Global Spirits 2019 Trends to Watch: Part 2

Tariffs impact American whiskey; developing markets offer growth opportunities; Brexit looms

IWSR continue to look at the results reported by the bigger global spirits players to garner some clues as to how the worldwide spirits market is faring in 2019.

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

Tariffs impact American whiskey, but the category defies defeat

With tariffs in place on American whiskey in the EU, China and Mexico since last year, it might be expected that sales would be under pressure, but the signs are that the category is still growing. Brown Foreman, whose fiscal year ended at the end of April, are showing that the most exported Bourbon brand, Jack Daniels, still recorded “single digit growth” for the year. However, they did concede that they had absorbed most of the Tariff costs. From January to June 2019, Beam Suntory have seen their Jim Beam Bourbon brand grow in “mid-single digits”, but they admit that the tariffs have impacted on their Bourbon sales in the EU and China. The US market for Bourbon will be contributing to these positive Bourbon results, and it is not just the flagship Bourbon brands that are pushing up sales. In the first half of 2019, Campari’s Wild Turkey portfolio saw a rise of 11% mainly due to its core US market.

Vodka flourishes outside the US

The US vodka market, however, remains a difficult trading environment for many brands. Campari’s SKYY Vodka sales are subsequently down while Pernod’s “Planet Earth’s Favorite Vodka” campaign has failed to resurrect the fortunes of their Absolut brand in the US. Out of the US, Pernod’s third quarter release indicates that Absolut is flourishing, with the brand singled out for its performance in Canada, Mexico, China, Africa, the Middle East, France, the UK and Russia. Diageo may have rekindled demand for the Ketel One and Smirnoff brands in the US, but Cîroc vodka remains work in progress.

Encouraging signs for the overall US spirits market and for developing countries

The overall spirits market in the influential US is still in relatively good health. Diageo’s results show that their drinks sales grew organically by 5% in the last half of 2018 and in the first half of 2019. For Pernod, “continuing double digit development relays growth” in the US with their Martell, Avion, Altos and The Glenlivet Founder’s Reserve products up to the end of March 2019. Leading Irish whiskey brand Jameson was still very much in vogue in the first quarter of the year. Rémy Cointreau are witnessing promising growth in the US, and Campari’s results for the first half of 2019 were reportedly driven by the US (as well as France). Aperol, is said to be making good headway and is growing with the cocktail culture in the States. The interest in cocktails in the US is likely contributing to the progress of the spirits sector in the US.

Encouragingly, many of the global spirits players refer to favourable numbers in the developing markets that have the potential to generate sizeable growth rates. Spirits sales in countries like China, India, Russia, Mexico and Brazil have all been named as being in good shape, as well as regions like Africa, the Middle East and parts of Asia. This bodes well for 2019. The early indicators from the recently published results provide comfort for stakeholders in the spirits industry for 2019. But, with the threat of further tariffs being introduced and a disorderly Brexit becoming more likely, there remain plenty of threats on the horizon that could disrupt the progress of the sector.

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

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