Cider sales sparkle

With value sales up a staggering 10% on last year, and attractive profit margins, cider presents a great opportunity for hosts to build profit. Nigel Huddleston reports

It may not have the most cutting-edge image in the drinks industry but cider is certainly flavour of the month with many pub customers.

While sales of beer tread water and RTDs plummet, cider has been enjoying a period of growth unparalleled since a boom in new product development briefly made cider sexy a dozen or so years ago.

AC Nielsen's audit figures for the year to March show on-trade sales valued at £690m, up by 10% on a year earlier. Draught cider is up 7% and packaged by 40%.

Sukhvinder Gill of AC Nielsen says: 'In draught, it's really Strongbow that's driving the growth, while the packaged growth has been driven by Magners, especially in London and Scotland.

Although a relatively recent addition to the market, Magners has revitalised the packaged cider market, claiming 78.3% on-trade market share in Scotland and more than half the market in London.

But some licensees say they still only see the benefit of all this growth in the summer.

Suppliers have to get behind it

Hazel Purvis, of the Houblon Inn at Oasby in Lincolnshire, says: 'Cider is very slow in winter. I think suppliers really have to get behind it in the summer to get people grabbing it . Hopefully that will help sales in the winter because once people have tried something and like it, they'll stay with it.

Tony Oliver, licensee of the Royal Oak in Wood Street, Surrey, adds: 'I don't think cider sales have changed very much at all recently. They go up at this time of year, but otherwise it's fairly static.

What's positive for the pub market is that the volume figures show lower rates of growth than value, suggesting margins are being stretched.

Cider's relative lack of fashionability has arguably been a plus in an era where beer and RTDs have had margins ripped out by price cuts.

CGA-Centro figures show higher per-pint pump prices for all of the top nine cider brands at March 2005 compared with a year earlier.

Cider is a high-margin category

Kirsten Ogilvie, cider marketing manager for Strongbow firm Scottish Courage, says: 'The cider category is a high-margin category for the on-trade and the only long alcoholic drinks category in growth, outperforming the total market. It provides the retailer with the opportunity to make more of a profit from every pint of cider than standard lager.

Simon Russell, spokesman for the Gaymer Cider Co, which has Blackthorn and Olde English in its armoury, says: 'Cider is enjoying probably the strongest period in sales and general consumer interest in a decade. With value in the category ahead of volume sales, the outlook for retailers is particularly strong.

'Typically the average price of a keg of cider to the retailer is lower than that for beer or lager, yet the consumer usually pays at or around the retail price for a standard lager.

This position reflects a tough stance by Scottish Courage which has rejected the notion of cider as a cheap, downmarket product and tried to raise perceptions through raising prices and investment in marketing. Strongbow's dominant market position is a reflection of previous owner Bulmers' decision to keep investing in advertising in the late 1990s and early 2000s when its competitors were pulling out.

Strongbow's seven-figure spend

Figures compiled by Nielsen Media Research and the World Advertising Research Center show Strongbow to be the only brand consistently spending a seven-figure sum on advertising each year.

Main rival Blackthorn struggled even to make six figures for the early part of this decade.

Rather than worry about Strongbow chipping away at their market share, smaller producers seem happy to be dragged along in its tow.

Barry Chevallier Guild, marketing partner for Aspall Cyder, says: 'There was a time when Strongbow and Blackthorn were fighting at a price that devalued the market, and consumers' image of cider went down with it.

'Also the major brands positioned themselves almost as lager. It was difficult even to find the word cider on their packaging, but Strongbow is now saying 'we make cider and we've got to be proud off that'.

But not everyone is so unreservedly impressed. John Edwards, on-trade sales manager at Stowford Press firm Westons, says: 'Strongbow is really more of a brand now than a cider product. Bulmers had a passion for making cider and the people who managed it were cider people. Having said that, Scottish Courage is putting a lot of effort and support behind the brand and we all benefit from that as a result.

RTD decline helps lift sector

Edwards thinks that the pummelling RTDs have taken from Government and the media has done as much to help cider's cause.

He says: 'It's not just Stowford Press, but a whole range of ciders which are doing well. There seems to be a growing trend in the market based on the fact that RTDs are showing a decline. There's not been anything new in RTDs for a while whereas there are lots of new things in cider.

Ogilvie at Scottish Courage says: 'Cider, and Strongbow in particular, is becoming seen as more relevant to a new generation of drinkers, which could be partly attributed to the decline of FABs (flavoured alcoholic beverages), but also due to the increased brand investment raising more awareness of both the category and the brand itself.

And at least part of that investment has gone into attempting to take some of the seasonal sting out of the market by promoting the brand around Hallowe'en, alongside the Bitter Sweet ad campaign that ran through the winter.

Ogilvie says: 'From this, we have seen that cider is not by any means restricted to summer sales and that the increased growth in the category is evident all year round.

'AC Nielsen figures show that Strongbow actually sold more at Christmas than summer in 2004.