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The latest gin insights report from just-drinks and The IWSR was published this week |
The continuing global gin boom is beginning to shift and evolve, with growth accelerating in second-tier markets across Western Europe and beyond, according to the latest Global Gin Insights report from just-drinks and the IWSR.
Far from slowing, growth is poised to gather even more pace in the next five years, with global gin volumes (excluding low-priced expressions) moving up from 32.4m cases in 2016 to nearly 40m cases in 2021. The forecast rise represents a compound annual growth rate (CAGR) of 3.1%, compared to the 2012-16 CAGR of 2.5%.
The category remains heavily reliant on top three markets the US, Spain and the UK, which together accounted for 57% of global volumes in 2016. But, that is poised to change in the years to come.
The IWSR predicts that, below the top three, 13 of the next 17 gin markets will outperform the overall gin category between 2017 and 2021, as the gin boom spreads to countries across Europe, including Germany, Italy, France, Belgium/Luxembourg, the Netherlands and the Canary Islands.
Beyond Europe, Global Travel Retail, South Africa, Canada, Australia, Mexico and Brazil are all poised for dynamic growth, joined (off a smaller base) by Russia, Kenya, Austria and Sweden.
In the process, three more markets will surpass the 1m-case-per-year mark: South Africa, Germany and Canada.
This positive prognosis comes after a buoyant few years for the gin category, with global sales (excluding low-priced) reaching 32.4m cases in 2016, thanks to 17 of the top 20 markets posting gains between 2012 and 2016.
The US has been lacklustre, dipping below 10m cases in 2015
Over the five-year period, Spain and the UK have been the category darlings, posting CAGRs of 7.8% and 8.1%, respectively. The US, however, has been lacklustre, declining at a CAGR of -1.2% and dipping below 10m cases in 2015, before posting a slight recovery in 2016.
That said, the US is forecast to grow, surpassing 11m cases by 2021, although the market is still failing to cash in on the gin boom occurring elsewhere. The report notes: "As brand owners focus on an ever-expanding basket of gin destinations around the world, their biggest challenge remains the reshaping of the hitherto volume-led US, where growth remains sluggish."
Gin is becoming increasingly polarised in the US, with the previously-dominant standard and value domestic brands losing market share to premium-plus imports and small-batch products.
Meanwhile, in Spain, the gin boom has become more mainstream, with standard and value gins leading category growth, and retailer own-labels gaining volumes. Growth here is expected to moderate in the coming years, more or less mirroring overall category trends.
Prospects are brighter in the UK, but again here the growth trajectory is expected to flatten somewhat at a predicted CAGR (2017-2021) of 4.9%, topping 5m cases by 2021.
Multiple factors are conspiring to create and perpetuate this gin boom, from generational consumption shifts to an embracing of flavour, the 'foodie' focus on provenance and the increasing sophistication of the humble gin & tonic.
Brand owners will have to manage contrasting trends in different countries
As gin's popularity spreads around the globe, brand owners will have to manage contrasting trends in different countries – from some that are just 'discovering' gin to others where trends are more mature.
The marketplace is also becoming increasingly crowded, especially in marquee destinations like Spain and the UK, where hundreds of gins compete for space on the retail shelf and back-bar.
Although the space given over to gin has expanded, there is increasing evidence of a shake-out, with under-performing brands losing listings. The report says: "Even as markets like Spain, Germany and Portugal continue to grow, there has been a rationalisation of the number of gin brands on offer.
"Only the strong and those with a distinct and compelling identity will survive in the longer term."
Flavoured gin could be one trend to watch: from small beginnings in Spain, it is gaining a bigger slice of the market, with leading brands such as Gordon's now entering the segment.
But, much of the product innovation in gin in recent times has been driven by smaller, independent brands that are slowly beginning to erode the market share of the larger players.
Although by no means a major threat to the likes of Gordon's, Bombay and Beefeater, these often highly profitable products leave the multinationals facing a dilemma: how to react?
"The choice appears to lie between two responses," the report suggests. "To fill those gaps with their own new products, or line extensions to existing brands; or, to acquire the most promising and successful new gin brands out there – and to do so at the right time and the right price."
Recent deals, such as Pernod Ricard's majority stake purchase in Monkey 47 in early-2016 and Beam Suntory's purchase of Sipsmith at the end of last year, suggest that this might already be happening.
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