Premiumisation, health concerns and demographic shifts are likely to be among the key factors influencing the strategies of beverage alcohol companies over the next five years, according to a report from Business Insights. Ben Cooper examines the report's findings.

Given how often we hear drinks marketers refer to the premiumisation trend, findings contained within a recent report from Business Insights - that drinks executives expect it to be a key strategy driver - may not come as a huge surprise. But the degree of unanimity on the matter only serves to confirm just how significant the premiumisation trend is likely to be.

The report Growth Strategies in Alcoholic Drinks - Emerging Trends in Beer, Wine and Spirits, analyses key market drivers and issues affecting the industry, regional and category growth opportunities, innovation and new product development and major market trends. For the report, Business Insights conducted a survey of industry executives in order to pinpoint key trends likely to affect the alcoholic drinks business over the coming five years.

According to the report, as many as 81.2% of the industry executives polled said they rated premium brands as those that will have significant or high growth potential for alcoholic drinks manufacturers over the next five years.

Interestingly, the report also confirmed the continuation of another prevailing trend in the drinks market, the growth in private label.  However, here too the emphasis appears to be on premiumisation, with the report revealing that 53.6% of executives expected premium private label brands to be the second fastest growing category over the next five years.

"It is evident that owners of private labels are repositioning to take advantage of growth at the premium end of the market," the report states. "Private label, initially developed as a 'recession proposition', is now being re-formatted to offer premium quality."

Drinks executives are also expecting new product development to be affected by increasing health-consciousness going forward. The survey revealed that some 66.7% of executives polled expected health consciousness "to have a significant impact or a high impact on alcoholic drinks NPD over the next five years".

Growing health consciousness will give rise to a number of key product trends, the report forecasts. Within the overall health trend, industry executives expect natural and organic products to have the strongest showing in alcoholic drinks NPD, followed by additive-free lines and functional products. Japan leads the market in functional alcoholic drinks, as it does in low-alcohol and alcohol-free offerings. Meanwhile, alcoholic energy drinks, which include stimulants such as caffeine, guarana, taurine and ginseng, are becoming increasingly popular in the US.

In addition to catalysing new product development, growing concern about alcohol and health, along with increasing public and political alarm over binge drinking and irresponsible consumption, is expected to result in tighter regulation of advertising. Indeed, the survey revealed that industry executives expect restrictions on advertising to be the second most important factor influencing NPD strategy, after health concerns, between now and 2010.

The Business Insights report also pointed to some key demographic shifts which are expected to influence the strategies of alcoholic drinks companies over the coming five years.

A key target audience for alcoholic drinks manufacturers is legal drinking age (LDA) to 24-year-olds. However, this age segment is forecast to shrink by 0.4% in Europe and grow by only 0.8% in the US between 2005 and 2010. Older age brackets, however, are forecast to grow and this will bring a new set of challenges for marketers, the report states.

By 2010, it is estimated that seniors (50 years of age and above) will make up approximately 46% of both the European and American adult population. The report forecasts that the 50-plus age segment across Europe and the US will swell by some 7.8m by 2010.

"This group has not traditionally been the focus of many manufacturers in the alcoholic drinks industry," says the report, "but with numbers growing in this age segment and the financial strength of this age group, it will increasingly form a focus for marketers, particularly of luxury and premium products."

One possible caveat, however, is the fact that this age bracket will be most influenced by health concerns. However, even if they moderate their consumption on health grounds, with higher disposable income and a preference for quality products, senior consumers will tend to drink less but better, which should serve to bolster the premium trend.

The 25-49 age bracket will remain the single largest consumer segment at 222.8m people across Europe and America, and is set to become increasingly lucrative for the drinks industry as young adults put off rights of passage and extend their 'youth' into their 30s, according to the report.

Business Insights also suggests that while the LDA-24 age segment is set to remain static over the next five years, it will continue to be a key target for drinks marketers because of the disproportionate amount of income this group spends on alcoholic drinks.

One of the most significant trends within the LDA-24 age group highlighted in the report is increasing alcohol consumption among women. On average, young adult female per capita alcohol consumption has risen in Europe and the US from 110 litres in 1999 to 148 litres in 2004, and this growth is forecast to continue through to 2009.

The female consumer segment will offer increased opportunity to alcoholic drinks marketers moving forward, the report forecasts, with recent product introductions showing that drinks companies are already beginning to respond to this growing demand.


For more information or to download this report, click here.