Diminished loyalty is ‘fact of life’ for spirits

An explosion of choice has created a fussy, capricious generation of spirits consumers. What does the future hold for an industry historically so dependent on brand loyalty?

Many believe that brand loyalty is now a thing of the past in spirits

*This article was first published in the August 2015 issue of The Spirits Business magazine

Long gone are the days when, for a vodka drinker, choices were limited to Absolut or Smirnoff. Now, consumers are inundated with premium, prestige, flavoured, aged and “small batch” varieties from around the world. In addition, a thriving cocktail culture and emphasis on education means consumers are becoming braver, more willing to experiment across categories, and are increasingly disloyal to brands.

In its Market Report 2015, William Grant & Sons UK noted that “consumer behaviour has changed forever”, with brand loyalty now considered a thing of the past. The group’s insight team found that, as well as a growing customer curiosity for different labels and categories, the recession has left a “lasting legacy” on spending habits. Thriftiness has now become a celebrated trait among shoppers who are seeking the best value for money. “Pre-recession loyalty was much greater because people did not worry so frequently about how much they spend, and were not necessarily seeking the cheaper deals,” says Stuart Baker, head of strategic planning and insight at William Grant & Sons UK. “Brands are now realising that they need to offer more value to the consumer, meaning that there is a possibility loyalty will come back around again.”

The type of “value” Baker is referring to is something of a double entendre. Not only are consumers looking for greater financial value, but also value at an “emotional and functional” level. The long-running trend of consumers expecting authenticity and heritage in their premium brands has, the report claims, been overtaken by a desire to establish “more genuine relationships” with products, placing a demand on them to reflect their own personal values. In essence, consumers want even more bang for their buck – they want to be taken out to dinner first and cuddled the morning after.

For Donna Hood Crecca, senior director of the Adult Beverage Resource Group at US consulting firm Technomic, the spirits market has been made infinitely more complex by the nature of today’s target consumer – the millennial. “They are much more adventurous and like to explore different categories, which has definitely had an impact on the US spirits market,” she says. “But what’s interesting is that millennials overindex on calling the spirits they prefer for mixed drinks. To me, that’s significant because it does speak to loyalty.

“However, baby boomers are loyal for much longer than millennials. I don’t know if we will go back to being loyal to one brand in spirits because the millennial generation driving growth is so different to any we have seen before. They don’t have a lot of rules.”

The allure of the millennial market is undeniable, and established brands with a traditional baby boomer following are innovating at a rate of knots to attract a younger audience, launching a plethora of new expressions, marketing campaigns and bottle designs. Blended Scotch whisky Grant’s is one such brand that has undertaken a significant image makeover to recapture market share, releasing the sweeter-style Grant’s Signature last year along with a sports-focused campaign following sales declines.

Blended whisky brand Grant’s unveiled a new ad campaign to capture aspirational millennials

“Younger drinkers are no longer following the traditional whisky journey and skipping blends, moving straight into malts and imported whiskies,” claims Ali Cloudsdale, brand manager of blended whisky, William Grant & Sons. “Without the recruitment of younger drinkers, both the blended Scotch whisky category and Grant’s will shrink in the long term. That is why Grant’s has switched its focus to recruiting a younger target: men in their 30s and 40s.

“With diminishing loyalty – a fact of life for all brands, particularly with younger drinkers – we need to be front-of-mind as repertoires grow larger, so on-going and consistent content across different platforms is very important.” The UK market for blended Scotch whisky certainly demonstrates a dilution of loyalty in spirits, losing more than one million drinkers in the past five years. But the growth of established brands in other categories suggests it may not be a concern for all producers. The top two best-selling American whiskey brands (Jack Daniel’s and Jim Beam) continue to experience rapid growth, while the world’s leading international vodka brands have just as quickly slipped off their pedestals. Similarly, the success of independent “craft” brands continues to be highly publicised as they recruit an ever-growing hoard of dedicated advocates.

Perhaps this suggests consumer loyalty may not be dying, but instead finding a new, broader portfolio of subjects? Jon Davies, partner of brand agency Butterfly Cannon, whose clients include Glenmorangie and Hennessy, believes so.

“I think loyalty is still essential to spirits, especially in the premium sector,” he says. “Drinkers have always had a portfolio and no matter what the occasion they will adapt accordingly. There are a lot of brands fighting for position and offering more, so consumers do leave categories to experiment, but they come back to brands they have a connection with.” Davies adds that the prevalence of social media in spirits marketing allows brands to establish a “two-way” conversation with consumers and “build their personalities in a meaningful way”. He also warns against brands changing their image too drastically to appeal to younger consumers due to the risk of excluding the historically more loyal baby boomer generation.

Hood Crecca concurs: “I would caution not to forget about them (baby boomers). This is an affluent generation but they are also loyal and open to new experiences. But brands need to court them differently to millennials as their values and lifestyles are very different.”

While it seems consumers no longer purchase spirits as status symbols and their allegiance is spread across multiple categories and brands, there are ample opportunities for brands capable of, as Baker calls it, “walking the tight rope” in this complex marketplace. He concludes: “Loyalty is a bit of a misnomer in spirits and it’s never been more difficult for brands to add value for consumers. But, for those able to do so, the rewards have never been greater.”