Core Values

Cider – it’s fermented fruit juice but we drink it in pints. So is it more effective to market it like wine or beer? And how can cider producers add value to this profitably-challenged category? Jonathan Goodall reports

HP Bulmer, the world’s largest cider company, was snapped up by Scottish Courage in 2003. The Strongbow, Woodpecker, Scrumpy Jack and White Lightning cider brands now belong to the same stable as the all-conquering John Smith’s, Kronenbourg and Foster’s beer brands. Strongbow, which has 60% of the UK’s draught cider market, thus giving it more than three out of every five pints of cider sold, has a marketing budget of £22m for 2005.

Constellation bought Matthew Clark in 1998, and, with it, the Gaymer’s Olde English, Blackthorn, Addlestones and Diamond White cider brands. The packaging of both Gaymer’s and Blackthorn was revamped and refreshed last year and they now sit alongside the mighty Hardys, Banrock Station and Stowells wine brands. We now have a situation in the UK where some 90% of the world’s biggest cider market is divided between a beer behemoth and a wine colossus. And, true to form, Scottish Courage Brands and Constellation would appear, respectively, to be applying tried and trusted beer and wine marketing techniques to cider. It is rather appropriate that both disciplines should be applied to a drink which is fermented fruit juice, like wine, but which is generally consumed in pints, like beer, and there are signs that the cider category is benefiting.

After steady growth between the mid-1980s and mid-1990s, the UK cider market peaked in 1996. It remained stable for the next eight or nine years. But  December 2004 volumes are up 3% year-on-year, indicating that renewed growth is back on the cards. There was a feeling that cider’s recent period of stagnation could be attributed to growth in the alcopop, RTD and FAB market, but these have since dropped away, and according to Phil McTeer, brand manager for Strongbow, “the decline of spirit-based premium packaged drinks offers a major opportunity for cider to grow its share of the long alcoholic drinks market.”

Duty bound
The UK currently consumes about 5 million hectolitres of cider a year, worth around £1.2 billion, with cider claiming a 5.7% share of the alcoholic drinks market. But cider faces some significant issues of scale. Although the UK is both the biggest producer and consumer of cider in the world, the entire UK cider market is similar in size to the UK’s leading beer brand. As a result, any significant adverse change in cider’s tax and duty levels compared with its main competitor, beer, has serious consequences. In this regard, cider has been fortunate in recent years, with a 2% reduction in duty in 2002 followed by a most welcome freeze in each budget since. Hugh Archibald, chairman of the National Association of Cider Makers, says, “The path to growth has been greatly aided by the government’s enlightened tax treatment of the industry.”
Simon Russell, regional director for the association, says: “I think most, if not all, cider makers deserve credit for the improvement that is evident. Scottish Courage Brands, with Strongbow, supports the industry with a level of investment that generates a significant share of voice for the category; the Gaymer Cider Company as the number two player operates a portfolio of brands that illustrates the breadth of different styles and the choices offered, and other producers like Thatchers, Weston’s, Knights and Sheppys have delivered a number of innovative products that have stimulated interest.”
In line with its wine credentials, Constellation has launched Orchard Reserve, a single-orchard premium cider made exclusively from fruit from the company’s Stewley orchard in Somerset. Christopher Carson, the head of Constellation Europe, has also indicated that cider and food matching is a major opportunity, whether it be curry with the refreshment of Blackthorn or the softer style of Gaymer’s Olde English with grills, salads and barbecues. Another parallel between cider and wine that could work to the former’s advantage is that cider consumers have a much more even gender split than is the case for beer.

Essentially, the Gaymer Cider Company operates a portfolio approach, offering a diverse selection of brands and styles to cater for different consumer and regional preferences to cover more bases in terms of cider drinking opportunities. Russell says: “A ‘one size/brand fits all’ approach will not do.” For example, Addlestones is a premium, slightly sparkling cider with a cloudy appearance. It appeals in more stylish bars, offering something other than mainstream brands, and it works well in pubs with a strong following for real ales

Single varietal cider
Russell  believes the cider  category has not seen enough innovation from the major players. He says: “While smaller cider makers have demonstrated the interest that can be generated in new cider styles or varietal/orchard designate cider and the like, only the Gaymer Cider Company has the flexibility, resources and scale to really deliver a raft of new products that are something much more than niche.”

In its bid to “position premium cider as an interesting and fresh alternative to wine”, the Somerset producer Thatchers is introducing Christon, its first single-orchard cider. It has also launched a range of single-varietal ciders made from the Cox, Katy, Spartan and Tremletts apple varieties, and Katy has been repackaged in a 75cl wine-style bottle. Oak-matured cider, conditioned in ex-rum barrels, is Thatchers’ latest premium launch designed to stimulate interest in the category.

Another brand seeking to create interest through innovation, backed up with a significant above-the-line spend, is Magners Original Irish Cider. After its successful launch in Scotland, where the brand has achieved a 24% share of the on-trade cider market in less than two years, Magners is currently being supported by TV advertising in southern England. Much of the brand’s success has been attributed to its unique “pour” in the on-trade, where a glass is filled with ice before the pint bottle is poured over it, thus positioning itself as “an easy to drink alternative to lager and other long alcoholic drinks”. Stephen Kent, the brand’s marketing manager, says, “Magners has changed perceptions of cider and has been overwhelmingly well received by Scottish consumers and the trade, revitalising and expanding the cider category.”

The timing of Magners’ southern England sortie is to capitalise on the “sunshine effect” as cider sales tend to peak quite dramatically in the summer months.
Scottish Courage Brands, meanwhile, has a clear strategy to market Strongbow as one of its “power brands” and a product that competes with beer and lager brands. McTeer says: “We believed the acquisition [of HP Bulmer] would create the opportunity to enhance the performance of Bulmer’s cider brands by marketing and selling them through the Scottish Courage network, and this has proved to be the case. Strongbow will be backed by a £22m marketing spend in 2005, with a new £12m advertising campaign through the year; heavyweight summer and Hallowe’en promotions in the on and off-trades; and the Strongbow Rooms sponsorship, which will give the brand access to more than one million consumers at major music festivals through the summer.”

While there may be parallels with beer marketing techniques, McTeer stresses, there is a real opportunity to differentiate the brand from lager through highlighting Strongbow’s unique product taste, and this can be most effectively achieved through sampling programmes and the Strongbow Rooms sponsorship.

McTeer says support for Woodpecker will continue to focus on its on-trade heartland of the North East  of England (where it has a 71% share of draught cider and volume growth of 6%, MAT Nielsen Sept 04). The brand will be supported in the Tyne Tees region through a Galaxy Radio sponsorship and on-trade promotions running throughout the year, while Scrumpy Jack will have new advertising this summer in the South East of England.

The greatest single issue facing the UK cider industry is that of profitability. The industry is committed to using English apples in order to support the rural economy and the communities in which its based and most companies have virtually eliminated the use of imported apple juice concentrate. Cider’s raw material, apples, are twice as costly as those for beer, but the average retail price for cider has remained little changed since the mid-1990s and has actually fallen in real terms, with the off-trade price on that basis now 27% less than it was in 1994.

In volume terms the on-trade/ off-trade split is fairly evenly balanced, at 48%/52%, but in value terms the picture is very different. In the on-trade, keg prices for cider are typically lower than comparable keg prices for beer, yet mainstream cider brands typically sell for 10p to 15p more per pint than beer. Simon Russell at the National Association of Cider Makers says: “There is a clear profit incentive to retailers in the on-trade to grow cider sales.” Sadly, for the nation’s cider makers most of this margin is absorbed by on-trade retailers.

In the off-trade, Chris Carr, MD of Merrydown Cider, is clear where the problem lies: “I would argue that the cider industry has been its own worst enemy in two ways; a) by pushing volume by selling high-alcohol, cheap white ciders in two and three-litre plastic bottles, undermining the heritage, brand values and price position for cider, and b) by pushing volume through 50% ‘extra frees’ and BOGOFs even on lead brands. It is most encouraging that at last we see white ciders in value decline and premium ciders growing faster than any other sector.

“We were the original premium cider back in 1946,” he continues, “so we see the way forward as offering a premium product but at good value for money, ie £1.99 per litre versus Westons/Thatchers‘ £3 per litre, Strongbow at circa £1.25 per litre and white ciders at about £1 per litre. We also stick with glass, not PET and for the supermarkets over the past couple of years we have done no price promotions. Finally, we have been adding brand values through awareness raised by our Merry Down (Upside Down) campaign.”

Merrydown Cider, which also owns the Schloer grape juice brand, has just been bought for £36m by the Belfast-based SHS Group, owner of the WKD alcopop brand, which has obviously identified opportunities within the cider sector. Carr says: “As the leading bottled premium cider, with less than 2% of the UK off-trade, Merrydown has the potential to grow quite fast with the correct support in a cider market that is at last showing signs of reinvigoration.”

At last, the industry is beginning to rein in its excesses. The Big Two, Scottish Courage Brands and the Gaymer Cider Company, have agreed to scrap their “supersize” 3-litre bottles of cider and both are committed to ending “extra free” offers in large plastic bottles.

Russell at the National Association of Cider Makers says: “The mainstream brands have shifted their promotional strategies and are restoring value by eliminating the depth and frequency of discounting or ‘extra free’. This is important for a number of reasons. It prompts retailers to take the category more seriously and it interests them to drive volume and value; it allows producers to improve margins and as a consequence they can invest in brand building and the kind of value-added promotions that recruit new and lapsed consumers. It also improves the general perception of cider, and that brings people back into the category.”  db