In an interesting transition that summarizes many of the changes brought on by millennials, the alcoholic drinks industry has been changing rapidly in the last few years. Quality is indeed more important than quantity, particularly in spirits.
For years, vodka experienced healthy growth in the US, maintaining historical market shares of 40% in volume terms, according to Euromonitor International. Even today, vodka retains one-third share of the US spirits market in a highly evolving market place. However, since 2012, that majority market share has begun yielding to the high-growth spirits of today in accordance with the changing tastes of American consumers. This transition explains the switch from white to brown spirits.
Whiskies introduce a successful model for premium spirits
The whiskey boom is in some part responsible for the deflated interest in white spirits. Around the same time that vodka began to decline, the whiskey category started to pick up. Currently, there is a collection of other spirit types like cognac and tequila that in the last few years has joined the race contributing to the increased decline of vodka. The commonality between these lifting categories is the combination of brand premiumisation and a dedication to the origin story. Most spirits drinkers are interested in the experience of imbibing a particular drink because of the origin or the particular tasting notes, rather than choosing the cheapest option. The rise of buzzwords like “craft distilled” and “hand-made” have been effective at targeting curious consumers. In addition, the rising purchasing power of the millennial base has been paramount to this transition. The classification of a brand as a “sipping spirit” has benefited all kinds of categories from single-malt scotch whiskies to cognac, with the most recent additions spanning from tequila.
Rum begins to switch competition
Another category may be on the move to join the growing number of premium brown spirit brands. For years staple rum brands, such as Bacardi and Captain Morgan, directly competed with top vodka brands, particularly when comparing the white rum varieties. Everything from the colour to the mixability was in direct comparison. Much of vodka’s unique selling point stemmed from its economic price point. However, given the oversaturation present within the vodka market, it appears many rum brands are beginning to divert their branding to associate the brown spirit with the premium brown spirit segment. There is a number of “sipping rums” beginning to enter the market from Diplomatico to Flor de Cana; this is a clear effort to add value to an otherwise stagnating category. This may be a juncture where the rest of the category decides to follow suit positioning itself in a similar premium light; however, the success of this transition will depend on the category’s ability to control their branding in the origin story they construct for themselves.