Alcoholic Beverages / Marketing Strategies

Michael Spandern

Promoting Alcoholic Beverages:

The Effectiveness of Various Marketing Strategies

Michael Bruno Spandern

Agribusiness Consulting
Bahnhofst. 81, 24582 Bordesholm
Germany
mike@spandern.com

1 Introduction

The promotion of alcoholic beverages is most obviously dominated by branding efforts of various
large producers1. Most campaigns noticeable to the consumer are either re-launches of already
existing products aiming to adapt the image of a product to a shifting target by simply changing the
product 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 larger
companies using the power of their company brand and market penetration and it represents a
severe challenge for small producers trying to sustain their market share. Despite the tremendous
success 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 this
product orientated behaviour is even responsible for the severe losses of product groups with a
rather traditional image such as beer and whisky in Western Europe. Accelerating product variety
within one product category might have lead to the shift of consumers to completely different
product ranges2.

There is need for discussion regarding the dangers of alcohol consumption and regular moderate
consumption by healthy adults must be strictly separated from alcohol abuse.
The marketing of products, such as alcoholic drinks, needs greater care and responsibility than
others particularly with reference to their availability to young people. The advertising of alcohol is
usually subject to specific rules in addition to general codes3. It is therefore crucial to evaluate the
effectiveness of various marketing strategies with regard to the success of a single product or
company within the context of the overall trend of consumer behaviour. The following will discuss
the 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 or
innovation4. Consequently the traditional established beverage market is stagnating1. However, as

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sales in Western Europe started to lag and even fall in some cases, and competing beverages took
away market share, the companies with leading brands began to satisfy consumer demand with
more new products and extensions. In addition, some companies have initiated aggressive marketing
and promotional programs to acquaint potential consumers with the pleasures of consuming
alcoholic beverages.

Some of the changes include using new types of ingredients, using organic ingredients, adding
flavours 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”5 most classical marketing
textbooks often demand the development and implementation of a combination of various
marketing strategies or a specific marketing package6. This in practice is mostly not the case
because of the lack of scientifically proven standard processes for the selection of suitable
strategies2. No generally recognised system of methods or procedures is described7. Finding the
right strategy to market agricultural goods and food products and putting such a strategy into
action, is not mathematically formalisable. Strategic planning is rather a creative, often
spontaneous process and very dependant on the personality of the planer or decision taker2. In this
context ROVENTA8 describes two typical characters:
1. The manager depicted as an entrepreneur is controlling his environment, actively searching
for significant opportunities and relating them to his vision of strategy9.
2. The manager “mudding through”, is only acting when forced to and the can only consider a
few convenient alternatives, each of which will only cause small non-disruptive changes in
his/her organisation5,10, 11.
The British “Beer-Naturally”- campaign as an example is doubtlessly aiming at the more committed
style of management, willing and able to communicate the company’s vision.

Basically for main directions of market orientated product strategies are known12, 13:
1. Market penetration: existing product for existing market
2. Market development: existing product for new market
3. Product development: new product for existing market
4. Diversification: new product for new market

All of the above are also found as classical tools of strategic planning within the food and beverage
industries but not all techniques are used for all product groups and there is a strong regional
variation, especially between Eastern and Western Europe. Similar to other consumer driven
markets the success of marketing campaigns for alcoholic beverages underlies overall trends and
temporary fashion phenomena. But amongst all foods alcoholic beverages are probably the one
product group most affected by legislative interventions14, whether through restrictions in

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production, such as quotas and state monopolies, or through restrictions in advertising means, such
as 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 the
alcohol consumed annually comes out of beer (chart 1). Beers include lagers and ales. Lagers are
marketed as super premium, premium, specialty, light/lite, dry, ice, malt liquor and flavoured. Ales
are marketed as super premium, premium, specialty and flavoured. Beers have always been
produced with different brewing styles, but the current trend is to use new types of grains such as
all barley or all wheat, particularly by marketers of specialty beers and microbrews; or hops
imported 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 new
taste experiences for consumers7.

Recently the especially brewing industry in Europe puts most efforts into product development to
compete with the rapidly growing group of ready-to-drink (RTD) spirits, or “alco-pops”, and uses
advertising 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 sales
developments once these consumers reach an age of higher disposable income. It is noticeable, in
this context, that during the past decade the consumption of beer has declined in several Western
European countries (chart 2) and whilst the overall consumption of alcoholic beverages has
stagnated or even increased (chart 3).

15
Chart1: Alcohol out of Beer in percent of total Alcohol Consumption

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Chart 2: Change in Beer Consumption

Chart 3: Change in Alcohol Consumption.

The roots of beer production go back to the first agrarian societies where beer was noarmal part of
the daily diet16. Laws that regulate the production of beer and protect the identity of the product

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have always played an essential role in the brewing trade. One of these regulations was laid down
by the Bavarian dukes Wilhelm IV and Ludwig X at the State Parliament at Ingolstadt, Germany on
April 23, 1516; the law was accepted and today is internationally well recognised as the German
Purity Law (Reinheitsgebot). Today consumer protection and traceability are key words in the food
chain and pay an essential role in marketing strategies for beer all over the world17.

The “Beer-Naturally”-campaign in the UK is using this background trying to reverse the decline in
beer sales17. It is understood that brewing companies had considerable success promoting their
individual brand but paid less attention promoting the beer category1. The campaign has two main
strands: enhancing the public perception for beer and improving the drinkers experience when it is
drunk. But keeping these goals in mind, the British Beer Naturally campaign primarily acts within
the brewing companies themselves instead of launching new advertising series. The concept is
based on clear communication of company goals, assuming that employees highly committed to
their trade lead to a more confident appearance of the product category.

Keeping in mind that marketing beer is commonly based on a reputation of being natural and pure,
the new group of ready-mixed or flavoured beer products is surprisingly successful1. Especially in
Germany where there is a strong consumer perception against any ingredients in beer not complying
with the Reinheitsgebot, ready mixed beer-and-lemonade or beer-and-spirit products occupy an
extremely rapid growing market segment. Often the image of these products is built upon the
parent’s brand of both the beer and the added lemonade or spirit simultaneously1.

An advantage of blending beer with other products seen by the brewing industry is that there is no
need to change the image of the traditional product beer, and risk consumer loyalty, whilst moving
into new image segments. The new product category allows the brewing industry to pick up trends
with short life-cycles, such as ready mixed beer-and-caipirinjah referring to the feel of the summer
holiday season and the contemporary success of Latino music in Europe1.

Because beer contains alcohol and alcoholism is a matter of concern as well as alcohol related
accidents, crime and various social problems this beverage falls into the category of products
bearing a potential danger to the society or single individuals. General observations comparing beer
to other alcoholic drinks show that both the industry and most consumers have a sensible and
1,2,3,4,5
responsive behaviour when handling beer .

2.2. Marketing spirits

Spirits include white spirits which include vodka, tequila, gin, and rum; and brown spirits which
include whisky/whiskey (American, Scotch, Irish, and Canadian), brandy/cognac, and
cordials/liqueurs. Spirit consumers, do not expect many new products, and experimentation might

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require some degree of information-gathering before their higher prices are paid. Some spirits
producers are using single sources to make their products, such as single malt whiskeys and single
barrel bourbons, in an effort to provide unique tastes and create a super premium product. Spirits
producers are also adding flavours to some drinks in an effort to attract new younger, female
drinkers18. A great challenge which always limited the success of marketing spirit was the paradigm
of spirits being regarded as ingredients bringing a portion of alcohol into cocktails19.

Vodka is probably the most predominant spirit20, Scotch, especially the single malt, is the standard
bearer, congnac is the luxury spirit, and bourbon and tequila are serving a rather flat market. The
turnover of gin and martini is permanently fluctuating with trends. But rum and other spirit made
from molasses currently experience the greatest growth21. The market for spirits is generally
dominated by large brands. Most innovations entering the market seldom represent new producers
and their concepts rather than carrying the names of internationally recognised makes representing
the diversification of their product range.

The ready-to-drink products as an ideal example of diversification penetrate a market segment

which is new to spirits and traditionally is occupied by beer. Small units of finished product at a
price comparable to beer are directly to be enjoyed out of the bottle. These products now reach
consumers who usually do not regularly purchase spirit drinks but are well aware of the various
large international brands of whiskies, vodkas and rums. The “RTDs” or “alco-pops” and other ready
mixed drinks on the one hand enabled a younger group of consumers to take participate in a world
of famous brands which normally was only accessible to people with a higher disposable income, on
the other they moved from “special occasions” and gave way to everyday drinking. The challenge
for the producers of this new product category was to build up completely different and a more
complex marketing strategy than the traditional promotion of mixed drinks. To be fully successful,
the producer would have to build a solid business for the ready-to-drink products whilst maintaining
or even rebuilding the parent’s brand reputation22.

Sprits underlie significant governmental interventions is most markets. To overcome the obstacles
of the national intervention by the German state monopoly “Bundesmonopol” the German “Korn”
schnaps distillers have founded a central marketing agency the Deutsche Kornbrand
Vermarktungsgesellschaft, DKV. In its activities as a private enterprise, the DKV represents interests
of approximately 300 “Korn” distillers under public law. Its most important task is to take deliveries
of the raw "Korn" alcohol from the distilleries. After distilling it to an alcoholic content of about 96%
vol., the DKV sells its potable spirits to the producers of "Korn" schnapps or other spirits based on
"Korn" alcohol. As the central link between production and marketing, it also represents "Korn"
schnapps in politically and socially relevant bodies and contributes to the public relations work for
German "Korn" schnapps23.

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3 Conclusion

As in other businesses the marketing strategies of the beverage industries follow typical patterns of
consolidation and diversification. The market is characterised by an accelerated movement towards
convenience and an increasing consumer demand for transparency and safety. Under these
conditions large globally acting corporations use their financial strength and the power of their
brands to find new sales opportunities. Generally it can be seen that this strategy is very successful.
It allows some global players even to act trend setters. Simultaneously as strongly branded
international products are available as standards around the world, regional specialties gain
popularity.

With very few exemptions all campaigns miss to promote the product category as a whole and
educate consumers about the product background. Branding efforts drive all strategic planning.
Similar to global fast food chains not promoting beef in general but rather their finished restaurant
product, or like the dairy industry failing to stabilise milk prices and sales, the various producers of
alcoholic drinks seam to fear investments that might benefit the whole industry. One explanation
might be found investigating the companies’ financial structures showing that many larger
producers belong to global conglomerates of investors where alcoholic beverage is only one aspect
of the business.

Michael Spandern
mike@spandern.com

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