Alcoholic beverage brands are facing a challenging environment globally. Consumer attitudes to health and a squeeze in spending are compounded by the general economic uncertainty plaguing countries far and wide.
Against this backdrop of economic woes, we take a closer look at consumer tolerance and sensitivity to price in Southeast Asia. Its youthful profile is a contrast to the ageing demographics of developed countries, offering some hope for an embattled industry.
Demography and social norms
It’s fair to say, there are competing forces in play. On the one hand, the Southeast Asia region appears to offer opportunities for value growth, driven by young populations, a cocktail culture, and rising affluence. However, shifts in social norms around alcohol consumption, the rise of low and no-alcoholic alternatives, is something of a counterweight.
Dig a little deeper and category shifts are also evident. Traditional categories, such as beer, whisky and brandy are struggling to maintain position in some cases, whilst white spirits and RTD’s are experiencing an increase in popularity.
Additionally, there is no doubt tourism is also of significance to some countries in the region, being particularly influential in terms of nightlife. Whilst Thailand cuts taxes on alcohol to stimulate tourism and boost the economy, Vietnam is trending towards increasingly high taxation, framed as a public health measure.
Different lenses, an evolving landscape and challenges aplenty for alcoholic beverage brands.
A history of high taxes and price elasticity
History has shown that alcohol tax changes can be powerful levers, reducing consumption amongst heavy drinkers and youth. Higher taxes mean higher prices, especially for imported spirits and wines. However, changes are often more gradual than expected, with a shift to lower-alcohol or cheaper and unbranded alternatives. Past trends show that price alone may not be enough to significantly curb drinking habits. Indeed, the cultural affinity for beer in Vietnam, as an example, is strong, especially during family or social gatherings.
Elasticity of price can also vary considerably between categories. Spirits are often more price sensitive than beer or wine, although higher prices can also signify quality and status.
Alcohol taxes are in fact a double-edged sword. They may reduce consumption and increase Government revenue, but often also risk fueling illicit trade through unregulated local production or smuggling.
Taking a ‘glass half full’ approach to the current situation suggests new opportunities are emerging, but agility is required to capitalize. That means having a finger on the pulse. Engaging with reliable market research data. Tracking consumer tolerance, before it hits the bottom line.
Measure it to deal with it
Frontline Research Group is recognized as a leading expert in General Trade research, specializing in market and channel measurement. The company has built an impressive portfolio of beverage clients over the past three decades and offers a unique perspective of traders as well as consumers and shoppers. Its services bring depth and insight into both on- and off-premises channels.
High excise taxes and high retail prices are the general rule across Southeast Asia, and the planned tax hikes in Vietnam over the next few years will only exacerbate the challenge faced by brands. Some brands will be affected more than others. The idea that you need to measure it to deal with it certainly rings true.
The role of price
To help liquor companies strategize and execute their defenses in the current climate, Frontline Research Group is offering a tracking service focused on selling prices, elasticities and sentiments.
The role of price in purchase decision making helps provide understanding of the perception of value and willingness to pay. We look at this from the point of view of retail traders, plus a shopper/consumer demographic lens. We can identify a range of acceptable pricing for each brand, and we link purchases to activations noticed.
The research provides a line of sight into pricing and availability. A data-driven way to help set prices, promotions, product positioning and quantify the impact on demand. Real prices, real reactions.
Vietnam
Frontline Research Group has resources covering all markets in Southeast Asia. One that garners a lot of attention is Vietnam, especially with the trajectory of tax increases forecast for alcoholic beverages. The research specification below acts as an example of the approach taken but is applicable to all countries.
Our coverage of Vietnam is unsurpassed in terms of trade channels and geography. Spanning independent supermarkets and minimarkets, counter service grocers, market stalls, kiosks and other micro retail stores, we have off-premises covered.
In the all-important on-premises sector, we visit premium bars and nightlife, including cocktail bars, fusion lounges and nightclubs. Also, mainstream bars and beer gardens. And mainstream and premium restaurants and hotels.
From a geographic perspective, we offer flexibility. Beyond Ho Chi Minh City and Ha Noi, we can cover other major cities or whole regions including representation of large and small towns.
Your brands may be taxed to the limit, but we have insights built to scale.
Contact
For more information about our price tracking services, or indeed any of our beverage market landscape capabilities, please contact:
Steve Johnson, Managing Director steve@frontlineafrica.com
Jack Dewet, Business Development Associate Jack.dewet@frontlineafrica.com
Gareth Ellis, Regional Manager Southeast Asia Gareth.ellis@frontlineafrica.com
