After years in the wilderness, the Spanish spirits market finally found itself on the road to recovery in 2016, driven by an improving economic outlook, a resurgent on-trade and the return of large-scale investment from the market’s principal actors. But high hopes for a consolidation of this recovery were dashed in 2017, when the spirits market took an unexpected turn for the worse.
Spirits relapse into decline
With almost all major categories back in growth (apart from rum), 2016 represented a major turning point for a Spanish spirits market moving into its third consecutive year of overall expansion. However, after a relatively good start to the year, cracks began to appear around the key Easter period and it quickly became apparent that 2017 was going to fall well below expectations.
In the end, with rum (-3.5%) still failing to raise its head and whisky (-3.8%), flavoured spirits (-0.8%), brandy (-4.5%) and vodka (-2.7%) all relapsing into decline, 2017 looked more like a disaster than just a disappointment. Having failed to foresee 2017’s slump, the spirits industry was left picking apart a series of both short- and long-term factors that culminated in a -0.63% decline in overall spirits consumption.
Shifting habits driving change
At the heart of this generational lifestyle shift is a health-consciousness movement that has raised the importance of wellbeing, sport and healthy eating, while diminishing interest in the kind of explosive night-time drinking that came to define the Spanish spirits market in the 1990s and 2000s.
Since the onset of the financial crisis, which in many ways served as a catalyst for this process, attitudes towards drinking and going out have evolved and matured, favouring more moderate daytime and evening-oriented consumption. This change has completely altered the dynamic within the Spanish horeca sector, leaving the night on-trade struggling for relevance while sparking a resurgence in classic café-bars and the emergence of more modern, versatile establishments. This has helped foster moments and occasions such as the aperitivo, afterwork and tardeo (all day and evening oriented), which are now shaping the direction of the Spanish drinks market.
So, the shift from night to day has not only dramatically reduced the amount of drinks per person, but has effectively altered what people drink by channelling the market into a space that ultimately belongs to beer, wine, vermouth and gin. Apart from gin (whose refreshing versatility and unisex appeal has ensured its relevance across almost all occasions), spirits’ failure to challenge lower-ABV alternatives on their turf is what has brought about the segment’s current impasse.
Unable to breach Spain’s trending moments, the rest of the spirits category is consigned to battling for share of a diminishing and more competitive night on-trade segment, particularly now that beer has been able to penetrate what was once a no-go area for low-ABV products.
Despite the long-term challenge this presents for the broader spirits segment, there are areas that give considerable hope.
Premiumisation, pink and shooters pushing the agenda
Out of the same change in attitude that has put the squeeze on spirits, has emerged a flourishing premiumisation movement which is breathing life into the segment’s top end. Consumers now choosing to reduce their alcoholic intake are trading up as they do so and are driving premium-and-above growth in whisky (+3.8%), rum (+8.4%), brandy (+5.4%), vodka (+27.4%) and agave-based spirits (+29%).
Ironically, it is gin, the category that kicked off Spain’s premiumisation movement, that is losing its sheen as its own premium movement comes to an abrupt end; consumers have begun to question the perceived superiority of premium gins which are struggling to differentiate themselves. Instead, the market is moving towards the core standard and value segments that now drive the category forward.
Much of the momentum within the category, however, has now moved across to the burgeoning flavoured segment which, having surpassed the 750,000-case mark, has graduated from regional curiosity to nationwide phenomenon in the space of just three years.
Leader Puerto de Indias remains synonymous with the movement, but big investments from credible imitations in Larios Rose, Gordon’s Pink and now Beefeater Pink are helping to diversify and spread a trend that like its progenitor, has found it easy to penetrate a wide range of occasions and moments.
Almost counterintuitive for a market heading towards moderation, premium shooters have carved out a space among young, trendy consumers hungry for an energy boost, even in a low-ABV context. While the shooter segment came to the fore under Jägermeister’s stewardship, new brands such as Thunder Bitch, Fireball and Buitral are adding diversity to what is now a fast-growing movement.
So, while Spain’s spirits market has undoubtedly endured a tough year and may have some serious long-term battles in the pipeline, there is still plenty to look forward to.
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