What’s coming up in aged spirits in 2022? – Predictions for the Year Ahead – comment

The long-standing traditions within aged spirits mean the sector is often deemed to be slow-moving and non-progressive - perhaps unfairly so. But, as external forces create a rapidly-evolving trading environment - and a revised set of consumer needs - the industry is embracing change like never before. The protracted COVID-19 pandemic and other market pressures, as well as a heightened focus on identity politics over the past year, has led to the creation of fresh trends and values in the aged spirits market that look set to gain momentum in 2022. The emergence of the Omicron variant has augmented the uncertainty that was already permeating the market, and has dealt a further blow to the beleaguered hospitality and travel industries. It has also demonstrated that the global health crisis is far from over, and brands will need to navigate a series of choppy waters in the year ahead. As the old adage goes, though, with challenge comes opportunity, and there are a number of trends that, if latched onto successfully, will help the aged spirits category reach its next stage of evolution. Spirits with a conscience Throughout the pandemic, there has been a considerable uptick in ‘conscious consumerism’. COVID has prompted many to reassess their own impact on the world, both environmentally and socially, which has, in turn, affected the types of products they are drawn to. As an industry rooted in agriculture, aged spirits have endeavoured to improve and promote their eco-credentials for some time, a move that looks set to ramp up in the year ahead. Smaller brands have benefited from considerable community support over the past year, as consumers strived to limit their food miles and keep SME businesses afloat. A plethora of aged spirits brands - no matter if they're big or small - are therefore likely to further emphasise the virtues of their provenance and locality to capitalise on this sentiment. In tandem with the pandemic, there has been a considerable focus on social equality, with movements relating to racist violence, gender discrimination and trans rights gaining traction around the world. Some of these issues have already had a direct impact on the aged spirits segment, and brands are sure to take further steps to enhance diversity and inclusion within their own businesses and also with regards to how they market to consumers. So long, ostentatious gift boxes A direct result of brands’ bids to improve their environmental standings will inevitably be the scrapping of - or at least a drastic reduction in, or redesign of - gift boxes, which aged spirits have long relied on to exploit gifting opportunities and showcase their luxury positioning. In mid-2020 Remy Cointreau claimed early-mover status, discontinuing a number of Remy Martin gift box SKUs. Meanwhile, in October last year, Edrington released the first expression in a new series of The Macallan single malts - The Macallan Harmony Collection Cacao - which is packaged in fully-recyclable and biodegradable presentation box made from discarded cacao husks. Like The Macallan, we may see the creation of more ecological packaging innovations that tell the story of the product itself - for instance, by using local materials, or materials that relate to the creation of the liquid. While ostentatious gift boxes have historically been successful sales drivers in channels such as Global Travel Retail and high-end off-premise, the new relevance of e-commerce in today’s market means shelf-stand out is less important. Content, therefore, is becoming an increasingly key motivator for shoppers. Cross-category innovations Category curiousity is a trend that has been gaining momentum for some time, and we're seeing spirits win share from the likes of beer and wine in some markets, including the UK. Aged spirits brands are likely to strengthen their recruitment via cross-category product innovation. In addition, there has been an increase in drinks product innovation that connects with other food categories – take Glenmorangie’s A Tale of Cake, released in 2020, or The Macallan’s chocolate-inspired Harmony Collection Cacao (as mentioned above). There are other brands that have chosen to disregard category labels altogether – such as Horse With No Name, created by Monkey 47 founder Alexander Stein and part-owned by Pernod Ricard. Made in Germany’s Black Forest, the spirits uses a Bourbon base that is blended with chilli distillate. It will be interesting to see how these products are positioned in the market in the future, and which new players may join them. Will lockdown luxury continue? Financially, consumers have been affected by the pandemic in different ways. While some have suffered a loss of income, a significant portion has seen its disposable wealth rise, redirecting funds they would have otherwise spent on travel and dining out on treats to enjoy at home. Retailers note that consumers have been spending more on bottles of alcohol over the past year and, in the UK, they purchased more bottles of Champagne following the onset of the health crisis. Aged spirits are clear beneficiaries of the ‘lockdown luxury’ trend, and IWSR notes further opportunities for “niche status categories” such as Irish, Japanese and US whisk(e)y. The rapid spread of Omicron means lockdowns may once again become the norm in a number of global markets, but it’s unclear whether consumer purchasing trends will be the same this time around. Will the allure of the high-end home bar remain, or will the novelty wear off? Pricing woes and wins With mounting supply chain issues and, for the UK and EU, additional post-Brexit red tape, off-premise operators are warning that there could be significant price increases across the board for alcohol in 2022. This is a critical issue for the majority of consumer goods this year. As a category so reliant on global trade, aged spirits will not escape unscathed. While some drinks might be able to shift production or tweak production techniques to mitigate the rising costs, this won't be possible for the many aged spirits that possess Geographical Indication status. There are, however, potential future pricing benefits for the segment. In June last year, the US suspended its 25% tariff on single malt Scotch for five years, while five months later, the EU dropped its 25% levy on American whiskey, urging the UK to follow suit. Distillers also recently hailed a Free Trade Agreement (FTA) between the UK and Australia, removing the 5% import tax on Scotch. Meanwhile, reports suggest the UK and India - a critical whisky market - will resume FTA talks early this year. While 2022 may not necessarily be the year that India's spirits barriers come tumbling down - Lord, we've been waiting a while! - there's plenty to keep brand owners occupied for the next 12 months. What’s set to shape the spirits category in 2022? – Just Drinks thinks

What’s coming up in aged spirits in 2022? – Predictions for the Year Ahead – comment

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