LIQUEURS: Sugar and spice and all things nice

That’s what liqueurs are made of. Trouble is, many have lost their after-dinner niche and are having to find innovative ways to market themselves to a new consumer base. Alan Lodge reports on the category’s development to date.

The liqueur category has, perhaps more than any other in the drinks industry, been forced to accept and implement change as drinking cultures around the world shifted away from traditional after-dinner consumption. The loss of this key market focus left many brands without a recognised position in a highly populated and fragmented market.

Indeed, many of the older, more established after-dinner brands, such as Drambuie, Cointreau and Grand Marnier, struggled to adapt at first, failing to recognise where fresh opportunities could be found while newer products seemed to fare better with their more youthful, lower-strength offerings.

Just when things started to look really bleak, a lifeline was thrown to the sector by the boom in cocktail consumption, giving brands an ideal platform on which to grow volumes by attracting younger drinkers and opening up fresh avenues to market. What was once an obscure and limiting category has been opened up to experimentation by bartenders and many brands and sub-segments of the market were suddenly catapulted into rapid and unexpected growth. As a result, many older brands embarked on a reinvention programme to highlight their contemporary and youthful appeal and emphasise their sustainability as a cocktail ingredient.

Liqueurs are by definition sweet, so must contain at least 2.5% sugar by weight, though in practice most have a considerably higher sugar content and many contain up to 35% sweetening agent. Most liqueurs contain 17-30% alcohol by volume so some are as high as 50% abv.

Traditional liqueurs are typically thick, sweet products with a spirit base combined with an infusion of flavours such as fruit, herbs, nuts or mint.

Many, such as Bénédictine or Cointreau, have been produced for generations and are classified as full-strength 40% abv spirits. They were traditionally drunk as after-dinner digestifs or on special occasions, though now tend to be drunk also with mixers or as part of a cocktail.

The traditional liqueurs category also includes fruit brandies, which blend grape brandy or alcohol with a fruit flavouring. Products in this category include ranges by companies such as Bols and De Kuyper.

Since the turn of the century the world’s biggest markets for liqueurs have remained fairly stable, indicating that while companies may be struggling to attract rafts of new drinkers, there remains a loyal and sustained customer base for the sector.

The fastest-growing market since 2004, according to the IWSR, is Japan. The Land of the Rising Sun has seen volumes grow from 4,777,300 nine-litre cases in 2004 to 7,053,000 in 2008, resulting in it leapfrogging Germany as the world’s second-biggest market for liqueurs. As the Japanese market grew, the rest all remained relatively steady to aid total growth in the sector over the four years from 2004-2008.

New markets

Liqueur markets are, according to brand owners, opening up around the world. Werner Swanepoel, group marketing manager at South African company Amarula Cream and Liqueurs, believes there are still some major markets that are steadily increasing their liqueur volumes and need to be exploited.

“Growth in the past few years has been driven by developing markets such as Latin America and Africa, seemingly withstanding the economic crisis,” he says. “In Europe the German market has shown extremely positive growth for Amarula, under very difficult trading conditions. Distribution and volume in duty free have grown substantially, increasing our window to the world.

“The markets of China and Russia still hold huge opportunity as new players. In the Western world, Amarula has great potential to grow in the US, Canada and in the untapped markets of France and Italy.”

With other alcohol sectors competing for prominence in the off-trade amid falling on-trade sales, liqueurs find themselves in a slightly unusual position. With cocktails providing such an important growth opportunity, the category has been going against the flow by primarily seeking to grow on-trade sales.

Christmas is a particularly important time for the category, both in terms of at-home consumption and, increasingly, on-trade cocktails. “We definitely see an uplift in sales at Christmas,” confirms Jeremy Hill, chairman of Volare owner Hi-Spirits. “It’s the peak party season and any bar that isn’t offering an interesting range of cocktails and long drinks will be missing out in sales.”

Benoit De Truchis, export director at Joseph Cartron, adds: “I would say the consumption of cocktails is more important to the liqueur market in the second half of the year generally speaking, but the cocktail market is in action all year long. You’ll perhaps sell more caramel, cacao and coffee liqueur in winter time, and more fruity peach, passion fruit and watermelon in summer time.”

The Volare range is a perfect indication of how diversity and versatility are key to achieving growth in the modern marketplace. Volare is a range of liqueurs designed for bars at all skill levels – from those  which want to offer a varied menu of cocktails and long drinks but don’t always have staff behind the bar with the confidence to produce complex recipes, through to seasoned mixologists looking for authentic flavours for their latest creation.

It has also opened up new avenues for itself in off-trade markets, having built up a following among home cocktail enthusiasts who like to vary their favourite recipes with different flavours. Volare was developed by drawing on the expertise of both the Antiche Distillery in Ponte di Barabarano, Italy and multiple award-winning bartender Jamie Stephenson.

“The key to Volare is its versatility,” confirms Stephenson. “Making great cocktails is all about getting the proportion and the balance of flavours right. With Volare, if you’re following a recipe, then it includes the classic cocktail flavours you’ll need, such as Blue Curaçao and Amaretto.

“As confidence grows, it’s also a modular approach to cocktail making. For example, if you have a recipe that works well with Volare Green Apple, try it with Banana or Wild Strawberry. Customers are always looking for something different, and the range of flavours means bars can ring the changes with weekly or even daily specials by varying a simple recipe template.”

Perennial Christmas favourite – and the world’s best-selling liqueur – Baileys, approached the recent festive season by unveiling a new take on its iconic bottle by adorning it with an elegant red bow. The Diageo-owned brand employed Sex and the City star Kim Cattrall to model a red bow dress designed by super-stylist Patricia Field. The one-off dress will be auctioned in aid of the Clothes Off Our Back Foundation. Field says: “My first inspirations were the red and the bow on the Baileys bottle – and of course, Kim Cattrall. My goal was to put them all together. I chose an oversized bow because I was reacting to Kim as her character Samantha wearing a bow: If Samantha wore a bow it would have to be larger than life bow!”

James McDermott, director of Proof Drinks, which promotes Bad Angel Frappé Liqueur and Agwa de Bolivia Coca Leaf Liqueur, says the sector is aware of the importance of the seasonal uplift in sales, but also adds that companies are looking for ways to spread sales more evenly over the course of the year.

“Christmas has always been the peak time for liqueurs, accounting for over 60% of annual sales for some of the traditional brands,” he says. “This is a dangerously constrained pattern and not sympathetic with retail strategies who aim at all-year- round turnover.

"In recent years all the major liqueur brands have tried to reduce the seasonality of their sales patterns undertaking promotions at gift-giving times like Valentine’s Day and Mother’s Day and driving sales at Easter when families gather and socialise at home. The summer has been targeted by liqueurs attempting to extend their usage through long iced drinks, cocktails and flavour variants of the main brand to stimulate interest.”

Mix it up

As highlighted by the cocktail boom, one of the key strengths of liqueurs is their mixability. The big-hitters, Bailey’s aside, retain their positions of strength in the market purely through their mixability. Brands such as Malibu, Kahlua, Bols, Disaronno and Grand Marnier are plastered over cocktail menus across the world, and bartenders seem to enjoy countering their overt sweetness with the bitter twang of fresh citrus or the bite of herbs and spices to create thousands of variations on a theme.

Recently we have seen the emergence on the cocktail scene of brands which were seemingly consigned to after-dinner drinking history. Now mixologists are experimenting with brands such as Drambuie and Bénédictine, but that doesn’t mean the brands themselves have not been actively investigating ways to claw their way back to the forefront of the market.

Drambuie, the whisky-based liqueur, underwent a packaging overhaul early in 2009. The move was significant because, natural evolution aside, the packaging had been left largely untouched for decades. The redesign was a clear indication from Drambuie that it is actively seeking to recruit a new generation of younger drinkers to arrest what had seemed to be a terminal decline.

Drambuie chief executive officer Phil Parnell explains: “In the 100 years since the brand was first commercially bottled in Edinburgh in 1909, the packaging has changed very little. While the original bottle is something of an icon, it is so heavily associated with the after-dinner liqueur, that it becomes an impediment for new consumers. We have therefore taken a radical approach to introduce new packaging.

While Parnell admits the recession has delivered a short-term setback to the progress of Drambuie’s brand rejuvenation strategy in terms of volume and profit growth, the company will continue to invest in brand rebuilding during the recession, confident that such investment will reap rewards when the economic climate improves.

The renewed confidence at Drambuie is indicative of the fresh impetus washing through the liqueur sector. If brands which have stood still for so long are finally recognising the pressing need to move with the times it must mean that the amount of innovation and shifting of consumer trends within the sector has had a hefty impact. Expect 2010 to be a year of consolidation rather than massive growth, however.

Alan Lodge, January 2010