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Alcohol industry commercial strategies

The alcohol industry, along with most businesses, is largely engaged in the pursuit of growth. Alcohol industry growth can come in three ways: by encouraging more people to drink, by encouraging people to drink more and by encouraging them to drink more expensive drinks. In recent times, the alcohol industry has pursued each of these strategies. The discussion here is narrowly focused on commercial strategies. Social and political activities are also an important part of aspect of industry activity, but are covered in a separate chapter (The alcohol industry: Social and political activities)   

Targeting new customers

As described in the section ‘Global expansion’, there have been clear concerted efforts from alcohol producers to market their products to consumers in more and different countries. As SABMiller observed in its 2013 annual report, “Developing markets remain the engine of volume growth for the global beer industry”.[1] Multinational alcohol companies have typically sought to win customers in low and middle countries in two principal ways. They have formulated cheap products affordable to those on low incomes for the mass market. For example, SABMiller’s Chibuku beer is made from sorghum, maize and cassava and is sold in cardboard cartons for half the price of its bottled products.[2] Small plastic alcohol sachets, sold not only by licenced retailers but also by informal street traders, are increasingly common countries such as Zambia, Malawi, Tanzania and Uganda.[3]

At the same time, premium Western brands have been targeted at middle class consumers in low income countries as an aspirational status symbol. For example, Diageo claims its alcoholic apple drink Snapp provides African women with a “product they feel is more refined than beer, with cues of differentiation and sophistication”.[4]

Even in Western countries, alcohol companies have sought to target demographics that tend to drink less than average. For example, in 2008 the brewer Molson Coors set up a unit to develop brands and marketing messages to appeal to women, with the goal of creating “a world where women love beer as much as they love shoes”.[5] This is part of a broader trend of an increasing number of products being developed and marketed for women.[6] Similarly, even though alcohol companies universally claim to refrain from advertising to underage drinkers, there seems to be an awareness of the importance of winning over younger drinkers, to secure the next generation of consumers. For example, in 2014, SABMiller reported that:

“People have grown up on Pepsi and Coke, so the younger generation have a much sweeter palate. We are playing to that. There has been a huge focus around flavoured beers, and we are developing products around apple and citrus”.[7]

Increasing consumption per consumer

Alcohol producers also seek to deepen their relationship with existing consumers by increasing the volume of alcohol they consume. For example, in its 2013 Annual Report AB InBev claimed that its goal is to “create new occasions to share our products with consumers”. It outlines its strategy to associate specific contexts with specific products to try to ensure that people drink in these contexts. It claims its “insights have enabled us to create and position products for specific moments of consumption: enjoying a game or music event with friends, shifting toward a more relaxed mood after work, celebrating at a party or sharing a meal”.[8] Along similar lines, in 2014 the British Beer Alliance, a consortium of major British brewers, invested £10m in the marketing campaign ‘There’s a Beer for That’, aiming to showcase “the variety of beer available in the UK and how these different styles fit perfectly a wide range of occasions”.[9]

Premiumisation

A final strategy for growth involves convincing consumers to ‘trade up’ to more expensive drinks. This has been particularly salient in Western markets, which have generally seen a decline in the volume of alcohol consumed per person.[10] As Diageo explains in its 2015 annual report, “The opportunities in developed markets are…very different from emerging markets. Given the higher levels of disposable income and the importance of branding, in developed markets consumers are often prepared to pay more for high quality brands”. The success of such strategies is reflected in the fact that premium drinks categories have tended to see stronger growth than cheaper products.

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The ‘alcohol industry’ contains a wide range of prominent actors, among whom the alcohol producers are the most prominent. These are dominated by a handful of global multinational companies, though the wine and spirits market are more fragmented than the beer market. There has been a general trend towards consolidation of the alcohol industry, particularly in recent years – as these large firms play an ever more significant role in the alcohol market. This consolidation has occurred through mergers and acquisition, through global expansion and through the integration of production with other elements of the value chain, such as distribution and raw materials. These global alcohol firms engage in a number of commercial strategies to increase their revenue, including targeting new customers, particularly women and the global poor, developing new ‘occasions’ to encourage drinking, and encouraging ‘trading up’ to more expensive products.

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[1] SABMiller (2013), Annual report 2013

[2] Alcohol Concern, Creating Customers, p. 22

[3] Babor, T., Robaina, K. & Jernigan, D. (2015), The influence of industry actions on the availability of alcoholic beverages in the African region, Addiction 110, 566

[4] Alcohol Concern (2014), Creating customers, p. 23

[5] Alcohol Concern, op. cit., p. 14

[6] Alcohol Concern, op. cit., pp. 12–15

[7] Alcohol Concern, op. cit., p. 15

[8] Anheuser-Busch InBev (2013), 2013 Annual Report

[9] Green, M. (2014), “There’s a Beer for That”: biggest names in British beer unite for £10 million campaign, Off Licence News [Online]. 30 October. [Accessed 17 December 2015].

[10] Tettenborn, M. op. cit., p. 95