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Spirits more than any other alcoholic drinks category is about brand performance. The health of many spirits categories are reliant on at most a handful and at worst a single brand. This means that Millionaires can be a good guide to category performance in the preceding year. Global spirits volumes grew by 1.7% in 2014, driven by baijiu and whiskies. This is slower than the historic average and reflects the weak economic conditions globally during 2014.
Whiskies continued to see healthy growth in 2014 of 3% in volume terms, led by Indian bourbon/other US whiskies, Japanese and Irish whiskies. Indian whiskies growth was driven by a mixture of the higher priced brands in Pernod Ricard’s portfolio as well as the cheaper brands such Officer’s Choice. The most dynamic growth in whiskies came from the Irish, or, should one now say Jameson whiskey category. The brand and the category’s key growth driver continues to be the US, although it is helped by secondary markets such as South Africa, Russia and Canada.
Irish whiskey is closely followed by Japanese whisky in volume growth terms, as witnessed by the Suntory’s Kakubin brand performance. Despite the growing publicity around its higher end single malts in export markets, is still being driven by domestic consumption.
Bourbon’s healthy growth is also being driven by the US but also greatly aided by healthy growth in many international markets notably France, Germany, Russia and also growing rapidly from a low base in Latin America. Both major brands, Jack Daniel’s and Jim Beam saw strong growth, although it is really only Jack Daniel’s that is driving the international growth.
However, as can be seen poor growth figures of many of the leading brands, blended Scotch saw global volumes stagnate with what growth there was from lower priced brands, led by Bacardi’s William Lawson, Pernod’s Passport brand, and La Martiniquaise’s two brands.
It is worth noting that despite all the hype around categories such as Irish and bourbon/other US whiskies and their rapid growth, they are still significantly smaller than blended Scotch and will remain so in the near future. Bourbon/other US whiskies and Irish whiskey were respectively 40% and 8% the size of other blended Scotch in 2014, proportions that will only rise to 46% and 12% in 2019.
Single malts continued to grow healthily thanks to continued good growth in the US, due to the category’s ability to tap into continued premiumisation trend. That trend is also apparent in the positive performance in certain Western European markets such as Germany and parts of Scandinavia. The category is further helped by dynamic growth, albeit from small bases, in emerging markets such as India and Russia.
The one whisky category that continues to disappoint in growth terms is Canadian whisky with the global category declining by 1%, driven by its largest market, the US. While producers have looked to copy the success of bourbon/other US whiskies, by introducing flavoured variants and greater focus on small batch/craft brands, both have failed to capture the imagination of consumers so far.
The picture for cognac would be a lot worse if it was not for the dynamic double digit growth of the category’s biggest market the US. Many of the cognac’s traditional markets in Western Europe suffered continued declines and the former category growth driver, China, suffers from the continued fallout from the anti-corruption crackdown. Apart from the US the only other bright spot is Africa and the Middle East, which saw double digit growth driven by Nigeria and South Africa. It is thus of little surprise to see that it is the brand with the broadest geographic spread, Hennessy has performed the best of all cognac brands.
Brandy saw slightly stronger growth but that was only thanks to the continued growth of its largest market, India, although it was also helped by a slight return to growth by the next biggest market, the Philippines after a steep decline the preceding year caused by a duty hike. However, declines in traditional brandy markets in Europe, Brazil and China have restricted the rate of growth.
Global vodka continued saw volumes decline steeply during 2014, down 5% on the previous year. The key factor in this is the steep decline in the category’s core region, Eastern Europe, where volumes saw double digit declines. This decline was led by Russia, which was driven by legislative changes, notably minimum pricing pushing consumers towards black market products as seen by the decline in Pyat Ozer and Green Mark. Although other markets such Ukraine (turmoil) and Poland greatly contributed to the decline too.
Unlike previous years when there have been steep declines in Eastern Europe there have been few other dynamic markets to counter the negativity in the category’s core region. However, many of the larger, historically more dynamic markets offered limited support. This is most notable in the US where volume growth has slowed to 1.8% in 2014 less than half the rate it was in 2012 as the flavour frenzy has fizzed out as witnessed by the decline of Pinnacle Vodka and as consumers focus more on whiskies.
Another major vodka market, Western European, saw overall category decline, with steep declines in markets such as Ireland and Finland, while other larger ones such as Germany and the UK struggled for growth. Overall, of the major vodka market globally only Brazil saw healthy growth, although the relatively small China and South Korean markets saw double digit growth during 2014.
The gin category performed well, with economy focused Dutch Gin bouncing back as the category’s major brand Ginebra San Miguel from the Philippines more than bounced back after a poor 2013. English Gin has seen its strongest global growth this century in 2014. Growth was driven by the category’s second and third biggest markets, the UK and Spain but also got help from the dynamic growth in a number of Western European markets such as Germany, Portugal, Belgium and the Netherlands. All these markets saw double digit volume growth in 2014 as the popularity of premium and super-premium brands spread out from the UK and Spain.
The millionaire brands which have most benefitted from this trend are the Bombay Sapphire and Tanqueray brands. Many of the super-premium brands that are helping drive that growth are all still small players with the largest one, William Grant’s Hendrick’s brand still years away from breaking the million case mark.
Tequila’s growth of 4% in 2014 continues to be driven by the two leading markets, the US and Mexico, and so remains very reliant on both of them. As witnessed by the continued growth of Patron, growth in the former is primarily driven by the higher end brands. While there are promising signs in Brazil and China with double digit volume growth, these come off small bases while previous other up and coming markets such as Russia and South Africa respectively declined or saw minimal growth.
Rum only saw growth of 0.7% in 2014 with all the growth coming from dark rum. White rum was the main culprit in holding back growth as it declined by 1% globally. That decline was led by Bacardi’s eponymous brand, which suffers from maturity in all its major markets, particularly the US. Other major brands suffered too such as Malibu and Montilla again due to maturity in key markets.
Dark rum saw growth of over 1%, primarily due to the Philippines. Many other major markets declined in 2014, most notably India and the US. In India, brands continue to suffer from consumers switching to cheaper brandy brands, while the US suffered from the maturity of the major brand Captain Morgan. Although the brand’s US decline was countered by growth in Western Europe.
In 2014, growth in liqueurs was driven principally by bitters, with growth driven by Argentina, where the category and in particular the Fernet Branca brand. Growth of both category and brand have benefitted from heavy price promotion and a sense that Italian brands are a national drink due to the Italian heritage of many of the population. Other markets doing well include the UK, thanks to Jägermeister and Aperol and Africa with the Ghanaian brand Alomo brand performing strongly. However, growth was held back by the double digit decline of the US thanks to the falling out of favour of the dominant brand there Jägermeister.
Cream-based liqueurs, however, continue to suffer from the maturity of the category’s dominant brand, Baileys in many of its and the category’s core markets. The cinnamon flavoured RumChata brand which revived the US category for a while seems to have run out of steam.
In contrast, whisky based liqueurs seem to be the key growth driver in other types of liqueurs with the dynamic growth in the US of brands such as Sazerac’s Fireball and Jack Daniel’s Tennessee Honey doing particularly well.
Many of the local spirits categories such as anis, cachaça, shochu continued to suffer from the fact that they are traditional products which are perceived as being unfashionable and what their parents drunk, especially with the eclectic mix of international drinks available and greater purchasing power. The exceptions to this are Korean soju which continues to benefit baijiu in China which continues to see healthy growth of 6% in 2014 to reach 5.5 billion litres in 2014. Growth was and is likely to be continued to be driven by the mid priced products as consumers not only trade up, but due to the government crackdown on corruption people trading down from the premium and super-premium variants.
As the global economy improves, so should the prospects of many of the leading alcoholic drink categories. Chief among them will be blended Scotch, which is expected to see global growth pick up between 2014-2019 to 2% a year on average. Additionally, one off impacts of political and legislative problems in Eastern Europe should will flatten out the decline of vodka over the forecast period. Nevertheless what it shows, is that for any company to do well in the current conditions it requires a broad portfolio in both category and geographic terms.