Business Analysis: The Spirits Industry

The range of spirits is wide, but the industry is dominated by a few sizable play-ers. As the sector is changing fast and very dynamic, competition among the brands is high and often very intense. Increasing regulations are faced within the key markets and are changing therefore the industry and the way of communica-tion, the concrete marketing consequences will be further discussed in the practi-cal part. In addition, the consumers tend to change preferences and tastes and want to be attracted by outstanding communication. Even for the big players, business became tough and price margins frequently came under pressure. Still the companies, which own the most established brands, produce the widest op-erating and net income margins. Huge amounts

Demand was inelastic across good and bad economies. Over the last 5 years, the consumers changed and became more discerning about what kind of alcohol they purchase. The trend is towards premium spirits, as con-sumers want to somehow reward themselves and choose wisely, what they drink. However, so called market trends, which last 5-10 years according to literature, do not really appear within this industry (cf. Trends & Futures 2013). There are some legendary products, which enjoy in most cases brand-related success, but the spirits sector is facing very often fads. Fads are common in fashion industry, and change from year to year. Since the last few months, gin became a very popular category and the number of gin producers increased enormously. The key to suc-cess is to build strong brands, which show great performance due to loyal cus-tomers and their high commitment. Targeting the right audience in the right way is crucial for a brand’s differentiation (cf. Lipsman et al. 2012, p.

Ac-cording to a study regarding consumer’s responsiveness to sales promotions (Rohr et al. 2013), consumers are highly influenced by such price discounts which affect their purchase decision. The interesting or challenging fact is that customers tend to buy any spirit brand, if it is under price promotion, which means that loyalty is not that high, if the price is attractive enough. This problem was faced over the past years, and brands spend a lot of time and effort for making brands competitive enough to assert themselves against its competitors. There-fore, it is vital for the brand to be attractively represented at the point of sale, in-cluding several merchandising materials, which create high visibility. (cf. Rohr et al. 2013, p.