Hundreds of new brewers and dozens of distillers have come into the market over the past five years and major producers have responded by placing increased focus on premium brands that add value.
IRI figures show that BWS sales in Christmas week in 2015 were up 11.5% on 2014 with spirits, sparkling wine and craft beer driving the growth.
Tim Eales, IRI’s strategic insights director, says: "People are changing where they shop for beer, wine and spirits, buying more from supermarkets and drinking less out of home."
This trend from on- to off-trade consumption should be good news for forecourt operators who can adapt to tap into what have become fast-moving trends in the drinks market.
In beer, the buzz is all about ’craft’ but this remains a nebulous category to pin down. The term has been claimed by, or applied to, everything from big bottled ale brands from national and regional brewers, through hard-to-find imports (principally from the US) to the product of established local UK microbreweries.
The waters have been further muddied with the acquisition by global multinational brewers of more ambitious, entrepreneurial small brewers, which some industry commentators have labelled with the pejorative term ’corporate craft’, such as London’s Meantime Brewery, which was bought by Peroni producer SAB Miller a year ago, and Camden Town which was picked up by Stella Artois brewer AB-Inbev.
The appeal of such operations to the major brewers is obvious when the craft effect is stripped out of the beer picture.
Nielsen figures for the year to last June depict a moribund overall take-home beer market, down by 1% in value and volume.
The big four lagers Stella Artois, Foster’s, Carlsberg and Carling remain in the top five off-trade overall drinks brands by value, but all saw sales decline in line with or faster than the overall beer market drop across a similar period.
Carling owner Molson Coors had much more joy with sales of Doom Bar, helping its Sharp’s ale brewing subsidiary to more than double its off-trade sales, while niche imported beers like Ab-Inbev’s Leffe and Heineken’s Moretti chalked up comfortable double-digit growth.
The fundamental shift towards premium brands has also been witnessed in spirits, with vodka, whisky, gin, liqueurs, rum, brandy and tequila all in annual growth according to Nielsen.
Overall, the market is now worth just under £4bn in take-home.
Like beer, the spirits market and gin in particular has seen major brands increasingly come under pressure from smaller, artisanal start-up producers.
Such trends pose questions for retailers in the forecourt sector where there is a tendency to focus almost exclusively on best-selling lines in BWS.
At what point should niche sub-categories and brands earn a place in a mainstream convenience shopping environment? No one wants to miss out on growth segments of the market, but smaller brands and producers represent a risk and can be awkward to source, especially when retailers are locked into a fascia deal. The trick is to strike a balance, introducing a few specialist brands while retaining the familiar BWS products that act as signposts to forecourt shoppers when they’re pressed for time.
Sourcing is becoming easier. The sheer number of brewers that have come on to the market, for example, means that most UK locations have a handful or more of small producers, many of which are eager to supply small quantities on an ad hoc basis.
The emergence of more niche producers has also been accompanied by the rise of smaller wholesalers, such as Pig’s Ears Beer and Beer Paradise, which supply a wide range and have a more flexible approach to minimum drops and mixed pallets.
Beer Paradise director Zak Avery says: "The feedback we get is that, although we may be a little bit more expensive, the list is great, the service standards are high and we’ve always got good availability of stock. You need to have good relationships with brewers to make sure that you have all of the stock you say you have and on time."
But it’s also important in a mainstream environment like convenience retailing not to get carried away with the exciting and the esoteric.
New products add excitement but it’s the established drinks brands that still provide the bulk of volume and revenue in alcohol, while offering reassurance to many consumers.
"When buying alcohol for a special occasion or a gift, people want a brand name on the bottle," notes Eales at IRI.
Mark Gilson runs the long-standing, family-run Oakdene Filling Station business in Ulnes Walton, Lancashire, which has successfully managed to operate as a forecourt store combined with a specialist wine shop for over 30 years, winning several drinks industry awards along the way.
"We’re no different to other specialist drinks stores that aren’t forecourts," says Gilson. "A lot of forecourt shops just end up following a blueprint, just selling a standard offering with the top 20 wines. I think that comes from a lack of knowledge of the market and confidence.
"We have big brands like Bell’s and Gordon’s but we’ve always done specialist stuff on the back of that. We do a lot of gins, malt whiskies and ales in particular."
Paul Isherwood, head of off-trade category development at Diageo GB, says shoppers in general are becoming more informed about what they buy in spirits. "Consumers are interested in the stories, ingredients and provenance of products and this is a trend we are seeing across food and drink and it is influencing purchasing decisions."
One area where convenience retailers have outdone the supermarkets in recent times is in fractional bottles of spirits 25cl, 35cl and 50cl, as opposed to the industry standard 70cl full-bottle format. These packs are increasingly being seen in premium and luxury spirits, with Diageo’s introduction of a six-bottle case of 35cl packs for Tanqueray gin a notable recent example.
Isherwood says Nielsen data shows that fractionals are responsible for 53% of the growth in vodka, with the majority of that coming from 20cl bottles. "Fractionals are the lifeblood of the impulse channel," he adds, "driving 70% of all spirits growth as they provide consumers with the choice to buy a specific size to suit their occasion."
Sparkling wine is another drinks category which has seen a surge in sales, with the grocery market seeing an 18% rise over the Christmas period, and 14.5% over the whole year, with the market now worth more than £900m, according to IRI.
Within that, Prosecco has been the big winner, with rapid growth over recent years as consumers have switched from Spanish rival Cava or sought to save money by buying it as an alternative to Champagne. Nielsen figures to June 2015 show Champagne up just 1%, compared with 25% value growth over the previous 12 months for non-Champagne sparkling wines.
"People have become a bit obsessed with Prosecco," says Gilson at Oakdene. "The danger is that it’s doing a bit of a New Zealand Sauvignon in that it’s got cheaper and cheaper and that’s making it harder to sell the better quality wines."
Gilson adds that in fizz "sparkling red Shiraz is doing very well".
Still wine’s recent performance mirrors that of beer with volumes down 2% annually according to Nielsen, and value down by 1%. Hardys is the biggest brand in the off-trade, followed by Blossom Hill.Accolade’s Echo Falls, family-owned Californian band Gallo and McGuigan of Australia make up the rest of the top five wine brands in take-home.
Maximising cider sales
Cider producers have started to find things tougher as the category has flattened out following a decade of rapid growth in the 2000s. Nielsen figures show the total off-trade market down 3% in the year to June 2015, with the prospect that sales could slip below £1bn annually. However, forecourts are a bright spot, with cider category growth of 5% and traditional premium cider up 27% (IRI data).
Westons category development manager, Matthew Langley, says its Henry Westons Vintage is its star performer in the forecourt sector, where it has just secured a listing in 300 Shell shops.
"Ranging is key to making the most of sales," says Bradman. "Placing cider between the beer and wine fixtures will maximise sales as people who buy cider also buy beer and wine."
The new year has brought with it the prospect of new red tape for forecourts which sell alcohol. A registration scheme for drinks wholesalers has been introduced in an attempt to help HM Revenue & Customs crack down on rogue traders who trade in black market stock and evade excise duty.
It has been introduced partly as a result of lobbying by the Federation of Wholesale Distributors on behalf of the major cash and carries and symbol group wholesalers. For now, the scheme is still in a registration phase for wholesalers.
While there’s no need for forecourt retailers to sign up, the scheme will impose an obligation on them to check out the legitimacy of wholesalers from which they source alcoholic drinks once it goes fully live in April 2017.
While for most forecourts this will pose little problem as the primary source of supply will be a known legitimate wholesaler, care will be needed when sourcing drinks from non-core wholesale sources. Failure to check that the source is on the wholesale register and to make regular ongoing checks will implicate retailers in any illegitimate supply chains that transpire and make them liable to penalties.