Spirits market

"The spirits market consists of the sale of brandy, gin & genever, liqueurs, rum, specialty spirits, tequila & mezcal, vodka and whisky."

We first choose to analyse the market in order to identify the different opportunities for our start-up. Therefore according to the 5 Porter’s forces we know that :

The buyer power is moderate

Hotel, restaurant, bars, are the most significant distribution channel in Belgium for the spirits market. The main actor invests heavily in marketing to promote their product. Products can’t be differentiated for a given market segment which weaken buyer power. Brand loyalty also play a key role which make difficult for cheaper brand to compete with the leading brand.

The supplier power is weak

There is a lack of differentiation of the raw materials, a lack of availability, and a lack of alternative suppliers. In addition, manufacturers are integrated backwards which allow them to grow their own inputs.

The threat of new entrants is moderate - strong

No need of a large capital to enter the market but brand loyalty is strong on the market, brand is part of a lifestyle. Also price can’t affect the market because existing brands are strong. Opportunity for niche product using artisanal production but R&D investment can be expensive as well as the cost of the production, the storage and the distribution.

The threat of substitutes is moderate

Substitutes are alcoholic beverages such as beers, wines, as well as non-alcoholic. Alcoholic producers produce non alcoholic beverages as well to reduce the impact on their revenues due to the substitutes.

The degree of rivalry is strong

Three players with 59.3% of the total market volume. There is a strong distribution network, a lot of independents present and large supermarket chains. The main actors are vertically integrated. The exit costs are heavy and the market growth is low.

Quantitative Analysis

An alcohol is qualified as a spirit from an alcohol level of 15% in volume. Spirits market has been the only stable market, in comparison with wine and beer, for 50 years. More, in 2013, the spirits market rose by 7.2% to reach a 8.5% part of the total market in 2014. For the liquor part, it represents 11.3% in 2014 of the spirits market, and was the only market that grew in 2014.

Qualitative Analysis

The reasons of liquor consumption are mainly driven by the search for great taste, flavors and originality. Liquors can be consumed for any occasion : with a tea or coffee, a dessert, a meal, by itself, with friends, or alone.

Moreover, liquors are often used as a basis in cocktails, which is interesting to take into account.

Segmentation

First of all, we decided to divide the market between men and women because consumption habits are differents, the market size of men is remained stable whereas the women market size is growing mostly due to cultural democratization.

Indeed, nowadays, joining women and alcohol is not negative connotation as it was in the past. That’s why the women alcohol consumption is growing every year. Second of all, we divided the market by age.

Two age ranges went out, the 20­34 years old and the 35­49 years old.

Firstly, we saw that most of the people drinking alcohol are in this rang and another interesting statistic is that this rang contain the biggest part of people consuming organic goods. Indeed 72% of people buying organic/local things are between 20 and 49 years old.

Secondly, the range 18­34 years old is the range the most exposed to advertising.

Thirdly, we saw a huge difference with places where people were drinking alcohol. Mainly people are drinking alcohol at home (80%), the last 20% are divided between bars, restaurants, nightclubs and so on.

Fourthly, the consumption frequency seemed to be a good factor for us for the segmentation. The market can be divided by 3 differents rangs, weekly consumers(51%), daily consumers(14%) and no alcohol consumers(35%).

Fifthly, the last factor of our study was the important of the taste. Our study has showed that 46% of the market buy a certain type of alcohol firstly for the taste.

To sum up, our segmentation will be turning to : ­ Women because the women market is steady increasing whereas the men market is remained stable. It is a better opportunity for our Brand to enter this market. ­ Between 20-­34 years old thanks to their advertising exposition, it will be easier for us to be known.

We can also benefit from the organic market that this range represent. ­ Daily consumption from home, in terms of volume it is the biggest women market we can target. Another argue confirming this segment is that people who are drinking often are more able to taste new products. ­ Interested by the taste, as a matter of fact, our brand is premium and with a premium product, we must sell quality.