The alcohol market can be divided into segments, each with its own needs and wants. The key to successful marketing is understanding these different segments and targeting them with the right products.
One of the most popular methods for performing market segmentation uses demographic factors like age, gender and income.
Other methods use psychographic factors like lifestyle, motivations, values, likes and dislikes as well as behavioral factors like purchasing habits, how someone intends to use alcohol, how often, the benefits they seek, or brand preference.
In this article, we will perform alcohol market segmentation using the following 7 variables: type of alcohol, price range, ingredients, taste, country/region of origin, the occasion of use, and brand.
But first, let’s start by understanding why it is important to use market segmentation when selling alcohol.
The Importance of Segmentation of the Alcohol Market
The segmentation of the alcohol market is essential because it allows alcohol manufacturers and retailers to target specific groups of consumers with laser precision.
By understanding the needs and wants of different segments, businesses can create products that are more likely to appeal to them and retailers can stock alcohol products that their customers are most likely to buy.
The market for alcohol ranges from those looking for a beer to enjoy with friends to those searching for a high-end bottle of champagne for a special occasion.
By segmenting the market, businesses can identify which type of alcohol is most popular with each group and target their marketing and sales efforts accordingly.
Variables for Alcohol Market Segmentation
Alcohol market segmentation can be performed along the following 7 axes:
- Type of Alcohol
- Price range
- Ingredients
- Taste
- Country / Region of Origin
- Occasion of Use
- Brand
Different people have different needs, wants and motivations for purchasing a product or service.
And so most alcohol manufacturers do not cater to all buyers. Instead, they focus on those segments of the market that are most likely to buy their products.
For instance, winemakers will focus on making and selling the best wine they can while breweries will focus on making beers.
It is therefore essential that businesses decide which segments they want to target and then design their products, marketing, and sales strategy accordingly.
Let’s now look in detail at each of the 7 variables used in alcohol market segmentation.
#1. Segmentation Based on Type of Alcohol
The type of alcohol that someone wants to buy is by far the most important factor affecting a consumer’s buying decision.
The most common types of alcohol are:
- Wine
- Beer
- Spirits
- Liqueurs
- Cider
- Spirits
- Cocktails
Different types of alcohol are popular with different segments of the market.
For instance, wine is popular with older consumers while beer is more popular with younger drinkers.
Spirits are popular with both men and women while liqueurs are more popular with women.
Cider is becoming increasingly popular with young people while cocktails are more popular with those who want to drink alcohol but don’t want the taste of alcohol.
What people drink can also be affected by the occasion. For instance, someone might choose a beer when hanging out at a pub with friends. The same person may choose a glass of white wine when dining at a fancy restaurant.
Even in a single product type, there are many variations. For instance, the market for beer can be segmented into many types of beer like ales, stouts, porters, pilsners, lagers, etc.
Similarly, the market for wine can be segmented based on types of grapes, region, color, age, etc.
This is why businesses need to decide which type of alcohol they want to sell, and to which segment before making their products and rolling out their marketing, and sales strategies.
#2. Alcohol Market Segmentation Based on Price
Price is, of course, a major factor that influences consumer behavior.
When it comes to alcohol, there are products available at all price points, from inexpensive options to outrageously expensive.
Not all segments of the market are willing to spend the same amount of money on alcohol, though.
For instance, younger drinkers are often more price-sensitive than older consumers. This is because they have less disposable income and are often still in education or starting out in their careers.
Price-sensitive consumers are also more likely to drink alcohol that is on sale or on special offers.
On the other hand, who have the money and appreciate the finer things in life are more likely to spend on expensive alcohol products.
Businesses that make alcohol products need to decide which price point they want to target with their products. They also need to make sure that their products are priced in line with what their target market is willing to pay.
Manufacturers and retailers often use price segmentation techniques to maximize their revenue and profit by extracting the most revenue out of each customer based on their willingness to pay.
#3. Segmentation Based on Ingredients
Most alcoholic drinks are made with just a few basic ingredients.
For instance, beer is made with water, yeast, hops, and malt. Wine is made with grapes, yeast, and water. Spirits are made with alcohol and water.
However, there are endless variations of alcoholic drinks that use different ingredients.
For instance, some beers are made with fruit, honey, or even chocolate.
Wines can be made with different types of grapes, and spirits can be made with different types of alcohol.
Cocktails are made with a mix of alcohol, juices, and other ingredients.
When segmenting the alcohol market, businesses need to decide which type of ingredients they want to use in their products and why.
The reason for this is that consumers care. Many consumers have strong preferences for certain types of ingredients.
For instance, some consumers prefer alcohol that is made with natural or organic ingredients. Others may have allergies or sensitivities to certain ingredients that they need to avoid.
And so alcohol market segmentation based on ingredients allows manufacturers and retailers to target that segment of the market who cares what’s in their drink.
#4. Alcohol Market Segmentation Based on Desired Taste
After the type of alcohol, taste is perhaps the most important factor that consumers consider when choosing a drink.
Taste preferences can vary significantly from one person to the next.
How often have we heard someone say – “I don’t like the taste of beer, I prefer wine” or “I only drink white wine because reds are too strong for me.”
Taste preferences are often cultural too. For instance, in the US, the UK and Germany, beer is the most popular alcoholic beverage, while in most of continental Europe, wine is more popular.
And so when businesses are segmenting the alcohol market, they need to decide which type of taste their products are going to target.
Are they going for a light and refreshing taste? A strong and bold taste? A sweet or fruity taste? Or something else entirely?
Such segmentation could easily decide whether their business succeeds or fails.
#5. Alcohol Market Segmentation Based on Country / Region of Origin
Many types of alcohol are tightly associated with their country or region of origin and this plays an important role in a consumer’s purchase decision.
For instance, Scotch whisky is strongly associated with Scotland, while tequila is closely linked to Mexico. And so someone may wish to have a tequila when having Mexican food and would rather not have a scotch.
Similarly, if someone’s hosting a themed party, say from Bavaria, they will want to serve Bavarian beers and not Belgian beers.
And so based on their circumstances, people may choose a drink solely based on its country or region of origin, thus making this an important variable for alcohol market segmentation.
#6. Alcohol Market Segmentation Based on Occasion
People buy different types of alcohol for different occasions.
For example, wine is often seen as a drink for more formal occasions, while beer is seen as a drink for more casual occasions.
Spirits are usually reserved for special occasions or when people are going out clubbing.
During a Thanksgiving meal or a Christmas meal, alcohol consumption usually revolves around wine.
However, on New Year’s Eve, people are more likely to drink champagne.
And so alcohol manufacturers, but especially alcohol retailers, need to align their marketing strategies to different occasions in people’s lives and their inclination to buy certain alcoholic drinks for these occasions.
#7. Segmentation Based on the Alcohol Brand
When it comes to purchasing alcohol, brand loyalty can be quite strong.
Someone who loves a Glenmorangie scotch is not likely to purchase Johnnie Walker whisky, even if it’s cheaper.
The same goes for beer. Someone who loves an Erdinger from Bavaria is not likely to switch to Heineken even if may be cheaper and more widely available.
Having said that, many people are willing to try something new. For instance, someone who loves red wine from Bordeaux might be willing to try a similar red wine from South Africa or Chile.
Likewise, someone who likes an after-dinner Grappa might be open to trying an Amaro for a change.
But the important point here is that businesses need to understand (and exploit) the affinity that consumers have for some specific brands.
Conclusion
As you can see, the market for alcohol can be segmented using many variables and can be analyzed from different angles.
In this article, we performed alcohol market segmentation following these 7 factors: type of alcohol, price range, ingredients, taste, country/region of origin, the occasion of use, and brand.
Alcohol manufacturers and retailers often use market segmentation to better understand their customers and figure out how to appeal to them.
With alcohol market segmentation, they can better understand which of their products are likely to sell well and can target their audiences more effectively.
