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Last Updated: Thursday, 19 February, 2004, 15:01 GMT
Alcopops sales dry up for Diageo
Diageo alcopops
Diageo was never able to tempt the more mature drinker
Three boom years for sales of alcopops, the pre-mixed cocktails so popular among youthful British drinkers, have come to an abrupt end.

Drinks giant Diageo, the firm behind a raft of booze brands from Guinness to Johnnie Walker, has unveiled a slump in alcopops consumption.

UK sales of Diageo's top ready-to-drink brand, market leader Smirnoff Ice, fell 12% in volume terms last year.

Elsewhere, sales are at best flat, and analysts say Diageo requires new ideas.

"Smirnoff Ice has been marketed in every possible place it can be now," says John Band, an analyst at market research firm Datamonitor.

"They need some fresh innovation."

Ice is no longer cool

One big problem for alcopops in the UK - a 1.3bn market at its recent peak - has been the Treasury's decision to levy excise tax.

Alcopops drinkers, usually price-conscious 18-25-year-olds, have turned away in droves, and Diageo's revenues have been hit hard. The 12% volume decline last year translated into a 20% fall in revenues from Smirnoff Ice.

Lower-price competitors, notably the aggressively marketed WKD, have mushroomed in recent years, and chipped away at the 80% combined share of Smirnoff Ice and Bacardi Breezer.

But the reverse is also a sign that the market has matured, and that alcopops are possibly not as fashionable as they were.

According to some estimates, younger British drinkers are shifting their allegiance back to traditional spirits and beer.

Over-extended

"What Diageo really excels at is category extension, getting the maximum possible value out of its existing brands," says Mr Band.

But there are fears that alcopops may have been extended as far as they can go.

Diageo's attempts to create alcopops for the more mature palate have fallen flat.

The launch of Captain Morgan Gold, based on its premium rum brand, has been less than stellar, and the firm has had to withdraw Gordon's Edge - a gin-based tipple - after disappointing sales.

The firm has done nicely out of derivatives of existing alcopops - Smirnoff Ice Black, for example - but even these seem to have run their course.


SEE ALSO:
Diageo outlook lifts spirits
04 Sep 03  |  Business
Alcopop boycott urged
26 Jun 03  |  UK


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