Ben Cooper

Research - Slow gin category represents a tough assignment

By | 16 October 2009

As Pernod Ricard names a new brand director for its gin brands, a recently published report from just-drinks/IWSR suggests it will not be an easy category from which to extract growth. Ben Cooper reports.

Last week, Pernod Ricard-owned Scotch and gin business Chivas Brothers announced the appointment of Simon Burley as brand director for Beefeater and Plymouth Gin. To judge by the figures in a new just-drinks/IWSR report, Burley has been given a challenging brief.

Notwithstanding Pernod Ricard's assertion that this is an "exciting time" for the company's gin portfolio, the numbers make rather grim reading.

While global gin sales rose by 0.6% in 2008 to 45.8m nine-litre cases, this represented the first increase since 2000. Indeed, between 2003 and 2007, the global gin market declined by a CAGR of 4.7% a year. Furthermore, much of the increase in 2008 was derived from the Philippines, a relatively low-priced market. According to the just-drinks/IWSR Global Market Review of Gin - Forecasts to 2014, the next three largest markets, the US, Spain and the UK, all declined, though the fall in the UK was relatively marginal.

Sales in the Philippines rose from 17.30m cases to 17.97m, but US sales fell from 10.97m to 10.82m, sales in Spain from 3.38m to 3.29m and UK sales from 2.379m to 2.375m. "These countries have all been particularly hard hit by the global economic crisis and the gin category seems particularly exposed," the report states.

The report's authors are cautious about the future, in spite of the small uplift in global volumes in 2008. Whether it is the beginning of a trend or an aberration "remains to be seen", the report contends, adding that while "it certainly is a break from the recent pattern, it is probably a little too soon to begin celebrating".

The report forecasts that, while sales will continue to rise slowly, reaching 46.29m cases by 2010 and 47.08m in 2012, the total market will fall back to 45.85m cases in 2014. On a market-by-market basis, the UK will see some growth, with volumes rising from a forecast 2.34m cases in 2009 to 2.58m cases in 2014, but volumes in the US will slip from 10.66m in 2009 to 10.20m cases in 2014, with sales in Spain predicted to fall from 3.22m cases in 2009 to 2.98m in 2014.

A further discouraging factor for gin marketers, the report continues, is that the premiumisation trend, seen in other white spirits categories such as vodka and Tequila, has been far less discernible in the gin sector.

On the plus side for Burley, the report states that Beefeater, along with Diageo's Tanqueray brand and Bacardi's Bombay Sapphire, is outperforming the category. It also states that a number of newer premium and super-premium gin brands, such as Hendrick's from William Grant and Martin Miller's, are showing some signs of "gaining consumer traction".

However, suppliers suggest that in the key US market, where the category has witnessed a steady decline, gin is suffering from an identity crisis. Diageo global brand director for gin Shivaun Lucey explains that for a long time gin was the definitive white spirit in the US, forming the base for many classic cocktails, such as the Martini. But gin has now been eclipsed by the tremendous growth in vodka.

"What happened is that a lot of gins started trying to compete and be like vodka, as opposed to being proud of what gin was about, which is great depth of flavour and richness, whereas vodka is distilled to be the ideal mixable spirit," Lucey says. "Our view is that we will eventually be able to take back the role as the definitive white spirit, if we focus on what we are good at - and that is taste, the intrinsic aspect about gin."

Gin's failure to capitalise on the premiumisation trend is particularly relevant to the US. "Premiumisation has been the overriding trend for the liquor industry in the US, although the economic crisis has led to some slowing of that trend," the report states. "Gin has been somewhat less successful than vodka in tapping into this consumer trading-up in recent years."

Burley's predecessor, Nick Blacknell, believes there has been "a lack of excitement" in the category for some years but the new product now being seen in gin augurs well for the future. "There are a lot of new brands coming on to the gin market, and that is the great hope for the US - that there is more and more interest in the category," says Blacknell. "There has certainly always been strong bartender interest and loyalty towards gin; it has just not necessarily translated into consumer interest."

All suppliers agree that the support of the bartender community represents a real asset for gin. Brands are also making a greater effort create points of difference. Highlighting particular botanical ingredients and the flavour differences they create is seen by suppliers as a key element in gin marketing, along with educating consumers about the unique properties of gin brands. Bombay Sapphire was one of the first brands to highlight its range of botanicals on the bottle, while the new Beefeater 24 makes great play of the use of rare Japanese Sencha tea.

The development of Beefeater 24 is one of the "exciting" features of Burley's brief highlighted by Pernod Ricard, along with the recent addition of Plymouth Gin. Also, in addition to assuming responsibility for the global marketing strategy, Burley will oversee the international rollout of key heritage and education programmes for both brands. As he takes up his new appointment today (12 Oct), he may have to accept he is moving into something of a becalmed sector. The challenge is to show that it is not a moribund one.

Expert analysis

Global market review of gin – forecasts to 2014

With over 30 data tables providing total consumption volume for all major markets and brands, this brand new first edition of our global market review of gin provides an excellent overview of the historic, present and future market for the sector. This edition includes 2008 actual full-year volumes, recently updated by The IWSR.

Sectors: Spirits

Companies: Pernod, Ricard, Diageo, Chivas Brothers, Tanqueray, Bacardi, William Grant

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