After a number of years of rapid growth, there is now no doubt that the FAB bubble has burst. But manufacturers still see a long-term role for these products. Olly Wehring examines figures and issues highlighted in the latest report from just-drinks.com, a global market review of flavoured alcoholic beverages (FABs) with forecasts to 2008.

The flavoured alcoholic beverage (FAB) market has been a phenomenon unto itself in the past 10 years. FABs have been widely credited with maintaining sales in the wider alcoholic drinks markets as the more traditional beer and spirits markets have declined. But with the period of heady growth for FABs at an end, we will perhaps now see if they were simply a short-term fad or they have a continuing role to play in the drinks market.

The FAB market has hit a crossroads in its development. The tremendous growth rates achieved in the last five to 10 years amongst the more developed markets have all but disappeared and manufacturers are facing a struggle to inspire consumers to stay with the sector. However, Joey Bergstein, senior vice-president of global marketing for Smirnoff RTDs, believes FABs still have an important part to play on the global drinks stage.

"FABs are here to stay," he says in the report. "The category will continue to be an important part of the alcohol beverages market since they are driven by consumer preferences. Consumers see FABs as a great addition to their repertoire. The incrementality is great news for retailers."

Contrary to popular belief, FABs - or RTDs (Ready To Drinks), malternatives or alcopops - have been around for over 70 years. The origin of the flavoured alcohol beverage market can be traced back to as early as 1932 when Davide Campari created Campari Soda. The launch of the modern FABs market, however, took shape in the early 1990s with the launch of brands such as Hooch and Two Dogs.

These early examples were known only as "alcopops" and, particularly due to their packaging, attracted considerable controversy. Today's sector icons include global brands such as Bacardi Breezer and Smirnoff Ice. The packaging nowadays is less controversial, as these products are closely linked to their mother brands, but RTDs have remained a much debated subject because of their popularity with younger drinkers.

The European market for FABs is dominated by the UK, and while Germany and Italy are significant, the Irish, Finnish and Greek markets all demonstrate high per capita consumption levels. In the US, 2001 saw tremendous growth in the FABs market with the introduction of many new brands to the category, although there has been a decline in growth rates and a shake-out of failed brands in 2003 and 2004. Japan and Australia dominate the market for FABs in the Far East, accounting for around 85% of the region's sales. Amongst the world's largest FAB markets, growth rates have started to decline, however, as the markets mature, consumers become overwhelmed by the array of products on offer and governments seek to impose levies on products with high alcohol content.

Governments across the globe have introduced, or are considering introducing, levies and duties on FAB products. Aside from the chance to increase tax revenue, the main reason behind this are to increase the prices of such products to the consumer to discourage binge drinking trends.

As one of the world's largest FAB markets, the UK presents a strong example of the major issues facing drinks companies. The stigma of leading the binge- and underage-drinking epidemics hitting the headlines almost daily is proving a major burden for the FAB industry. As the Government approaches a general election next year, it has to be seen to be combating this social ill.

Until now, the drinks industry has been self-regulating, but many organisations, the police especially, are calling for legislation to control the advertising and marketing of alcoholic beverages in general. The manufacturers of FABs, in particular, must continue to take consumption of their products amongst young adults responsibly if they are to retain public confidence in the face of this bad press. In addition, the UK market is maturing and FABs have lost their novelty value, so manufacturers are struggling to maintain the larger historic growth rates. All this provides an interesting snapshot of a potential future for the FAB market globally.

Going forward, performance across the developed FAB markets is expected to be 'low growth to slight decline' as the number of brands in the category contracts over time. The FAB market has retreated after a heavy growth period, though the industry is pinning its hopes on successful innovation to bring about a new surge in sales.

With consumer interest declining, successful innovation is the largest hurdle facing the FAB sector over the next four years, the just-drinks report says. It will also be the driving force behind growth in the market, particularly when making good use of already strong consumer trademarks that leverage a parent brand association. "Innovation is clearly the biggest challenge." Chris Vignoe, brand director of Jack Daniel's FABs, at Brown-Forman, told just-drinks. "Consumers demand great taste and refreshment and are always interested in new products and flavours. It is a distinct advantage to be ahead of consumer trends and not be just a 'me-too' product."

There can be no denying the challenges facing the FAB market. And yet, this is a sector that demands respect, primarily for its incredible returns over the last 10 years. The FAB market has provided more than its fair share of headlines - good and bad - in the past, and is likely to provide a fair few more in the years to come.

This feature is based on figures and issues highlighted in this report

A global market review of flavoured alcoholic beverages (FABs) with forecasts to 2008

This brand new report from just-drinks.com analyses the key recent developments and trends in global FAB markets, as well as analysing sales and leading brands across the key markets and forecasting sales to 2008. The report also considers key issues facing manufacturers of FABs and profiles the leading manufacturers, with a particular focus on the two global brands Smirnoff Ice and Bacardi Breezer.