Blog: Olly WehringSpirits in the UK - trade up while prices go down?

Olly Wehring | 19 February 2007

At Diageo’s interim results last week, we managed to grab hold of the head of the company’s European operations, Andrew Morgan, for a quick one-to-one (the results of that chat will be ready exclusively for you, dear reader, tomorrow).

The UK off-trade spirits market seems to be high on the agenda, not only for Morgan, but also for Adrian McKeon, Beam UK’s MD (with whom we also have an exclusive interview coming up later this month), and Pernod Ricard UK. The latter has trumpeted its strong showing in the sector today (19 February), while highlighting how tough the market has become.

In the last eight weeks of 2006, Pernod said, the overall spirits category in the UK was down by 1% in value and by 4% in volume. While Pernod may have outperformed the market as a whole, the battle of Christmas 2007 will may drag the French group into the fray.

Morgan, meanwhile, conceded that the battlefield is getting bloodier. “We did draw something of a line in the sand in terms of what we were prepared to support with the retailers this Christmas and it cost us volume,” he told us. “We knew we’d lose some significant volumes, but as far as I’m concerned this is the right thing to do for the brands. It was negative for us but this is about the health of our brands for the long-term.”

So, is this some sort of tipping point? How do these drinks companies, so keen on ‘premiumisation’ and trading up, maintain this ethos while spirits sales - and volumes - slide in a market dictated by price? Does this not do the brands some damage? And where will this all end?


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