Chris Mercer

Comment - Spirits - Gin's Revival: The Numbers Don't Lie

By Chris Mercer | 12 February 2013

Although it is being trumpeted as the next big thing, gin has not bounced back as much as spirits companies claim. Chris Mercer looks at the figures and asks, when does the revival kick in?

Is gin on the brink of something beautiful? For all the tub-thumping by Diageo, Pernod Ricard and a sea of smaller brands, it's still not clear whether enough drinkers can be won over.

Pernod Ricard's plan to open a visitor centre at its Beefeater distillery, to "capitalise on the recent renaissance for gin in the UK capital", is the latest example of spirits industry optimism around old 'mother's ruin'. 

Like an estranged parent who has missed their child's middle years development, it feels as if the drinks industry-at-large is trying to right previous wrongs with an outpouring of overbearing affection for gin. 

In key spirits markets such as the UK and US, distillers have left a whole generation of consumers botanically-challenged by failing to keep gin relevant with innovation and marketing.

Subsequently, for much of the past few decades, gin's image has been about as premium as the brewing industry's notorious 18th Century depiction of the chaotic, debauched 'gin lane' in London

More recently, though, there's been greater effort to reconnect with drinkers. This has largely been driven by grassroots developments, including an influx of craft distillers across Europe and the US, and a volley of brand launches from the boutique to the bizarre: a cream or a spiced gin anyone?

In the on-trade, gin is feeding off bartender boredom with vodka and a consumer trend towards Prohibition-era cocktails. More bars are subsequently adding gin to their repertoires. 

Larger distillers are taking note as they split hairs in their portfolios to find latent growth opportunities that might have been overlooked in better economic times.  

When not sketching visitor centre blueprints, Pernod has spent the past year dishing out limited edition Beefeater and dusting off Plymouth, after coming close to selling the brand.  

Back in 2009, Diageo talked up gin's "Johnnie Walker" potential with reference to Tanqueray. Whether this potential will be realised remains to be seen, but there are at least signs of long overdue premiumisation in the UK on-trade. Brands like Hendrick's, Bombay Sapphire and Tanqueray are doing relatively well, with Diageo noting that gin sales are up by 12% year-on-year by value in the country's pubs and bars.

This week, Diageo promised GBP1m backing for ready-mixed, cucumber-themed line extensions on Gordon's (imitation is the sincerest form of flattery, Hendrick's). The launch utilises strong momentum in canned spirits to address long-standing criticism that gin distillers have lost touch with younger drinkers.   

Amid all of this enthusiasm, it might seem a little churlish to note that the only things holding back a full-on gin revival are the overall sales projections and consumer attitudes.

Forecasts released by Vinexpo and The IWSR last week say UK gin volumes are set to shrink by 2% in the next four years. Case sales of 2.5m in 2012 already make the category around three times smaller than vodka.

"People have been talking about a gin revival for a long time," says Mintel analyst Chris Wisson. "If there was a big gin revival, volumes wouldn't be down."

He agrees that consumers' propensity to treat themselves on a night out is keeping gin "quite strong" in value terms in the on-trade. But, he adds: "I think the gin movement is quite London-centric. Whether it spreads out, I'm not so sure."

Some observers think that gin can benefit from a foodie culture that is seeping into drinks; a fresh appreciation for craftmanship and ingredients. From a distiller's viewpoint, gin is a dream, providing endless opportunities for experimentation and almost instant results.

However, in its 2012 white spirits report, Mintel said its research shows that only 11% of UK consumers drink gin neat. "This suggests that people still do not appreciate its complexity of flavours," it said. 

This analysis, together with Vinexpo/IWSR forecasts, raises questions about gin's foundations for long-term growth. There have been mutterings in the drinks trade for several months now that the next few years will be a clean-up period in gin, when brands lacking a clear point of difference will fall away.

For larger distillers and observers, meanwhile, the market forecasts serve as a reality-check, despite some good growth for individual brands.

On a global level, Vinexpo/IWSR predicts that gin will be the only major category of 'western' spirits to decline over the next four years. Volumes are expected to dip by 1%, to 47.5m cases, in an overall spirits market that will expand by 9%.

As in the UK, however, pockets of growth will exist. Spain is motoring at present, while the US looks particularly interesting; a market around five times bigger than the UK and with sales by value rising at almost double the rate of volumes in 2012.

Smaller-scale brands have also shown international potential in both mature and developing economies. For example, Sipsmith has launched in China and US brand Bulldog Dry Gin recently entered Italy with Illva Saronno. 

Exports could be key for some UK gin brands, Mintel's Wisson believes. "Gin has a strong association with the UK and it's potentially something they're not pushing hard enough," he says.

Gin is certainly in a better place today than it was a decade ago. 

But, for this to be sustained, more distillers should harness their new-found affection to communicate the category's rich variety and heritage with consumers.

It's over to you, then, Beefeater tour guides.

Expert analysis

Gin & Genever in BRIC to 2015: Market Guide

Synopsis Canadean’s, "Gin & Genever in BRIC to 2015: Market Guide" provides in-depth detail on the trends and drivers of the Gin & Genever market in BRIC. The report includes quantitative information (historic and forecast market values). The report provides data, analyses and opinion to help companies in the Alcoholic Drinks industry better understand the changes in their environment, seize opportunities and formulate crucial business strategies. Summary This report is the result of Canadean’s extensive market research covering the Gin & Genever market in BRIC. The report provides a top-level overview and detailed insight into the operating environment for the Gin & Genever market in BRIC. It is an essential tool for companies active across the Alcoholic Drinks value chain and for new players that are considering entering the market. Scope • Overview of the Gin & Genever market in BRIC. • Analysis of the Gin & Genever market and its categories (where applicable), including full year 2010 consumption value and forecasts until 2015 • Historic and forecast consumption values for Gin & Genever for the period 2005 through to 2015 Reasons To Buy • The report provides you with important figures for the Gin & Genever market in BRIC with individual country analysis. • The report will help you to identify trends by analyzing historical industry data. • The report will help you analyze the market with detailed historic and forecast market values, segmented at category level (where applicable). • The report will help you to enhance your knowledge of the market with key figures on consumption value and segmentation by category for the historic period. • The report will help you to plan future business decisions using forecast figures for the market. Key Highlights NA

Sectors: Spirits

Companies: Pernod, Ricard, Diageo, Tanqueray, Vinexpo, Johnnie Walker

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