Diageo to focus on RTDs to maintain Spanish growth

- Last updated on GMT

Related tags: Pernod ricard, Diageo

The success of J&B Twist and Smirnoff Ice in Spain has
convinced Diageo that RTD products are the way forward in a market
where it has been steadily losing sales in recent years.

Diageo, the UK-based wine and spirits group, has been holding a meeting this week with all its Spanish workforce as part of its ongoing efforts to strengthen its market position in Spain.

According to a report in the Spanish newspaper Expansion​, the company is focusing on new products as the best way of reversing a steady decline in sales in the Spanish market over the last few years. With this in mind, Diageo​ is said to be preparing a number of launches in the low-alcohol segment of the market, in particular the pre-mixed spirit products with which it has had so much success in other markets.

Diageo has already launched its flagship ready-to-drink (RTD) brand Smirnoff Ice in the Spanish market, but Spain's penchant for whisky has also led to the development of the J&B Twist brand, a whisky-and-lemon-flavoured RTD. The success of both these products has now convinced the company that this is the way forward in the Spanish market, where spirit-based long drinks are extremely popular.

Designed to take on the bottled beer market, Diageo has already had a great deal of success with these RTD products in numerous other countries such as the UK, the US and Australia, and the company is hoping that Spain will be the latest country to take to the pre-mixes - and is preparing to invest heavily in marketing to ensure that they do.

Because success is not always guaranteed, it would seem. J&B Mack, a product very similar to J&B Twist, was launched by Diageo in Greece prior to the Spanish launch, and that product has since been withdrawn as a result of consumer indifference, according to the paper. J&B Twist also went through various formulations before Diageo found what it hopes will continue to be the winning formula.

The paper gave no indication of what RTD products Diageo was preparing to launch in Spain, but given that country's substantial consumption of gin, it is possible that an RTD based on that spirit could figure prominently.

Diageo is one of the leading producers of RTD products, with its brands such as Smirnoff Ice, Smirnoff Mule and Archer's Aqua, but the recent failure of the Captain Morgan Gold brand in the US has highlighted the fact that even major players can get their fingers burnt if the product is not what consumers want.

Only Bacardi has really rivalled Diageo in terms of brand development - it produces the Bacardi Breezer, Bacardi Silver and Metz brands - but several US companies are now jumping on to the RTD bandwagon, including Jack Daniel's which has produced Hard Cola in association with the Miller brewery.

The other main European spirits groups - Allied Domecq and Pernod Ricard - have been slow to follow suit, however. Pernod Ricard produced Pernod Hex, an RTD product based on its flagship anis brand, but that product has now all but disappeared from supermarket shelves and the French group has hinted at possible RTD products for several years without ever actually producing anything.

Likewise, Allied Domecq has taken until this year to enter the market in any major way, launching Stolichnaya Citrona and Sauza Diabolo during the summer in the US.

So despite the success of RTD brands in many markets - primarily the main English-speaking countries - the jury is still out on whether consumers in other parts of Europe, especially the Latin countries, will take to them in the same way. Companies clearly believe so, given the steady stream of products being launched onto the market - such as Campari Mixx from Italy just last month - but only time will tell.

Related topics: R&D, Diageo

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