Global Spirits 2019 Trends to Watch: Part 1

The appetite for premiumisation remains strong, but the bubble may be bursting on UK gin; a word of caution for tequila

After some mixed results from the global beer players, IWSR look at some of the recent quarterly, half year and full year results reported by the bigger global players to garner clues as to how the worldwide spirits market is faring in 2019. Overall, many of the trends that had helped to shape 2018’s results would appear to be intact.

 

This is part 1 of a 2-part series. You can read part 2 here.

Premium spirits continue to make headway

The consumer’s appetite for premium brands remains strong. Diageo announced that their premium-and-above brands are their best performers in developed markets. Their ‘Reserve’ portfolio grew by as much as 11% in 2018/2019, helping to underpin their upbeat results for the year.

In Pernod Ricard’s quarter 3 figures release, they reported that their speciality brands, many of which fall into the higher-end bracket, continue to show “dynamism”. The company point to “premium brands continuing a very strong performance” in China. Pernod continue to add to their speciality portfolio with new premium plus additions like Italian gin Malfy and Rabbit Hole Bourbon.

Rémy Cointreau’s overall results between April and June were tainted by the ending of partnerships in Europe and price rises, but the company report that trends “remain very favourable” for the House of Rémy Martin’s “highest end qualities, particularly in South East Asian countries, Japan and Africa.”

Beam Suntory, meanwhile, say that in the first half of 2019, their “strategic focus on premiumization” was rewarded with double-digit growth in their “superpremium Bourbons, as well as brands including Hornitos tequila, Sipsmith and Roku gins, and Toki Japanese whisky”. Rival Bourbon producer Brown Foreman registered “double digit growth in their premium Bourbon and tequila brands” in their fiscal year to the 30th April 2019 and are predicting that their premium Woodford Reserve brand is on course to sell a million cases by 2020.

The interest in top-end spirits may be continuing, but this did not help premium mixer brand Fever Tree, whose first half 2019 results were underwhelming when compared to their previous growth levels. The brand does, however, continue to have UK bias and the poor comparable weather in quarter 2 and increased competition dented demand. The company’s International expansion plans though are very much on track, with “strong momentum” in the US and in key European markets, and an acceleration in sales in Canada and Australia.

The bubble may be bursting on UK gin, but global gains continue

You could conclude that Fever Tree’s results suggest a slowdown in UK gin sales this year, but out of the UK, the segment is making further robust gains. Sluggish UK gin sales may be behind a slowdown in Diageo’s gin sales in the second half of their fiscal year in 2019. Diageo’s overall global gin sales do remain vibrant and the company say that the Tanqueray brand is prospering in South Africa and Brazil in particular. Elsewhere it is documented that other more International gin brands, such as the Botanist, Sipsmith and Monkey Gin are performing very well.

The indicators may point to a UK-driven global slowdown in gin, but Tequila looks to still be thriving. Diageo’s second half growth for their Tequila products replicated the first half with sales increasing by as much as 29%. Other leading players are also reporting buoyant Tequila sales with Campari highlighting strong demand in the US for their Espolon brand. Campari do add a word of caution, suggesting that the price of Agave increased more quickly than they had anticipated, putting pressure on prices.

Note: this is part 1 of a 2-part series. You can read part 2 here.

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