As the number of young drinkers falls and fashions change, the future of alcopops is uncertain.
When alcopops first hit the market in the 1990s they were demonised in the press and adored by the public in equal measure.
Blamed for encouraging underage and binge drinking, their sweet, easy-to-drink flavours nonetheless meant sales boomed into the early 2000s.
But that growth has declined as drinkers' preferences have changed and the government has hit the category with higher duty rates. The question faced by the drinks industry is whether the flavoured alcoholic beverage (FAB) market is in terminal decline or settling at a lower but more sustainable level.
The FAB market was estimated to be worth pounds 1.2bn by the end of 2005, according to Mintel, marking a 7.5% decline on 2004. However, that decline is slowing, as the market had dropped 11% between 2003 and 2004.
Factors working against the sector include a decline in the 25- to 34-year-old demographic (down 800,000 from 2000-2005); FABs being viewed as less fashionable, with many drinkers trading up to cocktails; and higher excise duty pushing the products to a price deemed too expensive by many.
Young people are a key target group, as the sweet flavours of FABs prove a popular introduction to alcohol. Within that, C1C2Ds are the most prominent group. Most FAB drinkers are women, but the top two brands, Smirnoff Ice and WKD, remain more male-focused.
The product types within this sector have changed over the years. While the market was established with alcoholic carbonates such as Hooch, this category declined as premium packaged spirits (PPSs) such as Bacardi Breezer and Smirnoff Ice took off.
Furthermore, changes in excise duty rates have led the brand manufacturers to reduce the ABV of the drinks in recent years to avoid the higher ready-to-drink (RTD) tax. Brands have reformulated from their previous level of about 5.5% ABV to 4% for commodity brands and 5% for more premium products.
The clear brand leader in the market is Diageo's Smirnoff Ice - a blend of Smirnoff vodka and lemon juice introduced in 1999. In August 2002 it added Smirnoff Black Ice, aimed at young men who wanted a less sweet alternative to the original. Launched in the on-trade, it is now also on sale in off-licences.
Diageo's FAB portfolio also includes Archers Aqua, a sparkling blend of Archers Schnapps and a fruit flavour. Its core variants are peach, cranberry and raspberry, although it has launched other limited-edition flavours.
Diageo has engaged in NPD in this category, and last May added Archers Vea, a low-sugar FAB positioned as having a more refreshing taste. Its attempt to extend its Baileys brand into this category, Baileys Glide, did not do well, however, and was withdrawn last August.
Its most recent launch in the category is Slate 20, a bourbon drink flavoured with lime and ginger aimed at 18- to 30-year-old men, who its research suggests prefer dark-spirit mixes. Its debut was supported by a pounds 2m ad campaign.
Jane Sutcliffe, European marketing manager for Smirnoff Ice, says: 'As well as delivering marketing campaigns that connect with consumers, we will continue to innovate in the RTD category. Success will be achieved by renovating existing brands and extending the category by creating new products.'
Beverage Brands' WKD is one of the few brands growing in this declining market and has risen to second place behind Smirnoff Ice. The brand has been supported by a high-profile advertising campaign using the strapline 'Have you got a WKD side?' The brand is available in three variants: Original Vodka Iron Brew, Blue and Red.
Bacardi Breezer, Bacardi-Martini's foray into this market, launched in 1993 and was the brand leader until Smirnoff Ice overtook it in 2002. …