Preview of the Year - 2011 – Part I: Alcoholic Drinks
By Jeremy Cunnington and Spiros Malandrakis at Euromonitor International | 13 January 2011
Euromonitor International considers the year ahead
In this, just-drinks' first management briefing of 2011, Euromonitor International takes a look at the broader alcoholic drinks category and finds at least three reasons to be cheerful for the next 12 months.
Key trends - The times they are a-changing, or The birth of the post-recessionary new normal
If last year’s projections on the future of the global alcoholic drinks industry were an exercise in cautious optimism amidst still hostile and fluid socio-economic and operating environments, the arrival of the much-vaunted - and partly disputed - recovery is only raising fresh questions regarding its nature, sustainability and momentum. Nevertheless, crises can sometimes have a cathartic effect, essentially accelerating underlying trends and playing the role of harbingers of change. Within this context, China, the off-trade’s relative resilience in the face of the on-trade’s demise and widening discrepancies in the alcoholic drinks industry’s performance in mature versus emerging markets are themes that not only dominated headlines over the past year but are also expected to dictate developments over the short- to medium-term.
The Chinese influence
China’s unquenchable thirst is not only playing a major part in the direction the global alcoholic drinks industry is taking but has come to be its primary driver and most important market. The performance of ascending Chinese brands and companies, as well as key manufacturers’ investments, underline the fact that the country’s formidable influence over the alcoholic drinks industry will only tighten further. A rapidly-expanding middle-class, rampant fascination with Western drinking habits and a consistent shift towards higher-end varietals will only make China’s influence more prominent as traditional alcoholic drinks bastions such as the US, the UK and Japan continue to stagnate.
The on-/off-trade conundrum
According to Euromonitor International’s latest findings, both off- and on-trade sales witnessed a relative resurgence during 2010, although this should not be taken as an all-clear sign. The Russian influence, where massive tax spikes transformed the on-trade into a value-for-money proposition in relative terms, and the 'going out' buoyancy of emerging nations, spearheaded by China, skew the global data. However, the on-trade is still suffering in Western markets and forecast short- to medium-term growth is bound to be anaemic at best. The introduction of austerity measures, additional taxes and job cuts in a large number of Western nations does not bode well for discretionary spending and post-recessionary going-out habits. Although it has to be stressed that the on-trade’s travails in Western markets actually preceded the recession, the alcoholic drinks industry is not out of the woods, and it will be some time before Western consumers return to frequenting bars as often as they did before the recession.
A tale of two worlds
The improving top-line global alcoholic drinks figures mask widening discrepancies between the industry’s performance in emerging and mature markets; a sharp bounce back for the former contrasts with stagnating growth for the latter. Moving forward, the theme is expected to gather further momentum as Western Europe's and North America’s expected lacklustre performances will shift the spotlight towards emerging nations, primarily the BRICs, Asia Pacific and Africa and the Middle East.
Polarisation: extremes appeal
If premiumisation was the offspring of the boom years, polarisation and its dual focus on higher-end as well as economy variants will shape the global alcoholic drinks market in the near future. Affordability credentials will gain further traction and take many forms; from larger pack sizes to private label launches, trading down is the signal for the dawn of the era of frugality. That is not to say that the premium segment will necessarily suffer, as it will still appeal to upper-income groups willing to indulge and aspiring middle-class consumers. Nevertheless, standard products will be squeezed from both sides.
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