What Trends in the Alcoholic Drinks Market Mean for Spirit Makers

By Matt Dunn, co-founder of Cadello.

 

It’s clear from trends across the food and beverage industries that consumers are increasingly focused on quality. In the past 15 years, the overall quality and breadth of offerings of both restaurant and cocktail bars has improved dramatically.

 

This shift has influenced, and continues to influence, some pretty transformative trends in the alcoholic drinks market, forcing spirits producers to improve the quality and breadth of their offerings. This has given rise to more and more premium and craft beverages.

 

We take a closer look at the major changes that have emerged over the past few years, and what it means for both new and established spirits producers in the near future.

 

The new age of craft

 

The incredible growth of craft beer looks set to stay for the foreseeable future. This new wave has occurred along side craft adoption in the spirits industry. Gin, in particular, has seen enormous growth, led by brands such as Hendricks, Gin Mare and Monkey 47.

 

Typically, successful craft spirits have started out selling to a small number of high-end bars in cities, before expanding internationally into drinks venues of all kinds and launching into supermarkets.

 

According to LEK Consulting, the U.S. craft spirits market has grown by approximately 20% per year since 2012 and is forecast to grow by approximately 15%-20% per year through 2022.

 

We are now seeing all types craft spirits on shelves everywhere, with wide ranging experimentation with different flavours, ingredients and botanicals to make the variety of offerings even broader.

 

Consumers now want and expect to try something completely new every time they walk into a bar or restaurant. It has become a critical part of the appeal and experience of dining or drinking out. Distillers are evermore challenged to find ways to continue to diversify their offerings, including providing exclusive and limited small batch products, to keep things interesting.

 

Cocktail culture

 

The growth of cocktail culture has also propelled the popularity of craft spirits and higher quality product offerings. In sync with the improved trends in restaurants, bartenders have dramatically improved the cocktail experience. Both classics and amazing new creations are now appearing on menus at over 70% of bars and restaurants in the UK. CGA’s Mixed Drinks Report shows that the value of on-trade cocktail sales jumped by 7.5% year on year in the first quarter of 2018. There are a number of drivers behind this:  the desire for differentiation, for the drink to share on social media and the trend towards luxury and indulgence, which we will discuss below.

 

Category creations

 

The Spirits Business in its 2019 spirit trends forecast predicts an increase in boundary breaking categories – including crossovers, cask experimentation, distillation techniques and botanicals. As consumers seek differentiation, traditional categories are becoming more and more saturated, particularly with the rise of small batch distillers.

 

Going forward, innovation in the industry will start to come from products that define new categories of their own. There have already been some interesting breakthroughs in the creation of new categories. One example is Kamm & Sons. Another is Italicus. Italicus is an Italian liqueur that has also seen rapid growth since it launched two years ago.

 

As a brand-new luxury player in the market, Cadello is appealing to the rising demand for something new, unique and high quality. Produced by a 150 year-old, Italian family-owned distillery, Cadello is steeped in history and tradition – something that has made traditional categories such as cognac, whiskey and brandy so enduringly popular.

 

Rise of premium and luxury

 

Quality has taken over from quantity. People want to drink less alcohol but still get a buzz from the enjoyment of their drinks. This coupled with a cautious return to spending, means consumers are willing to spend a little more on a reasonable volume of higher quality alcoholic beverages. Premium and luxury spirits are going to be major growth areas in the spirits market, with millennials driving the trend. Millennials comprise 32% of spirit consumption by value, even though they comprise only 29% of the total drinking population.

 

Between 2012 and 2017, the super-premium spirits and high-end premium spirits segments grew 6%-7% per year by volume. CGA also calculated that 43% of consumers select high quality drinks. This increases to 54% among 18 to 34 year olds. The result is that brands have switched their focus to higher and higher quality and differentiation, particularly in mature markets such as the UK and France.

 

Changing relationships with alcohol

 

We’ve already touched upon some of the trends affecting the consumption of alcohol at bars and restaurants, but there are other changes affecting our relationship with alcoholic drinks. After many years of rising prices and stagnant wages, a lot of people are choosing to drink at home to enjoy the highest quality drinks, without the additional markup. We can also see with the increase in the availability of home brew and botanical kits, consumers are doing more to discover what flavours they like and educate themselves on complimentary ingredients and mixers.

 

In addition, we now live in a world in which we explore our identity through social media. We follow experts and have access to more information and we can more easily discover smaller brands that don’t have the big-brand budgets for mainstream advertising.

 

There seems to be a greater sense of  confidence amongst spirit drinkers to experiment and try something new, rather than reaching for the familiar. Distillers and spirits producers are capitalising on this by increasingly inviting consumers to see the process of making their products. Experiences such as distillery tours and events focusing on ingredients, recipes and complementary foods are becoming more and more popular.  As part of the overall trends in the market, consumers are more tempted to learn about what they consume and to share a more rewarding experience with friends.

 

In summary, discovery, identity and better quality are the key drivers affecting the spirits market. With a strong focus on these elements from the start, spirit makers and distillers are increasingly adapting their product offering to appeal to newly enlightened consumers who want a memorable drink experience worth sharing.

 

 

ABOUT THE AUTHOR

Matt Dunn is co-founder of Cadello,a new, category-defining spirit produced by a 150year-old family-owned distillery in Italy. A unique flavour combining eight ingredients, Cadello is perfect served neat or in cocktails.

 

Web:www.cadello88.com
Instagram:  https://www.instagram.com/cadello88
 Crowdcube: https://www.crowdcube.com/companies/cadello/pitches/qQX6wb

 

 

CITATIONS

 

U.S. craft spirits market has grown by approximately 20% per year by value since 2012 and is forecast to grow by approximately 15%-20% per year through 2022 https://www.lek.com/insights/ei/top-10-trends-affecting-spirits-industry
CGA’s Mixed Drinks Report shows that the value of on-trade cocktail sales jumped by 7.5% year on year in the first quarter of 2018. https://www.cga.co.uk/2018/04/26/cocktail-sales-continue-to-soar-as-new-trends-emerge/
The Spirits Business in its 2019 spirit trends forecast predicts an increase in boundary breaking categories. https://www.thespiritsbusiness.com/2019/01/the-spirits-trends-to-watch-in-2019/5/
Millennials comprise 32% of spirit consumption by value, even though they comprise only 29% of the total drinking population. And from 2012 to 2017, the super-premium spirits and high-end premium spirits segments grew 6%-7% per year by volume”, https://www.lek.com/insights/ei/top-10-trends-affecting-spirits-industry
CGA also calculated that 43% of consumers select high quality drinks and this increases to 54% among 18 to 34 year olds https://www.cga.co.uk/2018/04/26/cocktail-sales-continue-to-soar-as-new-trends-emerge/