Marketer meets new tax with new 'Lite' product

By SIMON HENDERY marketing writer

Faced with an out-of-the-blue tax rise that threatened the survival of one of their product lines, many businessmen would have crumbled.

But Michael Erceg of Independent Liquor - whose personal fortune is testament to his mastery in the art of liquor marketing - is already changing tack.

Next week, just three weeks after the excise duty increases on low-alcohol spirits were rammed through Parliament unannounced, a new wave of Independent spirits will begin appearing on store shelves, replacing the 23 per cent "light spirits", which Erceg says account for less than 10 per cent of the firm's business.

With an alcohol content of 13.9 per cent, the new range is unashamedly aimed at beating the excise, which added about $5 to a bottle to spirits containing more than 14 per cent but not more than 23 per cent of alcohol by volume.

The liquor industry is not surprised that Erceg has moved - and moved quickly - to reposition his products as the market changed around him.

Those 23 per cent Independent drinks were themselves a case study in pushing the boundaries at the time.

Calculating excise can be complex. Before this month's change, there were seven steps on the scale, depending on a brew's alcohol content.

But a graph of alcohol content versus tax per litre of alcohol showed a clear dip at the 23 per cent mark.

In other words, 23 per cent concoctions offered the best alcohol bang-per-buck.

Associate Health Minister Jim Anderton studied that graph before fronting the Government push to raise excise on the middle-ground spirits and fortified wines - a move intended to curb youth binge-drinking.

"Studies indicate that young people's purchases of alcohol are particularly sensitive to price and that excise duties have an important role to play in managing their consumption of alcohol," said Anderton's press release.

Erceg denied that Independent Liquor had simply redrawn the graph in light of the tax rise and found the new low-point - 13.9 per cent.

"In the situation where people were looking for better-value product, they're now better off buying full-strength product," he said.

"We believe there will be a residual market [for light spirits] of about 10 per cent ... We believe the category is effectively dead."

Asked why, then, he was launching into the 13.9 per cent market at all, Erceg was frank: one of his aims was to annoy Anderton.

"The man's a fool and it would be a mistake to let him think he can do what he wants in an industry such as alcoholic product without some mention being made of what we think of him. And this is just my way of recording it."

Political point-scoring aside, a knack for being able to push new drink products into the market quickly, and pull the failures out just as rapidly, is one of the key reasons for the liquor baron's success.

His products have caused controversy in the past. Last year, Independent faced pressure from the Alcohol Advisory Council to rewrite labels on its Shakers Mudslide drink, which the council feared would lure under-age drinkers.

Revamp

An example of how Independent Liquor has changed its product range:

* OLD PRODUCT: Kristov 62, 1125ml vodka-based spirit with 23 per cent alcohol.

Typical price: $10.95.

After-excise price: $15.95.

* NEW PRODUCT: Kristov Lite, 1125ml with 13.9 per cent alcohol.

Typical price: $9.95.