As macroeconomic volatility, the mature versus emerging market narrative, the craft revolution coming of age and shifting demographics all radically reshape the alcoholic drinks battleground, innovation is accelerating and becoming more crucial than ever. Exploring key underlying themes and highlighting exemplary launches spearheading relevant trends, Euromonitor International’s latest global briefing provides a category-by-category sneak peak of the industry’s short- to medium-term future. Spiros Malandrakis, senior alcoholic drinks analyst, looks into the proverbial crystal ball.

Cross-pollination: Westernisation and Reversing the Tide

The advance of globalisation is increasingly making its mark on the alcoholic drinks industry. The ongoing cross-pollination of drinking habits can be witnessed in the expansion of culture-specific drinking occasions beyond their regional origin and the universal embrace of once country-focused specialties. It’s a two-pronged trend;

Westernisation is one of the two primary forces at play and has historically been the strongest. The much vaunted rise of the aspiring middle classes in emerging nations has provided seemingly unlimited momentum to established Western brands and categories that have found very promising new opportunities at a time of gradual slowdown in their own, mature domestic markets. 

Still red wine’s advance and Cognac’s clout in China, along with Scotch’s passionate following in Latin American markets and Russia, provide strong examples of a trend that remains in full swing. 

While westernisation continues to advance, signs pointing in the opposite direction are also surfacing. Emerging nations are becoming more important in the realigning of the global economic stage, and their local specialties are currently experiencing rising interest from jaded westerners keen to experiment with 'exotic' products.

From obscure grape varietals to cachaça, from pisco to baiju and raki, the flow of drinking trends, fads and launches is increasingly shifting away from the rather one-dimensional Western markets to emerging markets to become a more interactive affair. Recent launches of premium niche regional spirits specialties in key mature markets like the UK vividly highlight the reversing of the tide. 

Segmentation: Flirting with Millennials and Courting the Female Drinkers

As maturity constraints and the sobering macro-economic environment claim a stranglehold on alcoholic drinks sales in the vast majority of mature Western markets, consumer segmentation is becoming a key for escaping the vicious circle. 

The millennial generation is gradually coming of age, and their lack of interest in brand equity, their adventurous and more experimental nature, tech-savvy backgrounds and an interest in sustainability, fair trade and environmental issues will increasingly come to the fore. 

The rise of micro-breweries and craft distilleries is tapping into such trends, while still embryonic attempts to harness the power of social media also have this generation in mind. 

Nevertheless, it is important to remember that, while the millennials have the potential to rejuvenate stagnant brands or categories, this generation finds itself at the epicentre of a continuing economic crisis that will severely limit its current and future job opportunities and discretionary incomes.

Consumer segmentation, however, goes beyond generational analysis. 

It is a well-known and often discussed fact that alcoholic drinks’ positioning, advertising campaigns, packaging and flavour profiles have historically focused on male demographics. 

Nevertheless, with opportunities for growth peaking, female drinkers are increasingly coming into focus. References to health and wellness trends, a critical revisiting of overly 'macho' designs and female-focused promotional campaigns are gaining traction in all major alcoholic drinks categories. Cider, wine and RTDs appear to be spearheading the trend, although beer and spirits are following close behind. Diageo’s launch of the RTD Snapp in Kenya in 2012 is a case in point.

While such initiatives have obvious advantages, there is the danger that 'female-friendly' innovation attempts can be perceived to be patronising or purely built around stereotypes and can thus easily end up backfiring, a development that could not only prove damaging for the brand in question but also for the entire category. The recent withdrawal of Molson Coors' Animee brand in the UK should be used as a cautionary tale. 

Micro versus macro: Corporate muscle and craft enthusiasm

While there is no doubt that industry behemoths can easily flex their considerable financial muscle in order to avoid or delay downward, recessionary or maturity forces, it is also true that changing course or embarking on radical new ventures remains a challenge. 

Taking their cue from more adventurous and experimental small, regional players, leading beer and spirits producers appear increasingly to be opting for more radical launches. 

While this kind of aggressive competitive environment paves the way for exciting new products across the board, there is little doubt that major players are - and will continue to be - focusing on their relatively superior distribution networks, routes to market, promotional budgets and acquisition war chests. At the same time, the craft movement is inevitably pushing for smaller sub-projects within these companies to be launched in an attempt to replicate the success of more niche operators.

While the impact of the micro trend has been repeatedly acknowledged and highlighted over the past few years, it is now crossing over from trade publications to the mainstream press, and from a niche that was only relevant to aficionados to offerings in supermarket aisles. 

The number of micro-brewery and micro-distillery start-ups in mature markets like the US and the UK are booming, and there are already signs that such ventures might even find fertile ground in emerging nations like India and China.

The craft movement has managed successfully not only to navigate the dual whirlwinds of maturity and challenging economic backdrops but has also succeeded in securing value growth in the face of adversity, through premium offerings. However, there is the risk that the explosive rise of micro-breweries and micro-distilleries could potentially follow a boom-and-bust cycle if quality control suffers – a development that proved costly to the nascent craft beer movement that appeared in the US in the 1990s.

The Retro Effect

The nostalgia or retro effect has a cyclical relevance to the vast majority of FMCG industries. The gradual return to heritage, tradition and craftsmanship that has surfaced as a key driver across the alcoholic drinks industry in the wake of the Great Recession has given an implicit nod to the retro trend. Nostalgia-inspired brands or categories will gain even more traction as the economic environment continues to deteriorate.

Providing a much sought-after sense of security and comfort against the bombardment of bleak socio-economic news, the retro trend’s success in the context of adverse macroeconomic conditions can be highlighted in a spate of launches spanning from the return of Hoopers Hootch RTD in the UK to the massive success of Fix beer in the nose-diving Greek market. 

Combining, appropriating and exploring these key themes, will define the alcoholic drinks’ industry’s future direction. Complacency and inertia are not viable choices any more.

For more details on the research that this feature refers to, click here.