Good times have long been gone for the RTDs (ready to drink) alcoholic drinks in Bulgaria. The category has been in a downward slope, quite far from the double digit growth rates experienced prior to 2005. Well-known brand names and new product launches have not been enough to jump start the category from the downfall, at utmost it only managed to slowdown the decline. It does not mean Bulgarians are decreasing alcoholic drinks consumption but a sign that the consumer is shifting their preferences.
 

RTDs out of fashion

Bulgarians are traditionally alcohol drinkers and this explains their high expenditure on alcoholic drinks. The consumer in Bulgaria tends to drink when going out in the evening as well as at home, and not only when seeing family and friends but also with dinner. Bulgarian drinking habits are deep-rooted and difficult to alter. In terms of litres of pure alcohol consumed per capita Bulgarians are the leaders among EU nations. Nevertheless, it does not mean Bulgarians are not getting health conscious towards drinking. RTDs are seen as an artificially flavoured alcoholic drink, particularly by the younger generation.

The decline in RTDs category is driven by the consumer’s preference shift from RTDs, once a fashion alcoholic drink, to alcoholic drinks such as fruit beer, tequila or cocktails are particularly popular with younger, health-conscious consumers, seeing these drinks prepared on the spot as a “purer” option to RTDs. Women often opt for martinis and sparkling wine.

Spirits is the main choice option from the consumer, either to drink at home or at the bar. Within spirits the consumers’ drink of choice continues to be Rachiu/Rakia. In 2012, Rachiu/Rakia comprised 46% of the total volume sales, followed by vodka and whiskies, with 36% and 7%, respectively. The three categories combined totalized 47 million litres sold, in 2012. RTDs do not have a chance against the pole position maintained rachiu/rakia maintains due to is long local tradition and well defined consumption patterns. Other categories compete with RTDs backed up by a strong advertising on TV, public transport, billboards and the special events in contrast to the lower spending on the RTD brands.

Source: Euromonitor International 

New product launches failed to boost the category
The RTDs category is entirely lead by three market players; Sofstock, Diageo and Belvedere, with Bacardi Breezer, Smirnoff Ice and Sobieski Impress, respectively. Combined the three brands have more than 90% market volume share, in 2012.

There was an attempt to boost the category, in 2011 from Diageo Bulgaria EOOD launched Smirnoff Grand Cosmopolitan and Mojito. However, despite the strong brand name, good distribution, strong launching support, the brand did manage to reverse the negative trend in the segment. Moreover, the products appeared to have unclear positioning – they were not suited for the on-trade because most bars prefer to mix their own cocktails and enjoy a better margin by doing so. Also, with the retail price of BGN14 and alcoholic strength of just 12.5% abv, Smirnoff Grand Cosmopolitan and Mojito proved to be expensive, as compared to buying local or imported spirits with an abv of 37.5-40% and a soft drink separately.

In spite of all the efforts the national brand owners of the main RTD brands – Bacardi Breezer and Smirnoff Ice, greatly reduced the marketing support for their brands a few years earlier and concentrated on their more profitable core spirits brands.

Unit price is discouraging
Added to the RTDs unclear positioning, RTDs compete with prepared-on-the-spot cocktails and with the spirits and soft drinks. As well, a falling demand for more expensive alcoholic drinks, due to economic uncertainty, which has encouraged consumers to switch to cheaper brands.

In many cases the RTDs are more expensive – a small serving of a locally produced spirit and a soft drink would cost about BGN3 against BGN3.8-4.00 for the RTDs. As a result, in 2012, RTDs declined by 3% in volume terms, while the CAGR for 2007-2012 was also negative, at 12%. Similarly, the value decline in 2012 was 7%, while the 2007-2012 was characterised by a negative constant value CAGR of 16%.

The prospects

The outlook for the 2013-2017, in volume terms, are that RTDs will post a more moderate negative CAGR of 2%, in contrast with the negative CAGR of 12% recorded over the historical period. It is expected a limited range of marketing activities by brand owners which will serve to maintain the market shares from a steeper decline. 

Fierce competition is expected to arrive in all directions, from the leading beer brands and the flavoured rum, vodka and whiskeys, added to a shift of the local consumer to a more healthier drinking habits, is expected to continue to push the category down due to its image as an artificial and low abv alcoholic drink. As a result spirits are expected to show a better perform over 2013-2017. The pop 3 rank will remain unchanged, with rachiu/rakia and vodka expected to have a CAGR close to zero, on another hand, whiskies is expected to have the best performance, with a 2% CAGR in volume terms, in 2013-2017. Where, rachiu/rakia and vodka mainly rely on a price advantage to compete, whiskies expected better performance is mainly based on consumers’ awareness and appreciation for whiskey with distinctive characteristics, different from the mass-produced brands.

Source: Euromonitor International

Note: Data for 2013-2017 is a forecast

Note: Off-trade values RSP, constant prices. Data for 2013-2017 is a forecast
Source: Euromonitor International 

The challenge and opportunity for the manufacturers to go out of the slump is to reposition RTDs as a premium drink, which follows the health conscious consumer trend. To create a product in the consumers minds seen as pure and healthier, in this manner explaining the higher unit price to a price sensitive consumer.

Source: Euromonitor International 

Elvio Andrade,