Discounters have been steadily building up their presence in the global alcoholic drinks market over the last decade, according to Euromonitor International's latest global briefing 'Global Alcoholic Drinks: More Bad News for the On-trade'. The arrival of the current financial crisis and a subsequent return to the values of thriftiness and inconspicuous consumption have provided the channel with an additional boost, whilst clearly illustrating that opportunities are still present even during times of economic gloom and instability. Spiros Malandrakis, Alcoholic drinks analyst at Euromonitor International, investigates.

According to Euromonitor International, convenience stores, along with discounters, were the fastest growing store-based channels between 2003 -2008, posting respective CAGRs of 3% and 4%. These figures serve as a reflection of the two opposing trends of impulse purchasing and bulk buying. Nevertheless, in the current economic environment value for money has become more important than convenience. Hence, discounters are expected to benefit further, and the growth seen in recent years is expected to accelerate, particularly over the short to medium term. Convenience stores, meanwhile, might see future sales slow as consumers are expected to make fewer impulse purchases and instead plan their shopping, which will benefit larger retail formats.

The discounter channel is particularly dynamic in Eastern Europe, posting a 10% CAGR over 2003-2008 for alcoholic drinks, and to a lesser extent in Asia-Pacific, where it achieved a 7% CAGR, although penetration levels remain comparatively low in the region. On the other hand, it accounted for the highest share of alcoholic drinks in Western Europe, commanding 14% of sales in 2008.

The share of the off-trade accounted for by discounters for wine on a global level remains the strongest, rising from 9.2% to 9.7% over 2003-2008. Major discounters like Aldi and Lidl are playing a part in this, although the alcohol sales of discounters are disproportionately concentrated on wine, which is particularly well-suited to their bulk-selling business model. On the other hand, discounters accounted for a mere 3% and 2% respectively of beer and spirits sales on a global level in 2008 as consumers remained largely brand loyal and sceptical regarding the quality credentials of their private label variants.

Euromonitor International believes that the growth of discounters could encourage sales of economy and private label alcoholic drinks at the expense of premium and branded variants as the financial contraction deepens. The channel is expected to play an increasingly important role in the context of the challenging economic environment and will continue to be positively impacted over the short and medium term. Taking into consideration that the number of outlets on a global level is expected to continue to rise, posting a 3% CAGR over 2008-2013, the channel's prospects remain bullish. Western Europe will continue to account for the greatest number of outlets, based primarily on the format's success in countries such as Germany and Spain. The likes of Aldi and Lidl, with 6,776 and 7,288 outlets respectively in Western Europe in 2008 will become increasingly popular with savvy middle-class shoppers who appreciate the value for money they offer and do not mind their lack of choice and stripped-down stores.

Germany is well known for its acceptance of the discounter format and the channel's performance over the review period can be used as a benchmark for future scenarios. Although the volume of beer sold by off-trade channels in Germany declined by 8.4% over the 2003-2008 period, discounters are growing their market share at the expense of independent and specialist stores. Private label beer offerings have played a significant role in this success, accounting for 9.3% of beer sales in 2007 (up from 5.8% in 2003). During much of this period, consumer confidence was low in Germany, making the average German consumer relatively price-sensitive, a trend that was further exacerbated following the 2001 crisis. The rise of private label has also been facilitated by the fragmented nature of the German beer market, where even the leading brand - Oettinger - enjoyed a share of just 5.9% in 2007. Private label beers have also found success in Spain and Italy, where they enjoyed market shares of 9.8% and 7.3%, respectively, in 2007. However, they have been less well received in the UK, where their market share fell from 1.7% to 1% between 2003 and 2007 as they are regarded as a distinctly inferior alternative to branded beers.

Anecdotal information and provisional findings reinforce the argument that discounters in Western Europe are thriving in the current recessionary environment. Aldi is attempting to appeal to the palate of the masses through the introduction of a white wine that claims to 'go with anything'. Riesling Anything Goes was launched in the UK in July and retails at only GBP3.79 (US$6.19) per bottle, bolstering the discounter's arsenal and reinforcing the view that wine is best positioned to take advantage of the 'pile 'em high, sell 'em cheap' motto.

And, as cash-strapped consumers have yet to see 'green shoots' blossoming in the real economy, discounters' penetration rates will continue flourishing.