European sales of flavoured alcoholic beverages (FABs) grew showed compound annual growth of 21 per cent last year to reach a total value $4.9 billion (€4.5bn). But according to a new report from market analysts Datamonitor, the market is centred on just a handful of northern European countries.
The report, The European Beer, Cider and FABs Market to 2007, reveals that while there has always been demand for sweet alcoholic drinks, the biggest change over the last five years has been that through innovative marketing, these beer alternatives have become trendy.
The UK is the largest FABs market in Europe, worth $2.9 billion in 2002. The next largest market is Germany, where flavoured beer-based drinks have been one of the few areas of growth in a stagnant beer, cider and FABs industry. However, in many Southern European countries (such as Italy and Spain), FABs have not succeeded in penetrating the drinks market - and are unlikely ever to do so, according to Datamonitor.
Smirnoff, Bacardi lead UK market
The UK market has long been the driver of growth in the European FABs market, and last year accounted for a massive 60 per cent of total European revenues. The market has seen two waves of growth over the last five years: the first fuelled by the craze for alcoholic soft drinks (or alcopops) such as Hooper's Hooch and Two Dogs; the second driven by the trend towards premium premixed spirits (also known as PPS or RTDs).
Diageo's Smirnoff Ice is the main success story of the UK market, according to Datamonitor. Since its launch in 1999, it has grown to take almost a third of the UK FABs market (and an even higher share in the US). Thanks to Smirnoff Ice - and Bacardi Breezer, its closest rival - spirit-based FABs dominate the European market in value terms, reaching $4.3 billion in 2002 and representing 88.5 per cent of the market as a whole. FABs overall have been the fastest-growing sector of the UK beer, cider and FABs market in recent years, experiencing growth rates in excess of 50 per cent.
"It's all about fashion and marketing," said Datamonitor analyst John Band. "There will always be a ready market for sweet-tasting drinks that mask the taste of alcohol - whether they're sweet perries like Babycham, wine coolers, alcoholic lemonades, ciders or even flavoured beers. The drinks industry's great success over the last few years has been to create sweet drinks which are seen as premium products - and which may even appeal to experienced drinkers."
Although penetration in mainland Europe has been significant, the dominance of the UK in this sector will remain unrivalled over the next five years. High levels of growth have also characterised the FAB markets of many northern European countries over the last five years, and subsequently the German and Irish markets rank among the largest in Europe behind that of the UK.
Youth driving the market
Younger drinkers have undeniably been receptive to the advent of FABs, attracted by the products' sweet taste. In tandem with this, aggressive marketing campaigns have fuelled further the drinks' dynamic and fashionable images. Product innovation and extensive advertising will play a pivotal role in the market in the future, claims Datamonitor, both in creating demand for existing and new products and ensuring that market growth is not in danger of stagnating.
"Young female consumers are still by far the key target market. On top of the easy-to-drink sweeter taste, brands such as Archers Aqua have a deliberate feminine focus in terms of packaging and content. And they offer higher alcohol content than beers at a lesser volume, which is another plus: while nobody wants a beer gut, most women find the prospect rather more upsetting than most men," commented Band.
German tastes run to cola beer
In Germany, more and more consumers are drinking FABs, and the category has more than doubled volume sales in the last five years. More importantly, it seems to have staying power, and looks set to remain an integral part of the drinks market because the brands offer young consumers different taste experiences.
FABs may only represent currently 1.94 per cent in terms of value, but there is a serious interest in FABs developing in Germany. This interest is mainly from breweries, which are attempting to diversify their product range against a background of declining beer sales. This means that the most common and popular FABs are marketed as being based on beer. Premixed spirits have made few inroads into the country's $456 million FABs market.
"It would appear that young Germans may be rebelling against the country's tradition of ultra-pure beer: strict beer purity laws have only recently been repealed, and now beers mixed with cola or fruit are surging in popularity," said Band. "Germans have long made cola or lemonade shandies in pubs. As with premixed spirits, it's just a long established bar practice moving to the bottle."
Southerners shun sweet spirits
As in the beer market, the biggest spenders on FABs in Europe are the Irish, who spent $64 per head on FABs in 2002. Not far behind are consumers in the UK, who spend $49 a head on FABs. Belgium, Finland, Greece and the Netherlands are the other European countries where FABs spending is above $10 per head.
In consumption terms, the UK leads the European FABs market, with 5.16 litres per head (almost 21 standard-sized bottles). Ireland comes second with 4.97 litres per person (just under 20 bottles). Germany and Finland follow with 3.62 and 3.19 litres per head respectively.
Yet flavoured alcoholic beverages have not been received equally across Europe. In Italy, for example, consumers prefer 'sodati' aperitif drinks such as Campari Soda and Aperol Soda. These drinks totally dominate Italy's $295 million FABs market, while fruit-flavoured 'alcopops' languish far behind.
In Spain, the dominance of beer as the alcoholic beverage of choice for young people has limited the penetration of FABs - Spanish people simply prefer less sweet options. Consumption of FABs in Spain has nonetheless increased steadily since 1997 from 0.34 litres per head to 0.37 litres per head in 2002. The market is worth just $16.4 million, and is forecast to shrink between now and 2007.
"It's not surprising that Northern Europe leads the market," said Band. "FABs are about going out at the weekend and getting tipsy - and this is something the Scandinavians, the British, the Irish and the Germans do. In places like Spain, Italy and France, where people spread their alcohol consumption throughout the week and drink because they enjoy the taste, FABs are never going to have the same impact."