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Getting ready for the future

New generations mean new drinking habits. For younger consumers it’s important to make conscious decisions, both regarding what you drink, but also for when, where and with whom you drink it. That means the market for Ready-to-drink (RTD) beverages has exploded. We had a chat with The Absolut Company’s Sofia Heuer, Director Global Consumer Insights & Planning and Fredrik Syrén, Director Global Channel Marketing, Brand Advocacy and RTD’s, on how to pick up the trends and turn them into products. 

Sofia, how do you work with consumer insights?

In many ways. Partly specific to The Absolut Company and our portfolio, but we also work with trend and foresight reports for the entire Pernod Ricard group. You could say that it is our job to identify the trends and then connect them and define what they mean for our brands. The method is very much based on understanding different target groups, where we have an ongoing dialogue with them on various subjects. We do, for example, in-depth interviews, ethnographic research, group interviews, social listening, continuous monitoring and ad-hoc coverage.

They are easy to keep at home in the fridge and provides variety of flavors as well as enable discovery of new cocktails, without the fuzz of having to have ingredients and mixers at home

And which are the biggest consumer trends right now?

The convenience segment has had a significant increase the last years, and there are a couple of underlying trends driving this change. For example, there has been a strong development of what we call daytime drinking the past few years – when you don’t just consume alcohol in the evenings. For example, it could be about festivals, having a picnic outdoors or just hanging out with friends. That’s where ready-to-drink products fits nicely. They are easy to keep at home in the fridge and provides variety of flavors as well as enable discovery of new cocktails, without the fuzz of having to have ingredients and mixers at home. In addition, since they’re low in alcohol, you can easily keep track of how much you drink compared to if you mix the drinks yourself, which is important from a health and wellness perspective. In other words, with ready-to-drink products you are more in control of your alcohol intake. Another reason to why consumers are looking for control is because of social media. Everything you do can now be documented beyond your control.

In Europe, we’ve been a bit slow to embrace RTD’s, but as there are more and more premium and “better for me” alternatives, the market is showing a strong momentum now as well

How do you work to support the development of new products?

We put a lot of effort into understanding consumers needs and what they are attracted to in products and in this way we can get a better idea of which flavors to either pick up or remove. Right now, for example, we are seeing an interest in cross-pollination of flavors across continents, in the same way as the fusion cuisine in cooking. There is a lot of inspiration from street food and peppery flavors. Of course, a lot of inspiration comes from Asia, but also from Mexico and South America.

Kahlúa RTD Espresso Martini

Fredrik, why does The Absolut Company focus so much on the Ready to drink-segment?

The market has exploded in several parts of the world in the last couple of years. Much of this development stems from a strong US-based trend which can be summarized as “better for me”. You want to enjoy a drink, but not get too many calories. You want something lighter than a beer to feel less full. This has led to the strong growth of the hard seltzers segment. Another trend that has also helped to popularize RTD’s is that it has become much more premium. Now there are high-quality cocktails in a can that taste perfect and that you just drink from the can or pour and serve. We have, for example, launched a range of Absolut cocktails and Kahlúa has its popular Espresso Martini. Malibu has the classic Pina Colada cocktail and some other refreshing offers.

Malibu RTD’s

What differences are there between the generations?

In terms of age, one might be inclined to generalize a bit and say that RTD’s mainly appeal to younger target groups. But older target groups are also starting to open up to the convenience of ready-mixed cocktails. One explanation for this may be that younger generations aren’t mainly looking for the effects of alcohol. For example, we see a clear trend that nightclubs are no longer as important as bars when it comes to consumption. The pandemic has also accelerated this shift. Today you hang out more at home and then it is convenient to have a variety pack in the fridge so you can serve perfectly chilled drinks to your guests without having to worry about mixing it right or having all the ingredients available. We also see that this trend continues after the pandemic. The forecast for the top 20 markets is growth of about 20 percent annually.

Sofia Heuer, Director Global Consumer Insights & Planning and Fredrik Syrén, Director Global Channel Marketing, Brand Advocacy and RTD’s.

Is this a global trend, or are there any regional specifics?

The development differs between markets. The US is both the largest market and also have the highest growth with over 40 percent growth last year. The calculations made by independent research bodies are that RTD’s will overtake wine in terms of volume in the American market already this year and be the second largest alcohol segment after beer. Next to the US, Japan is the largest market, but with a much stronger presence of domestic brands. In Europe, we’ve been a bit slow to embrace RTD’s, but as there are more and more premium and “better for me” alternatives, the market is showing a strong momentum now as well.

Doing good in times of troubles

The pandemic has been hard on everyone, but in the Philippines and Mexico, things have been really challenging. We had a talk with Lynne Millar, Purchasing Director at Malibu and Kahlúa operations at Pernod Ricard, on the status of the Malibu initiative the Coconut Commitment and the Kahlúa project; Coffee for Good.

How are the Coconut Commitment and Coffee for Good initiatives doing?

If I start with the Malibu program, life in the Philippines during the pandemic has been especially difficult. In rural areas there is a lack of sanitation and getting access to provide support can be a major challenge as most of the Philippines has been in a lockdown. In the region where most of our coconut farmers are located, the situation has been even worse with the military taking control of the area and setting up checkpoints in efforts to try and control the spread of the virus and to prevent migration of people to different regions. In these areas there is little access to fresh water and no money to buy sanitation equipment and extra food supplies, but within the framework of the develoPPP.de program our partner the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) was able to access additional funds from the Federal Ministry for Economic Cooperation and Development to help aid the community by distributing emergency packs with rice, corn, bottles water and face masks to the farmers. At times, we really didn’t know if our farmers even had enough food to feed their families, so it’s amazing that we could help in some small way.

Our ambition is to double the work to make up for time lost during last year

In addition to the hardest of times facing a global pandemic, the country was struck by a super typhoon in November claiming several lives and affecting over 2 million people, with widespread destruction of homes. As a culture they are so incredibly resilient.

The program was naturally impacted heavily by these circumstances and everyone connected to the project has had to adapt. It was our initial plan to sit down face to face with the farmers to assess a starting point for each individual by defining number of hectares planted, number of family members and typical annual yields and income. This was of course not possible now, so we tried to do what we could from a distance, but it wasn’t easy when we couldn’t talk directly with all farmers. But by reaching 10-20 percent of the farmers, we’re at least able to make qualified assumptions based on the intel we were able to get. We will validate our assumptions when it’s possible.

We also had to cancel all on-site training of the farmers, and instead switch to digital sessions, but eventually we managed to have a consultant visit the area once the hardest restrictions were lifted. The consultant then carried out an assessment of the situation and put together a plan for a set of demo farms that can help train the farmers in sustainable farming methods and how to maximise the efficiency of the farm to both improve the yield and minimize the negative impact on the environment. When time allows, we will build additional demo farms with the involvement of the farming communities, especially the youth. Our ambition is to double the work to make up for time lost during last year. We’re ready with all the infrastructure needed when we’re allowed to restart at site. So, we’ve not wasted any time, but we’ve made less progress than we hoped. Our major targets over the four years of the initiative are to increase the farmer’s yield by 20%, increase income by 15% and also to help the farmers to adapt to more sustainable farming practices, guided by the Farm Sustainability Assessment (FSA) tool developed by the Sustainable Agriculture Initiative (SAI) Platform.

Image from a previous site visit in the Philippines for the Coconut Commitment program.

And how has the situation been in Mexico for the Coffee for Good farmers?

It has been a similar difficult situation. The Veracruz region was mainly cut off and access controlled by military adding to that, there was some skepticism amongst the farmers on the severity of the covid virus initially. Our NGO Fondo Para La Paz did their best to educate the farmers and raise their awareness and eventually they understood the serious nature of the situation. Even if Kahlua invests a lot in the program, when Covid 19 impacted the world in 2020 Kahlúa immediately allocated additional funds to ensure that the farmers and the team of our NGO partners Fondo Para La Paz had access to protective clothing and sanitizer products.

For Malibu, we’re really ready to ramp things up. Both by increasing the training of the farmers and the physical help in providing crops for planting.

In terms of progress for the project, things were slowed down a bit, but the Coffee for Good initiative is so mature by now that there was no immediate need for new planning. This year, we’ve had bigger yields than ever before, so all the planting and work we’ve been doing is proving successful and generating results. Adding to that, both Brazil and Colombia have had bad crops last year which has driven up the prices to a new high. Good news for our farmers as they could take advantage of a short term opportunity to earn more.

Now that the area has opened up a bit more, our NGO can visit the farms again, and some of the construction projects that has been put on hold can continue again. I’m sure we’ll be up to speed quite fast in Mexico soon.

Lynne Millar, Purchasing Director Malibu and Kahlúa operations at Pernod Ricard (to the right) during a previous visit in Mexico for the Coffee for Good program.

What are the next steps?

For Malibu, we’re really ready to ramp things up. Both by increasing the training of the farmers and the physical help in providing crops for planting. We have a program to replace old coconut trees that are not productive and we’re also looking into varieties that are more resistant to climate change so we can maximize yields over time. That’s our top priority from now on.

For Kahlúa, our plan is to reach the target of 100 percent sustainable coffee by 2022. And we’re well on track to achieving this. Our long-term plan is also to continue to purchase from these communities for many years, even after we’ve completed our Coffee for Good project.

About the programs

The Coconut Commitment

The Coconut Commitment is Malibu’s way of helping to positively impact the livelihood for 500 coconut farmers in the Philippines by 2024. The goal is to increase their income and farm yields and help them adapt their farming practices.

Coffee for Good

Kahlúa’s initiative Coffee for Good is a sustainable development program designed to have a meaningful environmental and socio-economic impact on the lives of Mexican coffee farmers and their families. Shining a spotlight on how it sources its coffee, Kahlúa has also outlined its ultimate goal – to source 100% of its coffee from sustainable communities by 2022.