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The spirits category in 2015 - just-drinks' Review of the Year, Part III

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With 2015 drawing to a close, just-drinks looks back at the stories that have made the headlines across the global drinks industry. Here, deputy editor  Lucy Britner picks out the highs and lows for the spirits category.

Its been another lively year for the spirits category and Tequila was no exception

It's been another lively year for the spirits category and Tequila was no exception

The World of Whisk(e)y

They all tried, but nothing has succeeded in being as exciting a category as whisk(e)y in 2015. Back in February, we, along with The IWSR, predicted that non-Scotch whiskies were set for success in the year ahead. And, no other segment has felt the gold rush quite like Irish whiskey. The just-drinks team has crossed the Irish sea more than once this year, to visit new projects and talk about the enormous potential of the category. But for some, the potential is not as big as the trade hopes, and our spirits commentator, Ian Buxton, questioned whether there was enough of a prize to go round

And yet, the stills are popping up across the Emerald Isle and major US players have been quick to see the prospects. In September, Brown-Forman started work on what will be its first distillery outside of the US, at Slane Castle near Dublin. In October, the Sazerac Co added another Irish whiskey to its stable, through the purchase of the Michael Collins brand. Meanwhile, former Islay distillery owner Mark Reynier saw the first spirits come off his Irish whiskey stills, earlier this month

Not all Irish whiskey players have looked - literally - to lay foundations, though, and, with a rise of brands without distilleries, research recently suggested there might not be enough stock to feed the industry

With so many distilleries on the horizon, many promising unique and exciting propositions, Pernod Ricard's Irish whiskey behemoth, Jameson, is also keen to play in the 'up-and-coming' arena - the company has introduced a micro distillery this year, no doubt to keep up with micro trends and go shoulder-to-shoulder with other craft players. 

2015 has also been a great year for American whiskey. The Kentucky Distillers Association said the state's Bourbon warehouses stored the highest number of casks in 40 years last year, as global demand for the spirit continued to rise. In March, Bacardi entered the category with the purchase of the Louisville-based Angel's Share Brands, owner of the "super-premium" Angel's Envy. And, in May, Brown-Forman announced a major investment in a new Old Forester Distillery, allowing the company to double production capacity. Plans have been delayed, however, due to a nearby fire.

Flavoured whiskies drove sales for the likes of Brown-Forman - with the Tennessee Fire and Tennessee Honey variants of its Jack Daniel's flagship - while Beam Suntory hit the market with an apple-flavoured Jim Beam. Some suggested the category was "doing a vodka" when it came to flavours. Meanwhile Sazerac and Brown-Forman fell out over their cinnamon-flavoured variants towards the end of the year.

Other categories looked to be riding on the coattails of the US and Irish success. 2015 saw Cognacs turn sweet with the addition of honey. We also asked if blended Scotch was following in American whiskey's footsteps and even Tequila was tipped to benefit from the resurgence of the American whiskey category. Diageo will no doubt be watching this closely, since it ploughed US$400m into its Mexico operations and its Don Julio brand back in March. 

Back to whisky, meanwhile, and Scotch continues to dominate the category - but the juggernaut showed steadying progress. And, as Japanese whisky's boom saw aged stocks deplete, so arrived the NAS drams. Interestingly, both Irish and US whiskey have never been burdened with the expectation of age statements. Perhaps this will be their biggest asset in 2016?

Which craft?

Predictably, some of the biggest stories this year centred around the craft segment. But, is the movement the great beacon of brilliance it once was? Sceptcism and cynicism have crept in and, after a few years of trying, the definition of 'craft' still isn't set in stone

As so-called craft brands boomed in 2015, we pondered: What will happen when they get "too big"? Elsewhere, Ian Buxton asked; Where does craft end and mass begin? Brands such as US vodka Tito's also began to feel the pressure as its 'handmade' tag came under scrutiny. So, what about terms, such as 'handmade', that are associated with craft? Analyists believe consumers are beginning to tire of marketing buzzwords.

Although it was suggested by Rabobank this year that the threat of craft spirits has been exaggerated, the movement has provoked further innovation within the big drinks companies. William Grant & Son's chief commercial officer, Simon Hunt, told us in October that craft companies are "challenging us to see how pioneering we are". From Diageo's start-up project Distill Ventures, to Pernod's regional 'Our Vodka' concept, the craft movement is still, well, in motion. For some, though, buying into existing craft spirits is more desirable - take Bacardi's purchase of 6,000-case Banks rum, for example. 

If we have learned anything in 2015, then, it's that craft does not always mean good and that big does not necessarily mean bad. 

The M&A merry-go-round

Shifts in spirits company ownership continued this year, though perhaps they were felt as ripples, compared to the great waves in the beer world

Diageo finally started trimming its non-spirits portfolio, first with the divestment of the Gleneagles hotel and golf resort in Scotland in July, and then with the offloading of the bulk of its wine business, in October. Its Argentinian wine brands followed a month later. DIageo continued to put its house in order with a tightening of beer operations in Africa: By December, the company completed the withdrawal from its South African and Namibian brewing joint-ventures with Heineken, recouping ZAR2.5bn (US$172m) in the process.The company has made good this year on its desire to trim its what it deems to be non-core, and has come quite close to becoming a pure-play spirits business. That said, don't go concluding that Guinness is leaving any time soon.

In Europe, it has been a testing - and transformational - year for the artist formally known as Belvedere. Now called Marie Brizard Wine & Spirits, the company saw French wine, beer and soft drinks company Castel take a stake this year, with further interest coming from long-time stakeholder La Martiniquaise Bardinet. Early indications are positive: The company has revised its targets for the years ahead, with sales between 2016 and 2018 expected to rise by 8% to 13%.

In neighbouring Holland, the Nolet family, which co-owns Ketel One vodka in a JV with Diageo, became the largest shareholder in Lucas Bols, after the spirits and liqueur company launched an IPO at the start of the year

Over in the US, Mast Jagermeister's purchase of Sidney Frank Importing was big news. The move was in line with the herbal liqueur producer's new strategy to control distribution in its core markets, executive board member Michael Volke told just-drinks. Hollywood actor George Clooney also caused a stir at Sidney Frank, which had previously handled his Casamigos Tequila brand, when he decided to go it alone, taking with him the unit's CEO and a clutch of execs.

Looking to 2016, and Brown-Forman's Southern Comfort was initially one of our front-runners for divestment. But, a new marketing campaign for the brand and a chat with Brown-Forman's CEO made us think there might be life in the old dog yet. 

Elsewhere, Philippine brandy company Emperador is hungry for acquisitions. The group, which purchased Whyte & Mackay in 2014, made its Louis Royer Cognac intentions public back in May, though it eventually lost out to French company Terroirs Distillers by July. Undeterred, Emperador marched on with the purchase of Beam Suntory's brandy and Sherry business, later in the year. Expect a lively 2016 for the group.

Make mine a Millennial

Possibly our word of 2015, we've heard it at least once from just about every major drinks company. The Millennial Generation - described as being born between 1981-2000 - seems to be the 'next big thing' for every drinks category. Pernod CEO Alex Ricard said last week they are the future of spirits, they were called the "slash generation" in Remy Cointreau's Cognac campaign, while Diageo sees a Millennial future for Smirnoff vodka as well as Johnnie Walker with its new 'Joy' campaign. Even Beam Suntory eyed the demographic group in its latest Courvoisier campaign. Then in October, Bacardi unveiled a return to the party for its Bacardi brand - taking it "back to Millennial consumption".  It doesn't take a crystal ball to forecast that this trend will continue in 2016. 

Speaking of Bacardi, the company''s party activation two months ago followed multiple changes in the group's marketing department, including the departure of its CMO. Prior to the restructuring of the marketing division, Bacardi cut 10% of its US staff in April and announced job cuts at its global brands division in the UK.

Beyond China

2015 appeared to be the year that the spirits industry finally accepted that the tradition of gifting in China is dead. With the dizzy heights of pre-2012 long gone, the big spirits players began to look at what Pernod Ricard called 'the new normal'. That's not to say China ceased to be important: As the CEO of Remy Cointreau put it, there are 30m more legal drinking age consumers entering the market every year. 

Anyway, for Cognac producers, the hangover might not be as bad as we thought: As recently as its third quarter, Moet Hennessy reported a "strong rebound in shipments to China".

Meanwhile, the Trans-Pacific Parnership free trade agreeement looks set to boost trade in the region, with Japan, Singapore, Malaysia and Vietnam among the signatories. In October, Diageo said it had introduced new, local manufacturing capabilities in South East Asia, created to broaden its portfolio presence in an attempt "to better compete with local beers and spirits".

Good health

Much as we'd like it to be the case, health and spirits consumption have struggled to become natural bed fellows. Our prediction for 2016, however, is that unit and calorie information on spirits bottles will become commonplace. The ball is already rolling: In March, Diageo laid out plans to introduce nutritional information - including unit and calorie intake - on its labels. Then in April, Europe's MEPs called for the European Commission to introduce calorie-content and ingredient labelling on alcoholic drinks sold in the region by next year.

As we bid farewell, to another year, then, the roadsigns for 2016 are already starting to come into view.

For just-drinks' full review of 2015, click here


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