Looking to the future:
Drinks 2025
Project question
“How could the alcoholic drinks industry
evolve by 2025, and what opportunities will
this present to Irish manufacturers?”
© 2009 The Futures Company
2
Some principles of futures work
•
You can‟t predict the future unless all the variables are known
•
You can identify and understand the drivers of change that will shape your
future
– understanding these drivers and how they connect will enable you to
consider possible futures
•
There are often many clues in today‟s world as to what the future could be
– piecing these clues together will enable us to explore the most plausible
futures for your industry
„The future is already here. It is just unevenly distributed‟
William Gibson
© 2009 The Futures Company
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Key phases to our strategic
futures methodology
Scanning the future:
Understanding the drivers of change
Impact assessment:
Prioritising & extrapolating these
drivers
Exploring implications:
Exploring implications for strategy &
marketing
© 2009 The Futures Company
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Overview of the process
Stage 1
Stage 2
Stage 3
Trends and driver
scanning
Impact
assessment
Exploring
implications
A series of expert
interviews and a
program of desk
based research
Workshop to
prioritise
drivers with
greatest
impact
Workshop to
identify
strategic
priorities
© 2009 The Futures Company
5
Trends and driver scanning
Stage 1
Trends and driver
scanning
A series of expert
interviews and a
program of desk
based research
14 one hour depth interviews conducted with
industry representatives and relevant experts in
areas such as design trends, future legislation and
sensory trends
Scan of Futures Company knowledge database of
long-term drivers of change across Social,
Technological, Economic, Environmental, Political,
and Organizational categories (STEEPO)
Desk research using reports from Euromonitor,
Mintel, Nielsen, TNS, ESRC, National Intelligence
Council etc
© 2009 The Futures Company
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Example driver slide 1
10. Rise in at-home winding-down drinking
The off-trade is growing its share of consumption in
down-tempo occasions, as people switch from the pub
to the home to wind down
In Spring 2008 a Deloitte
survey reported that only
28% of men said that the
pub was their preferred
location for the
consumption of alcohol.
- Deloitte 2008
© 2009 The Futures Company
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•
While visiting to the on-trade is declining, we are not seeing a
corresponding increase in drinker numbers in the home:
– A larger number of adults drink in the home than visit the
on-trade each week, but claimed frequency of
consumption has fallen .
•
The types of occasions are different in the home, with almost
6 in 10 „everyday‟:
– 47% of at home occasions are down tempo, compared to
just 22% in the on-trade, with the key motivation being
winding down or having time for self or partner.
•
Volume growth will be possible through the increase in higher
tempo occasions:
– Occasion types such as a sociable night in or a big night
are growing share as consumers appear increasingly
comfortable with using the home for these occasions.
Sources: TNS AlcoVision; % Occasions; Deloitte. (2008). „Annual Drinks Research –
Analysis of consumer attitudes and buying behaviour in the beer and wine category‟
Example driver slide 2
17. Increased focus on the experiential side of drinking
“Walk-in”
cocktail,
London, UK –
intoxicating gin
and tonic
vapours are
sprayed into the
air in an
enclosed room
Zeta bar in Sydney, Australia, offers
„sensory‟ cocktails –customers
ordering a piña colada are
blindfolded in a semi-private area
and sprayed with shots of Hawaiian
Tropic sun tan oil for the authentic
cocktail on the beach experience
© 2009 The Futures Company
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There is greater focus on selling experiences that
accompany alcoholic drinks as part of the added value
of the product
•
As part of a general trend in Western economies towards
consumption of experiences over acquisition of material
goods, brands and companies have put more emphasis
into offering enhanced experiences that accompany the
alcoholic drink. This may take the form of offering greater
novelty, or stressing a ritual that should accompany the
drink
•
The desire for novel experiences is particularly strong in
developing markets: 52% of consumers globally say that
they are “always looking for new experiences and
sensations that will liven up my everyday activities”. This is
generally higher in developing markets (61% in India, 57%
in China, and 75% in Russia) than in developed ones
(42% in the UK, 46% in France and 50% in the USA)
Source: TFC Global Monitor 2008; expert interviews
Impact assessment
Stage 2
Impact
Assessment
Workshop to
prioritise
drivers with
greatest impact
Stage 3
23 drivers prioritised from an initial list of 59 in a
standard driver prioritization workshop process
with the Bord Bia and TFC core team
Impact matrix driver analysis undertaken by TFC
team to assess relationships between drivers,
thereby assessing relative influence of drivers
Internal TFC workshop to develop 8 „Forces of
Change‟ from most impactful drivers
© 2009 The Futures Company
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The 8 „Forces of Change‟
1. Competition
for Provenance
2. Mainstreaming
of
Connoisseurship
5. Polarisation
of Retail
6. New Forces
of Global
Demand
© 2008 The Futures Company
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3. On-Trade
Specialization
7. Social Cost
of Alcohol
4. In-Home
Sophistication
8. Energy-Efficient
Production and
Distribution
Exploring implications
Expl
orin
g
Impli
catio
ns
Stage 3
Workshop
to identify
strategic
priorities
© 2009 The Futures Company
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Stage 3
Forces of Change reviewed and refined in one
day workshop with Bord Bia, Irish industry
representatives and other experts.
Implications of Forces of Change explored with
workshop participants.
Process outputs
Stage 1
Stage 2
Stage 3
Trends and driver
scanning
Impact
assessment
Exploring
implications
59 Drivers and
Trends
23
Prioritized
Drivers
8 „Forces
of Change‟
© 2009 The Futures Company
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The Forces of Change
The 8 „Forces of Change‟
1. Competition
for Provenance
2. Mainstreaming
of
Connoisseurship
5. Polarisation
of Retail
6. New Forces
of Global
Demand
© 2008 The Futures Company
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3. On-Trade
Specialization
7. Social Cost
of Alcohol
4. In-Home
Sophistication
8. Energy-Efficient
Production and
Distribution
By 2025, provenance will be still be
hugely important, but it will be more
fluid and less tied to specific national
geographies or heritage claims.
“Are Irish manufacturers working together to present a united face to the
world? Although it‟s not a pressing issue for big brands such as Jameson, it is
essential for smaller manufacturers. A united face for the Irish drinks industry
could strengthen the Irish alcoholic drinks market as a whole.”
Olly Wehring, Editor, Just Drinks
© 2008 The Futures Company
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What could cause this?
Greater interest in history,
heritage and tradition
Growing demand for local
products and services
Democratization of high
quality manufacturing
© 2008 The Futures Company
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Looking forward to 2025…
•The consumer has become jaded with near
identical stories of authenticity and copy-cat
provenance claims.
•Production processes and overall quality
matter more than where the product is
produced. “New World” spirits, e.g. those from
Asia, Australia and Latin America have taken off
•Provenance is more local rather than national,
and consumers are more sensitive to the difference
between a Siberian vodka and one from the Black
Sea region.
© 2008 The Futures Company
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Amrut blind tastetest winning
Indian Whisky
© 2008 The Futures Company
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Jensen‟s
Bermondsey gin
© 2008 The Futures Company
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Headlines from the future…
AMRUT WINS GOLD MEDAL
AGAIN
BOSTON IRISH CREAM IN
HEAD TO HEAD FIGHT WITH
BAILEY‟S
© 2008 The Futures Company
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TANZANIAN TEQUILA
IS ON THE MAP
Case study: where is vodka from?
„Scandinavia‟?
Alaska?
Sweden?
Russia?
Long Island? France?
Hawaii?
© 2008 The Futures Company
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„Europe‟?
Key implications of this include
•
Familiar, common heritage stories will not be enough for differentiation
– There are different takes on „Irishness‟ that may be appropriate for different
brands
•
Irish provenance in whiskey needs to deliver credible differentiation; what
makes an Irish whiskey different from a Scottish one?
•
More needs to be made of Irish expertise in distilling, even beyond whiskey
By 2025, a more discerning attitude
to alcoholic drinks will be much
more mainstream; there will be a
decoupling of price and
connoisseurship.
“The main change over the last few years is that society has created
a culture that treats alcoholic beverages like food. The barman has
become a „chef‟. As with food, there is now an emphasis on fresh
ingredients – e.g. fresh juices. 10-15 years ago this was not the
case”.
Billy Steel, Beverage Manager and ex-barman at Mesa Grill, New York
© 2008 The Futures Company
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What could cause this?
Greater desire for personal
expertise and “connoisseurship”
Greater scrutiny of value offered by
brands
Reaction against mass produced
brands
© 2008 The Futures Company
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Looking forward to 2025…
•Connoisseurship is no longer about
price. Therefore even at the value end of the
market, people will expect brands to have
meaningful differentiation
•Connoisseurship will be less about
history and tradition, and more about the
overall craft and commitment to excellence
that goes into a product.
•Alcoholic drinks have moved much closer
to food in the way they are thought of and
described. An international lexicon of taste
will take hold.
© 2008 The Futures Company
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Headlines from the future…
LVMH TO OFFER KUMQUAT
VODKA JELLY
CAROLANS “TASTE
PROFILE” NOW
EXPLORED ON BACK
OF PACK
TOOLEY STREET
DISTILLERY OPENS
© 2008 The Futures Company
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Adverts from the 1980s show how much our concept
of what is sophisticated has developed…
© 2008 The Futures Company
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Adverts from the 1980s show how much our concept
of what is sophisticated has developed…
© 2008 The Futures Company
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By contrast…
© 2008 The Futures Company
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Key implications of this include…
•
As the consumer becomes more discerning at all price points, it becomes
mandatory even for value or mid-priced manufacturers to emphasise the
craft, ingredients and expertise that goes into production
•
This may in some respects be easier to achieve for small manufacturers
than others, as they are less likely to be perceived as mass-produced.
•
The key here is the „conversational currency‟ – give people a reason to talk
about your product versus its competitors.
© 2008 The Futures Company
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By 2025, the traditional notion of
“going to the local” will no longer
exists as we know it. The on-trade
will become more specialized and
occasion-based, and brands and
products will have to adapt
accordingly.
Within the context of more diversified leisure
pursuits, traditional bars and pubs will face
greater competition for a more demanding
consumer‟s time and money. Outlets will have
to adapt and offer more of an experience..
© 2008 The Futures Company
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What could cause this?
Diversification of leisure interests
Increased focus on experiental
consumption
Growth of shared spaces
© 2008 The Futures Company
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Looking forward to 2025…
•The on-trade has diversified, and traditional categories
of bar/ restaurant/ venue nightclub are less relevant.
•On-trade venues have to offer more than just a drink,
and add value by offering a greater experience: either
“bars+” or “+bars”
•The alcoholic drink must work harder to be part of the
experience. Rituals and experiences will become more
important.
© 2008 The Futures Company
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Key implications of this include…
•
In order to succeed in this environment, the on-trade needs to reconsider
what they offer consumers – from serving drinks, to providing unique and
memorable experiences.
•
There must be greater partnership between brands/ manufacturers and the
on-trade
•
Greater specialization brings opportunities for Irish manufacturers, but also
challenges…
– Provides an opportunity for smaller players to focus on more specialized on-trade
propositions
© 2008 The Futures Company
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By 2025, the shift to in-home
drinking consumption has
continued, and the in-home drinking
experience has drifted more closely
towards the on-trade.
More sophisticated in-home drinking has
evolved out of a combination of a consumer
desire for a better experience, and more
targeted investment by brands in specific inhome propositions.
© 2008 The Futures Company
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What could cause this?
Increasing relative cost of drinking in
the on-trade
Greater interest in “professionalizing
the home”
Shift in marketing investment to the offtrade
© 2008 The Futures Company
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Looking forward to 2025…
•Brands with more targeted propositions to specific
lifestages, household sizes and in-home occasions do
well
•The divide between the on-trade and the off-trade is
more permeable, as traditional on-trade occasions
move in-home, with consumers expecting more of an
experience in-home
•Manufacturers need to deliver on both convenience
and sophistication
© 2008 The Futures Company
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Headlines from the future…
MOULINEX LAUNCHES ULTRA
CONVENIENT COCKTAIL MIXER
ALCOHOL DELIVERIES DIRECT TO
YOUR DOOR
HOME MIXOLOGY
BOOKS LITTER
RESALE BOOK
SHOPS
© 2008 The Futures Company
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Key implications of this include…
•
The challenge for manufacturers will be how to deliver a higher quality,
satisfying experience which is also convenient for increasingly time-pressed
consumers
•
While “home mixology” may not itself represent a major opportunity, it is
representative of a consumer desire for greater sophistication in the offtrade product
•
It will be important going forward to monitor and/or research how in-home
drinking habits are changing, and what new sorts of technology could
revolutionize the in-home drinking experience
© 2008 The Futures Company
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The Forces of Change
The 8 „Forces of Change‟
1. Competition
for Provenance
2. Mainstreaming
of
Connoisseurship
5. Polarisation
of Retail
6. New Forces
of Global
Demand
© 2008 The Futures Company
41
3. On-Trade
Specialization
7. Social Cost
of Alcohol
4. In-Home
Sophistication
8. Energy-Efficient
Production and
Distribution
By 2025, the retail market for
alcohol has polarized in two
directions: the rising power of value
and discount retailers, and the
growth of more niche or specialist
retail models.
“There will be a more permeable divide between trade and
consumer in the future– the distinctions are blurred already.
The way people purchase is also changing, and more people
are buying direct from manufacturers. Small spirits brands
can make more money this way”
Ian Harris, CEO, Wine and Spirit Education Trust
© 2008 The Futures Company
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What could cause this?
Growth & consolidation of global
supermarket chains
Growth in direct to customer and
specialist retail models
Desire for connoisseurship
© 2008 The Futures Company
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Looking forward to 2025…
•There has been a shift in volume towards
“Every Day Low Price” retailers and
discounters.
•At the same time, small-scale specialist shops
that supply more niche or emerging brands thrive.
•Major supermarkets try to provide alternatives to
these in the form of “stores within stores” and
small-scale supplier development programmes.
However, supermarkets struggle to compete in
this area.
© 2008 The Futures Company
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Key implications of this include…
•
EDLP retailers and discounters pose a great threat
– Harder to get listed as they offer less choice
– Harder to build brands in these environments
•
Irish manufacturers may have to focus more on specialist shops, where
education and training is key
•
Becomes almost as important deciding where you don’t want to be as
where you do, as being in some places limits others
By 2025, opportunities for
significant growth will come from
emerging markets. Spirits brands
will need to work harder to capture
the younger consumer in traditional
markets.
“We are seeing a globalisation of tastes – Italian teenagers are now
drinking more lager than wine. French teenagers are eating lots of
sandwiches. Teens across Europe have more in common with each
other in terms of taste than with their parents.”
Thornton Mustard, flavour and sensory trends expert
© 2008 The Futures Company
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What could cause this?
Growing middle class in emerging
markets
Greater international transfer of
consumer tastes
Ageing population in the West/
younger in the East
© 2008 The Futures Company
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Total spirits
market revenues
are forecast to
grow 24% in Asia
Pacific by 20121
Whiskey sales
grew by 60% in
Latin America in
the last five
years
Sales in the
global tequila and
mezcal market
are forecast to
grow 39% by
20121
Source: Euromonitor
© 2008 The Futures Company
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1 2007-2012 forecast
Looking forward to 2025…
•The potential for further growth will be limited
in traditional Western markets.
•By 2025, brands that have succeeded will have
recognised that the profile and needs of the
emerging market consumers differ increasingly
from those in traditional markets.
-Taste preferences
-Occasions
-Attitudes to brands
•Larger brands will have laid the foundations of
opportunity for niche brands to follow
© 2008 The Futures Company
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Key implications of this include…
•
The key issue for smaller manufacturers in particular is focus and
pragmatism
– Go for the lower hanging fruit first
– Follow the “Irish footprint” of major brands
•
Regardless of the emerging market, it will be critical to understand the
nuances of consumer behaviour and desire
•
Manufacturers should not transfer their attention away completely from
existing markets, where the volume demand is likely to remain high
© 2008 The Futures Company
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By 2025, an ageing Western society
has become much more conscious
of the cost of drinking, both to an
individual‟s health, and to society
as a whole.
“Overall alcohol consumption has actually gone down since 2004, but
there is still a 7% of drinkers who consume a large proportion of the
alcohol, and that hasn’t changed. My concern is that we could see
sweeping tobacco-style regulation that would affect all drinkers
because of this minority”
Michael Thompson, Head of Communication and External Affairs, The
Portman Group
© 2008 The Futures Company
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What could cause this?
Increasing focus on healthier
lifestyles
Greater focus on the social cost of
alcohol
Increasing taxation and regulation
© 2008 The Futures Company
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Looking forward to 2025…
•In developed markets, total alcohol consumption
will have declined
•There are much higher levels of duty, particularly
for more alcoholic drinks.
•With increases in duty, consumers are more
conscious of what they are paying for
•Grey import and counterfeit markets are much
bigger.
© 2008 The Futures Company
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Key implications of this include…
• How the future unfolds depends more on how governments react, and the
degree to which they get on board with the “shared social responsibility
agenda”
•
It will be crucial to promote an agenda of shared responsibility; continued
dialogue with government and health stakeholders will be critical
•
Ever tighter self-regulation will be required to pre-empt tighter legislation
© 2008 The Futures Company
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By 2025, overall energy costs will
much higher, affecting all aspects of
production. This will be
compounded by the tax that carbon
emitters will be required to pay.
Higher energy and carbon costs will affect all
industries, and some will be more dramatically
affected than others. However, the alcohol
industry will have to address the high carbon
footprint of packaging, global distribution
networks and supply chains.
© 2008 The Futures Company
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What could cause this?
Rising energy costs
Greater awareness of climate
change and carbon footprints
Advances in packaging design and
packaging formats
© 2008 The Futures Company
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Looking forward to 2025…
•Packaging innovation helps minimize some of the
impact of higher energy prices and carbon taxation.
•New distribution and production models are
developed to minimize transportation e.g. localised
bottling and production networks
•There is much greater reuse and recycling of bottles,
cartons, cans and pouches. Manufacturers have to play
their part, and are incentivized to encourage the
consumer to do this.
© 2008 The Futures Company
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Key implications of this include…
•
Any energy efficiency initiatives should look at all elements of manufacturing
and the supply chain
•
It may be a challenge to reconcile premium positioning with a focus on
sustainability
•
Localised production and bottling could represent an opportunity to reduce
carbon emissions, but not at the expense of undermining the brand‟s
integrity
© 2008 The Futures Company
63
The 8 „Forces of Change‟
1. Competition
for Provenance
2. Mainstreaming
of
Connoisseurship
5. Polarisation
of Retail
6. New Forces
of Global
Demand
© 2008 The Futures Company
64
3. On-Trade
Specialization
7. Social Cost
of Alcohol
4. In-Home
Sophistication
8. Energy-Efficient
Production and
Distribution
Implications for
the Irish Industry
Key implications
More
competition
© 2008 The Futures Company
66
More
sophistication
More
specialisation
Key implications
More
competition
Focus
Differentiation
Collaboration
© 2009 The Futures Company
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Key implications
More
competition
Consumer insight
More
sophistication
Branding
Innovation
© 2009 The Futures Company
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Key implications
More
competition
Understanding your
customer
More
sophistication
Focusing where
you can win
More
specialisation
Developing niche
propositions
© 2009 The Futures Company
69
The case for collaboration
•
A key message coming through from this work is the potential value of greater
collaboration within the Irish alcoholic drinks industry
•
You are operating in a global market and facing increased global competition
– Requiring increasingly sophisticated marketing and distribution expertise
– And in some cases the ability to leverage scale
•
Irishness has the potential to deliver meaningful differentiation in a global market
– But it requires a clear and consistent identity
– The right balance between heritage and modernity
– Credible expertise in distilling beyond whiskey
•
Collaborating in areas such as research, R&D, marketing & distribution could
be mutually beneficial to all players in the market
© 2009 The Futures Company
70
The 8 „Forces of Change‟
1. Competition
for Provenance
2. Mainstreaming
of
Connoisseurship
5. Polarisation
of Retail
6. New Forces
of Global
Demand
© 2008 The Futures Company
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3. On-Trade
Specialization
7. Social Cost
of Alcohol
4. In-Home
Sophistication
8. Energy-Efficient
Production and
Distribution
Taking this further
What does this mean for your business and brands?
Future Brand
Audit
© 2009 The Futures Company
72
Future Innovation
Workshop
Final thoughts
• It is difficult to predict the
future, but you can plan for the
most probable developments
• The 8 Forces of Change
provide a framework to get
you started
• Preparing for the future is
better than waiting for the
future to happen
• The future is not static –
continuous monitoring for
signs of change is crucial
© 2009 The Futures Company
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“When it comes to
the future, there are
three kinds of
people: those who
let it happen, those
who make it
happen, and those
who wonder what
happened.”
-John M. Richardson