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Craft spirits offer opportunities for growth

`18th January 2021

Michael Hussey, Senior Manager Alcohol & Seafood, Bord Bia – The Irish Food Board

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According to Euromonitor, the global spirits industry is relatively stagnant in volume but growing in value. Premiumisation and the growth of craft spirits are a key element of this value growth. Whiskies, gin, tequila & mescals are projected to have the highest growth. Vodka on the other hand is a mature sector and seen as having little innovation, while brandy is perceived as old fashioned by many consumers.

 

Global consumer trends are driving this growth. Faced with a multitude of product offerings, consumers are increasingly looking to simplify their lives, while at the same time they are more interested in branded products and want to be seen to be financially successful. This has led to increased sophistication from consumers in terms of product knowledge and interest in trying new and original drinks. This environment has helped craft spirits to grow by catering to the growing need for authentic, high-value products which allow consumers to display their originality and individuality. This is in line with Bord Bia’s consumer lifestyle trend of “Engaging Experiences”, where consumers want “moments of discovery and delight that enhance my day”. At the same time, interest in food and drink pairings is growing, as consumers with more sophisticated palates seek to find the ideal taste combinations, and savour the higher quality drinks they are consuming

 

In conjunction with this, the rise of social media and the “Instagram culture” has further fuelled a desire to be seen drinking the latest high-quality spirits.

The impact of Covid-19 has been to accelerate these trends, with consumers wishing to “treat” themselves with more premium, better quality or unique or exclusive spirits.

 

According to Mintel, Craft and premium brands are booming in the US and Western Europe.

In recent years, the definition of craft has evolved. Craft brands are now smaller, discerning, and unique. Craft spirits consumption is higher among younger drinkers, especially millennials who have a preference for smaller brands. According to Mintel, this generation are early adopters of craft alcohol and are also highly engaged with a collaborative approach to creating brands. Brands created this way would have appeal for 51% of 25-34 year old UK alcohol buyers. The five key attributes sought by this cohort when choosing a craft product are-

  • Unique flavour
  • High quality ingredients
  • Not owned by a large company
  • Hand made
  • Produced in small volumes

 

According to IWSR the pre-pandemic trend for premiumisation and craft in the US market remained consistent for spirits during 2020 from a category perspective, with the largest rates of growth experienced in tequila, whiskey and Cognac. Greater at-home cocktail consumption drove secondary mixer spirits. As can be seen for Chart 1 below, they forecast that Super-premium whiskies will grow by 7.1% CARG to 2024 and the premium sector will grow by 5.7% over the same period. This is despite a number of assumptions-

  • On-premise will not return to pre-Covid-19 levels over the next five years.
  • Shutdowns and restrictions are likely to happen throughout the winter of 2020/2021.
  • Lack of federal mandates and state-by-state variances in the response to Covid-19, coupled with consumer fatigue may lengthen virus recovery.
  • Government provided financial aid will assist individuals and business owners through the pandemic keeping the economy going.

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The Irish spirits industry is well placed to capitalise on this opportunity. Many of our smaller brands have the above attributes. There is a need to build resilience by being less dependent on the on-trade into the future. Because of the growth in in-home consumption, players of all sizes are seeking ways to engage with customers through virtual tours and interactive tasting sessions. The importance of social media has accelerated since the start of the pandemic and will continue to grow in the years ahead.

 

Those brands that can tell a unique story, offer innovative and unique tastes will appeal to the increasingly discerning spirits consumer.

 

For further information contact Michael.hussey@bordbia.ie

 

Sources:

IWSR US Covid Market Update 2020-2024-

Euromonitor: Craft Spirits: Spirits of Our Times- September 2019

Bord Bia