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In Euromonitor International’s fourth year of carrying out research for the Drinks International Millionaires Club, the 2011 rankings (based on 2010 sales volumes) saw another record in terms of number of brands on the list, reaching 172. This is despite some brands dropping off the list due to fluctuations in various markets, and some companies not willing to take part. The supplement is a list of spirits which have sales of over one million 9-litre cases, but differs from Euromonitor International’s research in that it includes sales in all channels, such as duty free/travel retail.
The list continues to grow not only in length but also in breadth, with additions from new markets such as Belarus, whose six extra vodka brands have helped boost numbers and are among 18 new brands on the list. While a number of them broke the million case mark for the first time in 2010, others such as Miguel Torres’ eponymous brandy have had volumes above one million 9-litre cases for a number of years, but have agreed to take part for the first time this year.
Thanks to its new brand Bagpiper Rum joining the list for the first time this year, Indian giant United Spirits now has 20 Millionaire brands and is close to matching Pernod Ricard, which sits at the top of the list with 21 brands. It was the recovery in volumes of the Luksusowa Polish vodka brand, to bring it back onto the list, that saw Pernod Ricard retain its place ahead of United Spirits. Many of United’s brands continue to see phenomenal rates of growth thanks to the company’s leading position in a booming Indian spirits market, which achieved double-digit volume growth in 2010.
The world’s biggest alcoholic drinks firm, Diageo, remained in third place with 14 Millionaire brands, although the company should make gains on next year’s list through its acquisition of the Turkish company Mey Içki, announced this February and scheduled to be completed in the latter half of this year. Precise figures were not available for its three million case Yeni Raki brand in this year’s list.
Domestic/local brands continue to dominate the list, with 93 entries in 2010, followed by international brands on 57 and regional on 22. This shows that the vast majority of spirits are still consumed in the countries that produce them, particularly in emerging markets. Indeed, 16 of the 18 brands featured on the Millionaires list for the first time this year are in the domestic/local category.
Vodka overtook whisky as the largest category on the list with 54 brands. This year it was boosted by several brands from Belarus, led by Kristall with sales of nearly five million 9-litre cases, but also new domestic/local additions from companies such as Stock Spirits and Beam Global. Vodka is followed by whiskies, comprising 48 entries on the 2011 list. The category was boosted by the addition of Beam Global’s small-batch bourbon Maker’s Mark and Glen Catrine Distillery’s High Commissioner blended Scotch, both of which continued to see double-digit growth.
In a more distant third place comes the rum category with a relatively small 15 brands, closely followed by cognac and brandy with a combined 13 entries. Next comes soju and shochu with 11 brands, although the total volumes in this category are, of course, far larger.
2010 was a far more positive year for many in the list, especially international brands, with many returning to growth. In 2009, 36 international brands posted a drop in volume sales, while in 2010 only seven registered a decline. In addition, in 2010, nine international brands enjoyed double-digit growth – a feat achieved by none the previous year. Some of the decline in 2009 was undoubtedly caused by destocking as companies sold off surplus stock from 2008. This, in part, explains the good performance in 2010 as brands rebounded to more normal levels. A key aspect of this has been a return to growth in the duty free/travel retail channel.
In many cases, however, these international brands are still below their peaks of 2007 and 2008. There are exceptions, for example Pernod Ricard’s Jameson, Martell and Havana Club, Diageo’s Captain Morgan and Bacardi’s Eristoff brands.
The brands that have performed the best are those with strong exposure to emerging markets, particularly in Asia Pacific. Consequently, the best performing category has been cognac, boosted by strong growth in China and other markets in the region. In contrast, the brands which have performed less well are those which are overly reliant on Western markets.
Two examples are the blended Scotch brands J&B from Diageo and Pernod Ricard’s Ballantine’s. Both brands’ largest market is Spain, where the Scotch category is suffering a long-term decline as well as being impacted by a deep recession, leading to a 6% CAGR decline over 2005-2010. In 2010, J&B’s volumes remained static while, in contrast, Ballantine’s enjoyed growth of 7%. The stronger performance of Ballantine’s was due to its more global spread, with good positions in Asia Pacific and Central/Eastern Europe, despite also seeing volumes fall in its key Spanish market. J&B’s volumes have been overly reliant on Spain and other Western European markets such as recession-hit Greece and Portugal.
While international brands have benefited from returning growth in emerging markets, so a number of local brands in these markets have done the same. Local Indian brands have continued to grow rapidly across the spirits categories. In addition, brands in Korea have seen double-digit growth, as did Tanduay rum in the Philippines. And in Brazil, local brands such as Dreher brandy and a number of cachaças saw growth in part due to consumers trading back up to spirits.
This is not to say that brands cannot achieve strong growth if they are based in mature Western markets. Jameson registered double-digit growth in 2010 despite its leading markets including the US, France and the UK. This was primarily due to the dynamic growth of Irish whiskey in the brand’s largest market, the US, where the category and the brand are increasingly taking share from bourbon and other US whiskies.
Equally impressive is Campari’s regional bitters brand Aperol, which continued to see high double- digit growth in 2010 despite its core markets of Italy, Germany and Austria seeing at best static growth during the year.
As the recent economic crisis has shown, for the long-term growth and development of international spirits brands, a broader geographical spread is needed to enable them to withstand periods of tough economic conditions when they occur in particular regions. Emerging markets are likely to play an increasingly vital role in brand growth as disposable incomes rise. Yet, at the same time, the companies with an international focus have to maintain their core mature markets, upon which their brands depend for large proportions of their volumes and revenues. Those brands that have benefited and are most likely to continue to do so in the short to medium-term are those that already have a strong and established presence in these markets, leaving companies such as Pernod Ricard and LVMH – and their globally distributed brands – best placed to make the most rapid advances.
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