Labor Day was a successful holiday for Wine with dollar sales growing slightly more than 2.5 percent compared to last year. On-trend segments continue to be strong contributors to the overall Wine market’s success. Rose, both table and sparkling, grew by just under 7 percent in dollar sales, with Sparkling Rose showing solid gains of 11 percent.
Canned Wines faired best growing by a whopping 62.2 percent in dollar sales. The Ready-to-drink (RTD) trend continues its steady growth to prominence with Wine-Based Cocktails also performing extremely well, growing by 40 percent compared to last year.
The ready-to-drink cocktail sector has experienced mixed reviews from consumers, most complaining that they are often too sweet and low quality. But the industry is progressing and eager to provide a craft experience with convenience. RTD cocktails sales have experienced a worthwhile increase in the past year, growing by 5 percent with about half of the category’s total sales volume in the grocery store channel. The trend is expected to continue developing.
According to a recent report by global marketing research agency, Mintel, “RTD Alcoholic Beverages,” forecasted that sales of RTD spirits-based cocktails in the U.S. would rise by 9 percent in volume by 2021. The report especially highlights “product innovation with a craft focus, which can imply quality,” partnered with “ingredient transparency,” as being among the trends that led Mintel to predict strong growth.
Reports suggest that the popularity for craft spirits and cocktails has trickled into the ready-to-drink canned and bottles cocktails sector. The trend for craft products has become a desirable experience for consumers to mimic in the comfort of their own home, or even on the go. Restaurants, stadiums, hotels and airlines are also contributing to the trend. The new, high-quality RTD cocktails are proving to be an innovative product that saves time and money.
Vodka may be hot stuff in some of the world’s emerging markets, but in its established haunts, the spirit must evolve to reignite sales. By Becky Paskin and Melita Kiely
The global vodka scene has endured a shift in consumer trends, economic turbulence and political unrest in the past year, and has found itself in the midst of a sales slump.
Volume moved at just 0.5% in 2013 to 496.4 million nine-litre cases, and is predicted to have shifted by just 0.2% in 2014 when official figures are released by the IWSR in a few months. The five-year forecast looks even bleaker, with less than 0.1% CAGR predicted between 2014-19 thanks predominantly to the continued slowdown in Russia.
There are many obstacles standing in the path of vodka’s return to meaningful growth, not least the competition from brown spirits. But if the category stands any chance of counteracting the general inertia and reliving its former glory days, then reinvention is going to be key. “Vodka is in this space where it needs to reinvent itself to keep its growth going,” says Matt Bruhn, global brand director, Smirnoff. “We’re in a period of inflection in the category. Vodka has always been on the edge of trends and needs to keep reinventing itself – that’s the biggest challenge.”
Vodka has come a long way since its heyday in the 90s, but equally the category’s loyal drinkers have also evolved over the years. Consumers are now looking for much more from brands through provenance and an authentic story, and are demonstrating a demand for premium products. On a global level, these are the major trends that will shape the vodka landscape for the foreseeable future.
Flavour fatigue
Reinvention is “key” for the vodka category to grow sales
On a more regional basis, the wave of growth from the US seen in the past couple of years as consumers lapped up an extraordinary variety of flavours has begun to wane as ever-more discerning drinkers grow tired of the whipped cream and cake creations, turning their attention to more traditional expressions and even flavoured innovations from alternative spirits categories.
Meanwhile, political unrest in Russia and Eastern Europe has encouraged many producers to set their sights on alternative regions, although there are still pockets of growth in rapidly developing countries. Whereas for Western Europe, on-going hardships as a result of the Eurozone crisis have made for a tough playing field for vodka – though brands are trading rather successfully in one or two specific countries.
Perhaps the greatest potential for vodka has in fact manifested itself in Brazil, where an emerging middle class, blossoming cocktail culture and a nationwide predilection for white spirit cachaça, has created the perfect storm for vodka to flourish.
Asia, on the whole, is being treated as a long-term project by international brands, while Australia is peddled as a region with small, but dynamic, growth. Even Africa, with its penchant for beer and RTDs, and little experience of mixed drinks or cocktails, is showing sure signs of promise for leading vodka brands.
For our annual analysis of the global vodka landscape, The Spirits Business has partnered with the IWSR to present exclusive data, commissioned by leading wine and spirits trade show Vinexpo. The exhibition, which takes place this 14-18 June in Bordeaux, France, commissions research from alcoholic beverage market analyst IWSR each year so as to harness key insights into the development of both spirits and wine. The annual collaborative research allows SB to take a closer look at how vodka is performing in different regions throughout the world.
Continue to the following pages for an in-depth market-by-market analysis of the vodka category.
Diageo Australia managing director Tim Salt says Coles’ liquor fortunes are on the rise.
The managing director of Diageo Australia, which sells brands including Johnnie Walker, Smirnoff and Bundaberg Rum, believes Coles will eventually be able to reinvigorate its liquor retail business to be a much more forceful competitor against rival Woolworths.
Tim Salt, who runs the No.1 company in spirits in Australia, says while Woolworths is currently the standout performer when it comes to liquor retailing, he expects Coles will be able to catch up in a similar way to its dramatic improvement in supermarkets.
“I wouldn’t back against them, given what they’ve done in supermarkets,” Mr Salt says.
Coles has out-performed Woolworths in supermarkets for a record 21 consecutive quarters, but in liquor retailing is a long way behind, as Woolworths powers ahead led by its flagship Dan Murphy’s superstore chain.
The underperformance of the Coles liquor business has been a source of frustration for Coles’ owner Wesfarmers for several years, considering the supermarkets business has made such strong advances since Coles Group was acquired in a $19 billion takeover in 2007.
Diageo Australia generates about 75 per cent of its total sales to liquor retailers, most of it to both Woolworths and Coles. The rest goes to bars, pubs and other licensed venues.
Mr Salt says if Coles and other rivals to Woolworths such as the smaller independent chains also improved their performance it would be a plus for suppliers across the board.
“It raises the game,” he says.
He says Diageo has found the going tough in Australia over the past year, with consumer confidence still soft and volumes lower, even though there is a trend of “trading up”, where drinkers buy more premium brands. But that isn’t enough to offset the lower volumes.
“People are drinking less but they are drinking better.”
He says Diageo Australia’s sales revenue was down by 2 per cent in 2013-14 from the previous year’s figure of $542 million. Net profit after tax was also marginally lower than the 2012-13 figure of $43 million.
Consumers are still cautious.
“We’re not seeing a pick-up.”
The widely-held view that spirits is a category which is immune from economic softness, is just not right.
“The answer is, it’s not true,” Mr Salt says.
The company’s ready-to-drink alcohol brands in pre-mixed spirits are suffering from an onerous taxation regime which is hurting growth. “You’re seeing continued erosion of the RTD segment.”
The first few months of trading in 2014-15 across the Diageo Australia business had been patchy and Mr Salt says it is too difficult to make a profit forecast for the full year.
“It’s holding. We are where we want to be,” he says.
Diageo Australia is preparing to launch a new product called Smirnoff frozen cocktail pouches this month, which is a 250ml soft pack selling for $5 each in a pack of three.
The company is also gearing up for a traditional spike in sales over the next few weeks through Christmas gift packs of prestige spirits containing extra promotional specials such as two glasses.
Mr Salt says Diageo Australia, which is part of the global Diageo Plc conglomerate headquartered in Britain, won’t be altering its tactics in the pre-Christmas lead-up because of a change in strategy by Australia’s largest wine group, Treasury Wine Estates.
Treasury, led by chief executive Mike Clarke, has aggressively overhauled its own approach by switching the release of its flagship Penfolds Grange to mid-October each year, ditching three decades of the previous timing of May 1. Mr Clarke’s rationale is in part built upon the premise that Grange and other high-end Penfolds red wines will capture a large share of the pre-Christmas luxury goods gift-giving market.
Mr Salt says Grange is a “wonderful product” but is a small, niche player and Diageo will be focusing on its own business.
NEW YORK, Feb. 4, 2014 /PRNewswire-USNewswire/ — American distilled spirits exports broke new records in 2013 crossing the $1.5 billion threshold, driven by premium Bourbon and Tennessee Whiskey which exceeded the $1 billion mark for the first time, the Distilled Spirits Council (DISCUS) reported today at its annual briefing for Wall Street analysts.
“Eighty years after Prohibition Repeal, this global whiskey Renaissance is a trend that is benefiting producers, large and small, in the U.S. and around the world,” Council CEO Peter H. Cressy said. “These export records are driven by industry innovation, a very positive perception of American distilled spirits quality and heritage, and market-opening trade agreements.”
Whiskeys Also Pace Steady Industry Sales Growth in U.S. Market
In the important U.S. home market, the Council reported steady supplier sales growth in 2013 of 4.4% to $22.2 billion, paced by whiskeys of all varieties; total U.S. volume growth was up 1.9% to approximately 206 million cases. The Council estimated overall retail sales of distilled spirits in the U.S. market at upwards of $66 billion.
In addition, the group estimated overall market share versus Beer grew for the fourth straight year, rising by four-tenths of a point for a total of 34.7% share of the beverage alcohol market.
Total market share gain since 2000, has been 6.0 points. Each point of market share equals approximately $630 million in supplier sales.
Key factors cited as contributing to the U.S. market growth included industry product innovations; consumer fascination with premiumization, heritage and cocktail culture; expanded access through state market modernizations; and effective hospitality tax restraint by legislatures.
“The wide product selection spirits suppliers offer consumers again paid off with solid revenue growth,” DISCUS Chief Economist David Ozgo told the gathering. “For the first time in decades, all Whiskey categories saw some growth. Whiskey was once the dominant spirit of choice for most Americans. While growth had been picking up over the last few years, 2013 was a banner year.”
Ozgo reported that Whiskeys of all varieties in the domestic market grew 6.2% to 52.7 million cases, worth just over $7 billion in supplier sales, up 10.1% or $643 million in 2013. Highlights within the Whiskey category include Irish up 17.5% in volume to 2.5 million cases worth $500 million, up 20.5% in revenue; Single Malt Scotch up 11.6% in volume to 1.8 million cases worth$590 million, up 14.7% in revenue; and Bourbon and Tennessee Whiskey up 6.8% in volume to 18 million cases worth $2.4 billion, up 10.2% in revenue.
He also reported solid U.S. growth in several other categories including Tequila, which showed volumes rising by 6.6% and revenue up by 7.9%, with strongest growth particularly in the more expensive price segments and $148 million in new supplier revenue; steady growth in Cognac with volumes up 3.7%; and Vodka volumes up 1.1%, which given the enormous size of the category at 66 million cases, drove $122 million in new supplier revenue.
Another important development in 2013 cited by the Council was the continuing progress on key social responsibility indices. According to the latest U.S. government data, underage drinking has declined to historic lows, and binge drinking rates by teens also continued their long-term decline.
“All tiers of the industry have committed themselves to fighting against underage drinking,” Cressy noted. “Public-private partnerships such as ‘We Don’t Serve Teens’ and Century Council programs have contributed to the progress.”
Key Factors Contributing to Record American Spirits Exports in 2013
According to Council Senior Vice President for International Trade Christine LoCascio, projected Bourbon and Tennessee Whiskey exports overall grew 5.0% from $956.8 million in 2012 to $1.005 billion in 2013, an increase of approximately $50 million.
The projected top six 2013 growth markets for all American distilled spirits by dollar value were Japan (up $22.7 million to $120.8 million), Germany (up $19.6 million to $140.1 million), France (up $14.5 million to $130.5 million), U.K. (up $8.8 million to $159.6 million), Spain (up $6.5 million to $69.8 million) and Panama (up $5.8 million to $11.6 million). The projected top 2013 markets by growth percentage were Nigeria (up 475.5% to $5.0 million), Panama (up 99.0% to $11.6 million), Greece (up 72.5% to $9.2 million), Georgia (up 47.6% to $6.0 million), China (up 40.4% to $11.8 million) and Belgium (up 33.6% to $18.3 million).
“There is a genuine affection for ‘Brand America’ as a symbol of quality and taste,” said LoCascio. She also pointed to “the strong heritage backstory for American whiskey brands dating to George Washington, whose reconstructed distillery has received international media coverage.”
Other factors LoCascio cited for strong American distilled spirits export growth were market opening and other trade agreements in recent years that have seen tariffs significantly reduced or eliminated in key countries and regions includingPanama, China, Australia, Colombia, Korea and Chile, among others.
LoCascio also pointed to the Council’s own export promotion program—Cheers from the USA—which, in partnership with USDA since 2005, has conducted American spirits promotions in 15 key targeted countries, and that currently has American Whiskey Ambassadors in China and India.
Other important contributing factors included a globally resurgent cocktail culture, into which U.S. Whiskeys fit well; rising middle classes with disposable income around the globe; and industry innovation in bringing new products to market, coupled with general premiumization trends around the globe, LoCascio concluded.
