Sector Insight: Gin and white spirits

The sector is being buoyed by the rising popularity of cocktails and brands are adjusting their strategies accordingly

A gin and tonic may not be the drink of choice among the young, hip set, but cocktail-swilling is still de rigueur in bars and clubs. From Tom Collins to Singapore Slings, cocktails have helped maintain sales in the gin and white spirits sector. Many brands are actively promoting their use as a cocktail ingredient to ensure both on- and off-trade sales remain strong.

Since 2003 sales in the gin and white spirits sector, which includes white rum but not vodka, have grown by 5% in both value and volume, to reach £1.2bn in 2008, according to Mintel. However, in 2008 sales fell as the economic downturn hit the market; visitor numbers in pubs and clubs have declined and this trend is expected to continue in 2009.

As well as the broader economic climate, the market is affected by growing pressure on consumers to watch their weekly alcohol intake on health grounds. Binge drinking is on the rise, especially among women, and, because of the high alcohol content of many cocktails, it is easy to exceed the recommended safe limits if drinking them.

The high cost of cocktails in the on-trade may also work against the cocktail market if consumers look for cheaper options, such as wine or beer, when enjoying a night out. Many people lack the knowledge and confidence to mix their own cocktails. So if people are choosing to drink at home, they are less likely to reach for the cocktail shaker.

Brands promoting their products as cocktail ingredients include Bacardi, with its recent Mojito ads, and Beefeater gin, which has updated its website to include advice on cocktail mixing.

Despite its place as a cocktail ingredient, gin is viewed by many as an older person's drink and has therefore tended not to appeal to younger drinkers. Men in the 35- to 44-year-old age range, for example, tend to be only occasional premium gin drinkers, according to TGI.

The rise in food-related purchases in the on-trade has also been detrimental to white spirits as they are less likely to be drunk with a meal.

Speciality white spirits such as tequila and sambuca are a much smaller contributor to the sector but have proved buoyant, helped by their premium status and innovation among the category's brands. Similarly it is the premium and super-premium spirits that are currently growing fastest as consumers look for quality ingredients and provenance in goods, although they remain a small part of the market.

New product development has been limited in white spirits. The lion's share of such activity has been in the premium gin segment where botanical infusions have gained ground.

Gordon's leads the gin category, although it has been under increasing pressure from premium brands such as Bombay Sapphire and Tanqueray. Diageo has fought back and invested heavily by aligning with chef Gordon Ramsay in a marketing campaign for Gordon's that has stretched across most media. It has also launched premium variants such as lemongrass and ginger-infused Distiller's Cut.

Bacardi Martini's Bombay Sapphire is one of the fastest-growing brands globally and has boosted gin's appeal among younger drinkers. There are also several niche brands establishing themselves at the premium end of the market such as Hendrick's, a Scottish gin with quirky Victorian-style advertising, Saffron Gin from France and Martin Miller's Gin. Diageo's Jose Cuervo is the leading tequila brand.

Looking ahead, Mintel predicts this market will grow just 1% over the next five years, representing a 12% decline in real value, due to the recession and on-trade performance. By 2013 the gin and white spirits market will be worth £1.22bn. Volume sales will remain largely static but margins will be hit as the price per litre falls; non-premium branded spirits are predicted to be affected the most.

 

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