The ghost of Christmas past made an unexpected appearance in the boardrooms of the major retailers last January. While they each digested their 2002 festive drinks sales, he cast a shadow over the results by demonstrating that their price-cutting ways had effectively cut into their profits.
So, in reflective mood in the run-up to the 2003 festive season, buyers had some tough decisions to make before setting last Christmas’ strategy.
Craig Evans, ACNielsen’s product manager, says: “The previous year’s deals had a big wow factor. So, before Christmas 2003 the trade was worried that prices would go lower and retailers were asking, ‘How much can we grow the market at these prices?’ Luckily retailers saw sense.”
Marcel Hayden, Somerfield’s head of category buying, agrees: “There were silly deals out there but not as many, and most of us took more money. We weren’t trying to out do each other, as in the past.”
The move to EDLP pricing was another factor that made buyers reassess the discount levels that tight margins would allow at Christmas. Hayden adds: “The deep price cuts were not there last Christmas because prices were cheap all year round.”
Despite buyers’ good intentions, there were still a few surprises, such as Iceland setting a £9.99 precedent on a 24-can pack of Stella. However, these unexpected bargains did not prevent the main categories from growing faster in value than in volume, according to ACNielsen.
Overall, take home drinks sales weighed in at £1.3bn in the four weeks to December 27, a gain of 3%. The multiple grocers grew their slice of the market by 5% to £933m as they continued to steal share from the multiple specialists - down a whopping 11%. In contrast, independents netted £84m as sales surged by 6%.
Asda’s controversial move to slash the price of spirits in early November paid dividends. The retailer’s spirits buyer Andy Peake says: “We had a really strong Christmas and gained a record market share in spirits.” Indeed sales were up by 13%, which contributed to Tesco’s share of spirits dropping by 7% and Sainsbury’s by 2%, according to ACNielsen’s Homescan data.
The biggest loser was Safeway with its spirits sales sliding by 16% despite efforts to
match rivals’ on Christmas favourites such as Baileys, which bore the brunt of the deals. Although it remained the bestselling festive spirit, its value was down by 3% on 2002 to £35m. And while this puts it significantly ahead of its Diageo stablemate Smirnoff at number two, there is no doubt it was used as a key footfall driver.
Competition from Whyte and Mackay in the whisky arena helped dull the performance of Diageo’s other power brand Bell’s, which dropped 13% to £21m.
Inside the top 10 spirits, Jack Daniel’s was the star spirits mover - with sales up 29% to £9m, which Evans puts down to Bacardi Brown-Forman’s aggressive promotions.
Diageo also triumphed in the wine sector where its Californian wine Blossom Hill was the runaway Christmas winner, with £18m worth of sales, up 56%. Evans says: “In 2002 a US customs strike stopped Blossom Hill getting into the country, so sales were low.”
The brand also ran a big promotion with Tesco that boosted volume and encouraged drinkers to choose Blossom Hill over US rival E& J Gallo Sierra Valley, which nose-dived 21%.
Elsewhere, the Aussies continued to dominate, thanks to price-cutting. Allan Webb, Sainsbury’s BWS general manager, says: “This was the first Christmas that Australian wine outsold French - helped by special offers on Nottage Hill.”
Overall, wine fared well, with value growth up 6% to £377m, exceeding volume growth which stood at 4%.
Buyers have been unanimous in their concern over RTDs, which were down 10% across the off-trade to £43m. In terms of brand ranking, Bacardi Breezer is still on top, followed by Smirnoff Ice.
Asda’s Peake says: “We are working harder to drive the volumes because the market has plateaued.”
Both Tesco and Sainsbury RTD sales declined significantly, down 11% and 29% respectively. Asda, however, managed to pull them up 9% on Christmas 2002.
Evans believes that RTDs’ waning popularity led retailers to give display space to other categories such as premium lagers, one of the festive season’s cheapest deals. He says: “Premium lagers continued to be discounted whereas standard lagers could not get any lower because prices bottomed the previous year. Pricing was driven by Budweiser and Kronenbourg, which were both much cheaper than in previous years.”
Webb backs this up: “We sold 50% more lager than we did in Christmas 1999. Our half price special offer on 24 cans of Kronenbourg sold exceptionally well, as did cases of Becks, which was the best selling bottled beer.”
The level of discounting enabled Foster’s and Kronenbourg’s growth to stay well ahead of rivals in the top 10 lagers.
Evans says: “Scottish Courage wasn’t particularly active on pricing in 2002 and Foster’s was hit badly. But because it alternates its promotions yearly, Foster’s had an excellent year.”
This was in stark contrast to Coors where a move to equal pricing across all channels saw Carling dip for the second consecutive Christmas, this time by 1% to £31m.
Grolsch declined by 23.8% to £9m, which Evans says is because it did not have as far to fall in price terms because of promotions throughout the year.
Despite Coors’ ambitions, Stella remains the biggest selling beer. With sales up 6% to £69m over Christmas, it dwarfs Baileys, its nearest competitor for the title of the most popular Christmas tipple in take-home.
Evans believes the lessons from Christmas centre on retailers’ ability to make value gains while avoiding deep discounts.
With increasing competition from rivals, the question now is whether the multiples can stick to this agenda.