Global spirits volumes were relatively flat in 2016, but sales were up

Global spirits volumes were relatively flat in 2016, but sales were up

Looked at from a distance, there is a solidity to the latest IWSR figures for the global spirits industry. Sales were up 4.4% in calendar 2016, with growth in major markets including the US (+3.8%), global Travel Retail (+6.1%) and China (+5.4%). But what lies under the hood of the annual report? Analysts at Exane BNP Paribas have dug deep into the numbers to uncover the emerging trends in global spirits. Here, just-drinks takes a look at some of the prevailing winds on show.

  • The US remains the biggest show in town for Western-style spirits

When it comes to Western-style spirits volumes, the US is THE place to be, according to the IWSR. The country accounted for just over a third of volumes, but 80% of all volumes growth in 2016. In sales, big drivers were Cognac, which grew by 19%, and Irish whiskey, which was up 18.4%, though from a smaller base. Losing value market share in the highly-competitive US market were vodka (+1.2%) and rum (-1.3%). Blended Scotch woes continued as the category added just 0.8% in sales for the year.

  • Scotch skirts with danger

Scotch was in trouble in China as volumes dropped double-digits for the fourth year in a row. Meanwhile, declines for Chivas meant that China's Scotch leader Pernod Ricard lost 15% of its volumes.

  • Tito's is breathing down Smirnoff's neck

According to Exane, the Texan vodka was a "whisper" away from catching Diageo's Smirnoff brand by US retail sales after it added nearly 40% to its US volumes. Tito's accounted for 28% of incremental spirits volumes in the US last year.

The IWSR Real 100 Spirits Brands Worldwide - The Facts

  • China crisis over? 

The IWSR figures added further weight to the theory that Cognac has rebounded in China after three years in the doldrums. Sales were up 10%, driven by higher-end "Extra" products. Remy Cointreau's ultra-high-end Louis XIII, which costs more than US$3,000 a bottle, found 48% sales growth.

  • Europe's gin boom continues apace

Gin was the single biggest contributor to growth in Western Europe after a 14.6% increase in retail sales, according to Exane. To give that context, the next biggest contributor was Scotch whisky, with just 2.1%.

  • Price/mix drives sales

Global spirits sales may have inched up, but volumes were relatively flat (+1.2%) for the fourth year in a row, meaning that growth was down to price/mix. The return of the Chinese consumer, especially in Cognac, meant that raising prices was possible, however in other countries, the economic backdrop was not so rosy. Sales in Japan were flat, while in the UK they crept up just 2% in 2016. Germany also struggled, with 1.1% sales growth.

The two companies were ahead of their rivals in terms of Western-style spirits growth. William Grant added 10% in sales and 5% in volumes while LVMH was up 13% for both in 2016. Diageo underperformed with 1.6% sales growth and a 1.6% decline in volumes (Exane blamed weakness for powerhouse brands such as Smirnoff, Captain Morgan and Johnnie Walker), but Bacardi was worst of all, with sales flat and volumes dipping by 0.7%.

For full details from The IWSR, click here

Expert analysis

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