This brand new report from IWSR and just-drinks focuses on the spirits markets in countries with the greatest growth potential over the next five years. The first in a two-part series on markets and categories, this edition shows the greatest growth between now and 2012.

It is essential reading for anyone with an eye to the future. The new report covers each of the ever-important Brazil, Russia, India, China (BRIC) markets but also includes other dynamic areas such as Poland, Mexico, Thailand, South Africa and travel retail. Categories covered within each market include whisk(e)y, rum, brandy and Cognac, vodka and gin. The report contains historic and forecast category volume data, company and brand share data, as well extensive extracts from interviews with leading industry figures and in -depth analysis of the key factors driving these new frontiers.

The concept of emerging market countries is more an economic one than anything else. It refers to countries where economic growth is trending up, but per capita income is still less than US$10,000. In many cases these economies are moving from agricultural-based societies to ones that host large and expanding urban centres. As has occurred in developed markets, there is a broad migration from the countryside into these cities.

Historically, import penetration of these markets has been very low. In China, the largest of these markets, imports comprised of just 0.8% of total spirits sales in 2007 (up from 0.2% in 2003). In Russia, that figure is 4.7% (up from 1.8%), India just 0.05% (up from 0.02%) and Brazil 0.15% (up from 0.12%).

The main reasons for the relatively small import share in these emerging markets include low disposable incomes and tariff barriers. But there are also other non-tariff barriers. But, as disposable incomes rise with economic development and barriers come down (much of it driven by the WTO), these conditions are suddenly more favourable.

Such is the growth in these BRIC markets that Beam Global Spirits & Wine managing director, international Donard Gaynor expects they will eventually overtake the G8 countries in terms of importance. “It could happen as soon as 2050, which is not such a long time if you consider that we are now putting down whisk[e]y for drinking in 12 years’ time. It is just phenomenal to consider what impact that kind of growth will have on the industry. Dramatic increases in per capita income in these BRIC markets will fuel big consumer spend. And there’s another group of countries that are right behind those four, which have some bigger challenges to get over, but they have the potential to be really big markets too – countries, such as Turkey, Vietnam and Indonesia, could become significant. It’s a great time to be in the international industry.”

Chapter 1 Market opportunities
Viewed by category, the BRIC market countries’ share of individual Western spirits categories is impressive. Russia accounts for 53% of global vodka sales and is the largest single global market for the spirit. India is the largest whisky market, with a 33% share, while Brazil is also a top ten market. Brazil and India are the number one and two countries for rum/cachaca, with a 44% and 12% share, respectively. India (15% share), Philippines (7.1% share) and Brazil (6.3% share) are the first-, fourth- and fifth-largest brandy markets.

This chapter introduces the scope of the report by providing an overview of the most likely fastest growing spirits markets over the next five years. It suggests that these markets are set up for Western brands because of historically low import penetration, tumbling barriers and buoyant economies. But in response, it discusses how emerging market producers will raise their game and look outward. One key issue for the multinationals in these developing markets is whether to partake in the local brand market, or focus solely on their international brands.

Chapter 2 Asia market review
Covering India, China and Thailand, this chapter reviews Asia's hottest emerging spirits markets. It provides proprietary data gathered by IWSR for spirits category volumes from 2003 to 2012, top imported brands' volumes, and local and imported brands' market shares by 2007 volume. Extensive quotes are provided throughout from leading executives at the largest brands.

Highlighted typical interview extracts: UB Group chairman Vijay Mallya believes that premium Indian whiskies will prove more than a match for locally bottled Scotch brands. He says: “You have to understand the behaviour patterns of the Indian consumer and we’ve done a lot of research in this area, because it is critical to our business. Why should somebody who drinks Antiquity Blue – India’s most premium whisky – think that he’s trading-up by drinking Teacher’s, which is the cheapest Scotch whisky? Our research shows that Indians would rather drink the most expensive Indian whisky, than the cheapest Scotch whisky. And those who think that cheap Scotch is a solution for India are completely wrong.” He adds: “With the narrowing price gap, all these Bottled-in-India Scotch brands should have already had a major impact on the Indian market, which they have not been able to manage. By comparison, if you look at UB brands, such as Black Dog, a Bottled-in-India Scotch that has been successful, it has achieved its success because it is a 12-year-old. We’re not marketing it as a standard 3-year-old or 5-year-old Scotch. The Black Dog 12-year-old has been successful, because [it] is a significant step up from the Antiquity brand. Teacher’s, VAT 69 or their equivalents are not a significant step up from Antiquity. Being the largest group in both spirits and beer, we were able to push Black Dog quite strongly. Don’t worry about the narrowing of the price gap, because there will not be trading-up from a premium-end Indian whisky to a low-end Scotch. Indians are very brand- and status-conscious people.”

Bacardi travel retail director, Asia-Pacific Aude Rocourt believes there is opportunity for other brands (in China): “Johnnie Walker and Chivas are clearly the leaders. But there is room for everybody, and especially brands that are really super-premium and are trying to do things differently, such as Dewar’s 12-year-old, which has a very different taste profile. Chinese consumers are looking for new premium brands.”

Chapter 3 Eastern and Central Europe market review
Covering the Russian Federation, Souther Republics, Eastern Europe, Baltics & Balkans countries, this chapter follows the same form as chapter 2, providing proprietary data gathered by IWSR for spirits category volumes from 2003 to 2012, top imported brands' volumes, and local and imported brands' market shares by 2007 volume. Extensive quotes are provided throughout from leading executives at the largest brands.

Extract: Barry Younkie, global marketing director for Maker’s Mark Bourbon says: “Russia is very interesting to us. There is more Maker’s Mark sold per on-trade account in Russia than anywhere in the world outside Kentucky. Our distribution is very limited due to availability, but it is very encouraging. The Russian consumer finally has the disposable income to enjoy Western products, and they enjoy the taste of Bourbon.”

At the same time, some standard/low-premium vodka consumers are switching to low-price whiskies. The low-price segment had sales of around 250,000 cases last year. Glen Clyde, distributed by NPK Spirits, is the leading low price whisk(e)y.

Beam Global Spirits & Wine Scotch whisky director Michael Cockram says: “The value sector is already quite big, you go to Russia there’s lots of tertiary brands in that segment and definitely I think the value segment will build. The way it usually works is you have a penetration by the upper end marques and then the value segment comes in later, and that’s happening in Russia and I can’t see that ending.”

Chapter 4 Latin America market review
Covering Brazil and Mexico, again this chapter follows the same form as chapters 2 and 3, providing proprietary data gathered by IWSR for spirits category volumes from 2003 to 2012, top imported brands' volumes, and local and imported brands' market shares by 2007 volume. Extensive quotes are provided throughout from leading executives at the largest brands.

Chapter 5 Other markets
This final chapter also follows the same form as previous regional chapters. Here, South Africa and travel retail are covered in depth.

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Chapter 1 Market opportunities
Low import penetration
Overview of categories
Tumbling barriers and buoyant economies
Multinationals’ varied approach
Emerging market producers raise their game
Emerging market companies look outward

Chapter 2 Asia market review
India
Favourable environment
Different approaches
Retail revolution
Complex market
Local liquor surges in India
Indian whisk(e)y dominates
China
Chinese consumers trade up
Hennessy surges
Scotch growth slows
High-end Scotch booms
Counterfeit problem
Other categories
Thailand
Changing environment

Chapter 3 Eastern and Central Europe market review
Russian Federation
Rising import market
Retail developments
Less but better
Market leader
Industry consolidation
Distribution moves
Southern Republics
Central European markets
Poland

Chapter 4 Latin America market review
Brazil
Other categories
Mexico

Chapter 5 Other markets
South Africa
Growing female consumption
Travel retail
Asian developments
New channels
Emerging markets make an impact in Europe
Latin growth

List of figures
Figure 1: Market volume of spirits in India by company share, 2007 (‘000s nine-litre cases)
Figure 2: Market volume of imported spirits in India by company share, 2007 (‘000s nine-litre cases)
Figure 3: Market volume of imported spirits in China by company share, 2007 (‘000s nine-litre cases)
Figure 4: Market volume of imported spirits in Thailand by company share, 2007 (‘000s nine-litre cases)
Figure 5: Market volume of imported spirits in Russia by company share, 2007 (‘000s nine-litre cases)
Figure 6: Market volume of spirits in Russia by company share, 2007 (‘000s nine-litre cases)
Figure 7: Market volume of spirits in Poland by company share, 2007 (‘000s nine-litre cases)
Figure 8: Market volume of imported spirits in Poland by company share, 2007 (‘000s nine-litre cases)
Figure 9: Market volume of spirits in Brazil by company share, 2007 (‘000s nine-litre cases)
Figure 10: Market volume of imported spirits in Brazil by company share, 2007 (‘000s nine-litre cases)
Figure 11: Market volume of imported spirits in Mexico by company share, 2007 (‘000s nine-litre cases)
Figure 12: Market volume of spirits in Mexico by company share, 2007 (‘000s nine-litre cases)
Figure 13: Market volume of spirits in South Africa by company share, 2007 (‘000s nine-litre cases)
Figure 14: Market volume of imported spirits in South Africa by company share, 2007 (‘000s nine-litre cases)

List of tables
Table 1: India spirits market volume by sector, 2003-2012 (‘000s nine-litre cases and % change)
Table 2: Top ten imported spirits brands in India, 2003-2007 (‘000s nine-litre cases and % change)
Table 3: China spirits market volume by sector, 2003-2012 (‘000s nine-litre cases and % change)
Table 4: Market volume of spirits in China by company share, 2007 (‘000s nine-litre cases)
Table 5: Top ten imported spirits brands in China, 2003-2007 (‘000s nine-litre cases and % change)
Table 6: Thailand spirits market volume by sector, 2003-2012 (‘000s nine-litre cases and % change)
Table 7: Market volume of spirits in Thailand by company share, 2007 (‘000s nine-litre cases)
Table 8: Russia spirits market volume by sector, 2003-2012 (‘000s nine-litre cases and % change)
Table 9: Top ten imported spirits brands in Russia, 2006-2007 (‘000s nine-litre cases and % change)
Table 10: Total and imported spirits market volumes of Eastern Europe, Baltics and Balkans countries, 2003-2007 (‘000s nine-litre cases and % change)
Table 11: Poland spirits market volume by sector, 2003-2012 (‘000s nine-litre cases and % change)
Table 12: Brazil spirits market volume by sector, 2003-2012 (‘000s nine-litre cases and % change)
Table 13: Top ten imported spirits brands in Brazil, 2003-2007 (‘000s nine-litre cases and % change)
Table 14: Mexico spirits market volume by sector, 2003-2012 (‘000s nine-litre cases and % change)
Table 15: South Africa spirits market volume by sector, 2003-2012 (‘000s nine-litre cases and % change)
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