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Alcoholic Beverages / Marketing StrategiesMichael Spandern- 1 -Spandern Agribusiness Consultingwww.spandern.com

Promoting Alcoholic Beverages:

The Effectiveness of Various Marketing Strategies

Michael Bruno SpandernAgribusiness ConsultingBahnhofst. 81, 24582 BordesholmGermanymike@spandern.com

1 Introduction

The promotion of alcoholic beverages is most obviously dominated by branding efforts of variouslarge producers

. Most campaigns noticeable to the consumer are either re-launches of alreadyexisting products aiming to adapt the image of a product to a shifting target by simply changing theproduct appearance (i.e. logos, colours, packaging, slogans, strap line) or the continuous output of new or seemingly new products at a high frequency. The latter generally is the domain of largercompanies using the power of their company brand and market penetration and it represents asevere challenge for small producers trying to sustain their market share. Despite the tremendoussuccess of single products this approach has lead to a continuously decreasing lifespan of products,increasing costs of entering the market and protecting innovations. Several authors believe thisproduct orientated behaviour is even responsible for the severe losses of product groups with arather traditional image such as beer and whisky in Western Europe. Accelerating product varietywithin one product category might have lead to the shift of consumers to completely differentproduct ranges

.There is need for discussion regarding the dangers of alcohol consumption and regular moderateconsumption by healthy adults must be strictly separated from alcohol abuse.The marketing of products, such as alcoholic drinks, needs greater care and responsibility thanothers particularly with reference to their availability to young people. The advertising of alcohol isusually subject to specific rules in addition to general codes

. It is therefore crucial to evaluate theeffectiveness of various marketing strategies with regard to the success of a single product orcompany within the context of the overall trend of consumer behaviour. The following will discussthe observations for beer and spirits.

2 Marketing strategies in the beverage industry

In past years, the alcoholic beverage industry was not known for its high degree of creativity orinnovation

. Consequently the traditional established beverage market is stagnating

. However, as

Alcoholic Beverages / Marketing StrategiesMichael Spandern- 2 -Spandern Agribusiness Consultingwww.spandern.com

sales in Western Europe started to lag and even fall in some cases, and competing beverages tookaway market share, the companies with leading brands began to satisfy consumer demand withmore new products and extensions. In addition, some companies have initiated aggressive marketingand promotional programs to acquaint potential consumers with the pleasures of consumingalcoholic beverages.Some of the changes include using new types of ingredients, using organic ingredients, addingflavours to drinks previously only known unflavoured, creating products from a single malt or barrel,and creating healthy versions. In addition, companies use such strategies as niche marketing,packaging innovations, and tie-in promotions for sports events and social causes.To overcome the risks of the pure product orientated “tunnel view”

most classical marketingtextbooks often demand the development and implementation of a combination of variousmarketing strategies or a specific marketing package

. This in practice is mostly not the casebecause of the lack of scientifically proven standard processes for the selection of suitablestrategies

. No generally recognised system of methods or procedures is described

. Finding theright strategy to market agricultural goods and food products and putting such a strategy intoaction, is not mathematically formalisable. Strategic planning is rather a creative, oftenspontaneous process and very dependant on the personality of the planer or decision taker

. In thiscontext ROVENTA

describes two typical characters:1.

The manager depicted as an entrepreneur is controlling his environment, actively searchingfor significant opportunities and relating them to his vision of strategy

.2.

The manager “mudding through”, is only acting when forced to and the can only consider afew convenient alternatives, each of which will only cause small non-disruptive changes inhis/her organisation

5,10

.The British “Beer-Naturally”- campaign as an example is doubtlessly aiming at the more committedstyle of management, willing and able to communicate the company’s vision.Basically for main directions of market orientated product strategies are known

12, 13

:1. Market penetration: existing product for existing market2. Market development: existing product for new market3. Product development: new product for existing market4. Diversification: new product for new marketAll of the above are also found as classical tools of strategic planning within the food and beverageindustries but not all techniques are used for all product groups and there is a strong regionalvariation, especially between Eastern and Western Europe. Similar to other consumer drivenmarkets the success of marketing campaigns for alcoholic beverages underlies overall trends andtemporary fashion phenomena. But amongst all foods alcoholic beverages are probably the oneproduct group most affected by legislative interventions

, whether through restrictions in

Alcoholic Beverages / Marketing StrategiesMichael Spandern- 3 -Spandern Agribusiness Consultingwww.spandern.com

production, such as quotas and state monopolies, or through restrictions in advertising means, suchas claims and free choice of media.

2.1 Marketing beer

Beer is the most dominant alcoholic beverage throughout Europe. An average of around 40 % of thealcohol consumed annually comes out of beer (chart 1). Beers include lagers and ales. Lagers aremarketed as super premium, premium, specialty, light/lite, dry, ice, malt liquor and flavoured. Alesare marketed as super premium, premium, specialty and flavoured. Beers have always beenproduced with different brewing styles, but the current trend is to use new types of grains such asall barley or all wheat, particularly by marketers of specialty beers and microbrews; or hopsimported from different parts of the world; or to add sweet, fruit or spicy flavours. Hemp(cannabis) as an additive or even as a replacement for hops and seasonal beers also provide newtaste experiences for consumers

.Recently the especially brewing industry in Europe puts most efforts into product development tocompete with the rapidly growing group of ready-to-drink (RTD) spirits, or “alco-pops”, and usesadvertising techniques clearly addressed to young people. To influence the drinking preferences of consumers between 18 and 30 is crucial for reliable predictions. It is the background for salesdevelopments once these consumers reach an age of higher disposable income. It is noticeable, inthis context, that during the past decade the consumption of beer has declined in several WesternEuropean countries (chart 2) and whilst the overall consumption of alcoholic beverages hasstagnated or even increased (chart 3).Chart1: Alcohol out of Beer in percent of total Alcohol Consumption