Can emerging markets use gin’s UK success as a blueprint for growing the category locally?

Gin has become the undisputed darling of the UK spirits scene. While the spirit was once derided as a dusty and outdated drink by vodka-loving Brits, gin has assumed an altogether more exalted and cutting-edge image.

The UK adopted the gin-drinking ritual from Spain in the early 2010s, and producers were quick in taking serious steps to capitalise on the category’s momentum. “Industry activity ramped up in the UK in terms of gin innovation, the emergence of craft producers, and concurrent innovation in the mixer world,” said Humphrey Serjeantson, research director for Western Europe at the IWSR. “There has also been further investment in domestic whisky in the UK and some producers have used gin as an early cash-flow generator while waiting for their whisky to age.”

Flavour has continued to be a key driver of gin’s growth in the UK, as has the prevalent ‘craft’ segment. The on-trade, and the emergence of brand recognition within it, has also played an important role. As such, gin has “taken share from vodka, rum and whisky sales in the UK over the last 10 years”, allowing it to become a “high volume category”, added Serjeantson. In 2018, gin volume was up by 32.5% in the UK, boosted by rapid growth across all price points.

But such acceleration is rarely sustainable in the long-term, and while the ‘ginaissance’ in the UK looks set to continue, producers would be remiss to take their position for granted as growth rates start to soften.

As such, brands have been casting their gaze further afield to see if success can be replicated elsewhere, and emerging markets with a growing middle-class population are of particular interest. In a number of these markets – such as Brazil and South Africa – there are concurrent trends and drinking habits that mean gin’s UK success could begin to slowly spread across the globe.

IWSR insight shows that gin has already experienced explosive growth in Brazil, with volumes increasing by 122.3% in 2018; in South Africa the increase in 2018 was 53.6%.

The gin and tonic serve has taken the Brazilian market by storm, particularly in the upmarket bars of São Paulo and Rio de Janeiro. Brazilians have an established taste for long, refreshing drinks thanks to the popularity of their native spirit cachaça and its famous Caipirinha serve. According to Luciano Anavi, IWSR Senior Market Analyst for South America, while the Caipirinha is not a sparkling drink, it is an “easy-drinking cocktail that is well suited to the country’s hot climate and would play in similar occasions to the G&T”.

In South Africa, while consumers tend to have a sweeter palate that may not be seen as desirous of juniper or quinine flavours, gin is a “natural fit for the South African climate and outdoor lifestyle”, according to Dan Mettyear, IWSR Research Director for Africa. Gin also has a unisex appeal that bodes well for South Africa’s evolving gender dynamics.

Consumers in both Brazil and South Africa have a love of international brands, which the gin category’s multinational players are in a good position to satiate. However, in line with the pervasive ‘craft’ movement in the UK, local brands from Brazil and South Africa are also adding diversity to the segment. Mirroring trends seen in the UK, many of these brands champion local ingredients, and therefore provenance could also be a key draw for consumers in these markets too.

While some local brands will represent the top end of the market, others will be cheaper alternatives to the more premium international labels. Referring to Brazil, Anavi said: “An influx of cheaper local gins may take the sheen off the category for more affluent consumers, meaning they no longer see it as a quality drink. On the other hand, these consumers may make a clear mental distinction between imported gins, local craft gins and local cheap gins, in which case there may not be an issue.”

Unlike some other spirits categories, gin is well represented across all price points, allowing it to recruit consumers with varying disposable incomes. In South Africa, the ultra- and super-premium end of the market has started to slow, and prices are beginning to fall. “I think most volume growth will be driven at the value and standard ends, but there is still likely to be solid development at premium end,” said Mettyear. In 2018, in the UK, while ultra-premium gins showed signs of slowing, super-premium was still growing at a high rate.

As gateways to their respective regions, Brazil and South Africa are key destinations for gin brands with international ambitions. While the future looks promising, the UK is unlikely to provide an exact blueprint for success in these markets. Nevertheless, there will be some clear crossovers with regards to key trends.

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