
Figure 6.79: Dos Equis Most Interesting Man online and Dos Equis Most Interesting Academy
Figure 6.80: Heineken Draught Keg
Figure 6.81: Heineken television commercial, 2010
Figure 6.82: Sam Adams lager
Figure 6.83: Patron tequila range
Figure 6.84: Patron travel retail display
Figure 6.85: Svedka vodka bottle and advertising
Figure 7.86: Forecast value and volume growth in the global alcoholic drinks industry, 2009-2014
Figure 7.87: Global alcoholic drinks forecast volume growth versus price growth, 2009-2014
Figure 7.88: Global alcoholic drinks forecast on-trade volume sales (liters of pure alcohol m), 2009-2014
Figure 7.89: Perrier-Jouet sensitive journey
Figure 7.90: Examples of ready-to-drink alcoholic beverages
Figure 7.91: Perrier-Jouet champagne bar
Figure 7.92: Dewar’s craftsmanship
Figure 7.93: Courvoisier connoisseurship
Figure 7.94: Gran Tierra Chilean wine
Figure 7.95: Jack Daniel’s advertisement
Figure 7.96: Wenjun white spirits
List of Tables
Table 2.1: Global alcoholic drinks market value & value forecast by country, ($bn), 2004-2014
Table 2.2: Global alcoholic drinks market volume & volume forecast per category, liters pure alcohol (m), 2004-2014
Table 2.3: Global alcoholic drinks market share of throat by category (liters pure alcohol), 2004-2014
Table 2.4: Global alcoholic drinks average pricing and weighted pricing growth ($/liter alcohol),2004-2014
Table 2.5: US spirits market premiumization and growth (%), 2007-2009
Table 2.6: Global beer segment share of throat (% by volume), 2004-2014
Table 2.7: Region share of upscale alcoholic drinks launches (%), 2006-2009
Table 2.8: Sector share of upscale alcoholic drinks launches (%), 2006-2009
Table 3.9: Alcoholic drinks spending as percentage of GDP, by country (%), 2002–2012
Table 3.10: Middle class population size (m) & share of global total (%), 2009-2030
Table 3.11: Top 20 descriptors in upscale alcoholic drinks launches (%), 2006-2009
Table 3.12: Top 10 fastest growing descriptors in upscale alcoholic drinks launches (%), 2006-2009
Table 4.13: Selected examples of process claims in premium products
Table 5.14: Selected examples of celebrity-endorsed brands
Table 5.15: Selected examples of premium brand stories
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