As 2022 draws to a close, even the most optimistic are having their mettle tested by global events. From war in Europe to soaring inflation, it’s a time when we could all do with a festive break and a glass of something to soothe our worries away. The outlook for beverage alcohol, including spirits, around the world appears fragile, and it’s only fair to say that some regions – western Europe and China, definitely, North America possibly – could face a tricky 12 months ahead.
But the underlying consumer trends remain undeniably positive. More and more people, in more and more parts of the world, are willing to spend more and more money on the right product – particularly, but not exclusively, if it’s got agave or juniper in it.
That sentiment will come under pressure in 2023 but it will endure and re-emerge even more strongly in time – and for that reason, my glass remains half-full as the end of 2022 beckons.
¡Viva agave!
The relentless rise of agave spirits – centred mainly on the US and at increasingly extravagant price points – has been one of the features of the spirits market over the past five years. As 2022 draws to a close, the category stands at an interesting inflection point.
At the moment, there’s no sign of the high-end Tequila boom ending in the US and, perhaps surprisingly, American consumers remain content to spend big on their preferred cristalinos and extra-añejos. But will that sentiment persist into 2023, as rising prices begin to erode disposable incomes and optimism alike?
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These question marks make it all the more important that brand owners don’t remain over-fixated on the US to the exclusion of everywhere else. The savvy ones (assuming they have the necessary resources and routes-to-market) will look to simultaneously transform attitudes in legacy markets for Tequila and build its presence in fresh destinations – for example, in Asia.
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By GlobalDataIn the former, attitudes are beginning to change, eliminating the old clichés around shots and slammers, and people are increasingly taking both Tequila and mezcal seriously. As other agave and agave-adjacent spirits such as sotol, raicilla and bacanora emerge into the market – see, for instance, Pernod Ricard’s new venture with Nocheluna – the story for the consumer could become even more compelling – and not only in the US.
Gin enters a new phase
Gin’s in a funny place right now. For industry observers in the UK and Spain, it feels as if the juniper boom has been around forever and – since the worst effects of the Covid-19 pandemic – the category has moved into reverse, especially in the UK.
In such a saturated market, however, some kind of correction looked overdue, and even amid signs of slow decline, gin remains big business in both countries. Much more importantly, the UK and Spain aren’t the world.
Consider the recently-announced acquisition of German brand Elephant Gin by Italian import and distribution business Compagnia dei Caraibi. You might think this an odd time to be buying a gin, but the prognosis for the Italian gin market is bright – as GlobalData forecasts suggest – and I wouldn’t be surprised to see more deals like this in the near future.
Gin still has plenty of headroom for growth in a number of markets, from pockets of continental Europe to Latin America, South Africa and the Antipodes. Nor is this growth purely being driven by the category colossi, such as Gordon’s, Tanqueray, Bombay and Beefeater, but by a rising tide of locally produced brands using indigenous botanicals.
If the long-anticipated US gin boom finally materialises in 2023, all thoughts of having reached ‘peak gin’ will be dispelled… But, even if it doesn’t, there’s still plenty of optimism for gin’s future.
RTDs: time to grow up?
For many years, RTDs have been the moody adolescent of the beverage alcohol industry: fickle, unpredictable and, for all their success in markets such as the US and Japan, not always easy to love. Margins are thin, trends elusive.
Hard seltzers are the most recent incarnation of this, their apparently unstoppable rise checked by – well, what? Boredom? It’s hard to escape the feeling that this part of the market suffers from its consumers’ brevity of attention span.
But look beyond the seltzer phenomenon to the broader shift in perceptions of these products. More and more people discovered the convenience and appeal of RTDs during pandemic lockdowns and, as economic concerns lead more people to stay at home rather than venturing out to bars and restaurants, that habit will resurface.
Seltzers are part of this changing picture, but so is a raft of other products – particularly pre-mixed cocktails and long drinks, from the simple G&T to bar favourites such as espresso martinis and negronis.
Factor in emerging niche segments such as hard kombuchas, hard coffees, etc. and the RTD universe is increasingly diverse and dynamic. Importantly for brand owners, many of these products have far higher prices than the alcopops of the past – and that, above all, makes the humble RTD an increasingly exciting product in which to invest.
Vodka is a many-splendoured thing
The premiumisation and diversification of RTDs is more good news for a resurgent vodka category. With consumer preferences veering towards lighter, spirit-based products, vodka is the obvious go-to option for pre-mixed cocktails and seltzer-alikes.
Well, I say ‘resurgent’ but vodka is one of those spirits categories (rather like Scotch) that never really goes away. It’s easy to be distracted by difficulties in individual markets like the US and I wouldn’t want to minimise the travails that vodka has endured in its most lucrative global market.
But it makes no more sense to extrapolate vodka’s issues in the US into the rest of the world than it does to make the same mistake with beer. Even while the likes of Absolut and Smirnoff try gamely to rebuild their positions Stateside, they are simultaneously ploughing fresh furrows in markets from Latin America to Asia.
When the son of a Bollywood legend joins forces with the world’s biggest brewer to launch an ultra-premium vodka in India – as Shah Rukh Khan and Anheuser-Busch InBev have done recently with D’yavol – it reflects the fact that the outlook for this most established of spirits categories is still one of bags of potential, especially in emerging markets.
2023 outlook – aged spirits can steer through testing waters
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