In a few short years the international market for flavoured alcoholic beverages has grown to nearly 338 million 9 litres cases (including wine coolers), according to research released by beverage analyst Canadean. And whilst growth rates will not be so dynamic in the coming years, the size of the market is now already beyond spirit marketer’s dreams.
The international flavoured alcoholic beverages (FABs) market grew 27% in 2002, expanding the sector by over 71m 9 litres cases. Sales in the world’s three leading markets for FABs, the US, Japan and the UK notched up growth of an impressive 50%, 13 and 26% respectively.
These current high rates of growth will however slow over the medium term, says the report. By 2004, growth rates in the US and Japan are expected to slump to less than 1%, while that of the UK will stand at 12%.
“The stakes are high in the world’s largest market, the US, which has volume sales more than twice those of its nearest rival, Japan. The cost of entry for new products is correspondingly prohibitive. Diageo set the benchmark in 2001 with its $50m spend on Smirnoff Ice. This exercise showed that to quickly create a successful new product with significant volume requires not only a major brand, but also a strong distribution network and a significant marketing budget. So important has the market for FABs now become that despite the prospect of slowing growth, a raft of new launches is expected within the next few months,” said Canadean.
The report goes on to warn that saturation of the market is also a risk in Japan as one product is launched after another. The decline of beer sales has created an opportunity to entice more consumers to purchase drinks that have a modern image and are low in both alcohol and cost. However, warns the report, fierce price competition and heavy discounting by retailers will lead to reduced profitability for producers.
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In the UK flavoured alcoholic beverages have long since cast aside the ‘alcopops’ stigma and its association with under age drinking to become the most profitable of all spirits categories. The market is now served by brands that are properly marketed and developed and, in the opinion of the report’s authors, have longevity.