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Loading...By Matt Dunn, co-founder of Cadello
Across the food and beverage sector, there has been a clear trend towards higher-quality products over the past 15 years or so. In an effort to differentiate, food and drink manufacturers have been carving out niches for very specific, high-quality product ranges. From botanical health drinks to all-natural pork scratchings, the range and quality of products have been steadily increasing.
In the alcoholic drinks market, the shift towards more diversified and premium drinks has been most notable when it comes to beer and gin but is starting to be recognized in other categories, such as rum, as well as driving entirely new categories of spirits. Alcoholic drinks manufacturers and retailers need to be ready to jump on these trends in the near future or risk becoming obsolete.
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Here are five of the most important trends in the alcoholic drinks market and what they mean for manufacturers and retailers.
Unique and Hand-crafted
The incredible growth of craft beer looks set to stay for the foreseeable future. According to LEK Consulting, the value of the US 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.
This new wave of craft beer has triggered a focus on quality in the spirits industry. Gin, in particular, has seen enormous growth, led by brands such as Hendricks, Gin Mare and Monkey 47.
We are now seeing all types of craft spirits on shelves everywhere, with wide-ranging experimentation with different flavors, 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.
Typically, to be 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.
Distillers are ever more challenged to find ways to continue to diversify their offerings, including providing exclusive and limited small-batch products, to keep things interesting.
Cocktails Are Shaking Things Up
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 Insta-worthy drink to share on social media, and the trend towards luxury and indulgence, which we will discuss below.
Boundary-breaking Categories
The Spirits Business, in its 2019 spirit trends forecast, predicted 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 Italicus, an Italian liqueur that has also seen rapid growth since it launched two years ago.
Another is Cadello, a unique liquor that blends no less than eight ingredients, including star anise, mint, hazelnut, and coffee. 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.
These brand-new luxury players in the market are appealing to the rising demand for something new, unique and high quality. Alcoholic drinks manufacturers need to start thinking outside the limitations of traditional drinks categories in the hunt for something new, unique and exciting if they are to stay relevant.
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 18-34-year-olds.
In response to this changing trend, brands have switched their focus to higher and higher quality and differentiation, particularly in mature markets. Pricing strategies also need to reflect this change, ensuring that, despite less alcohol being purchased and drunk, revenues are still looking healthy.
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 enjoy the highest quality drinks at home, without paying the additional markup to go to a fancy bar.
The increase in the availability of homebrew and botanical kits, consumers are doing more to discover what flavors they like and educate themselves on complementary ingredients and mixers.
To summarise, the focus on high-quality, ‘craft’ alcoholic drinks is still the key driver in the market. However, the effect of this craft focus is a search for the new and unique. Whether it’s one of a kind cocktails, new categories, or homebrewed beers and spirits ‒ less is more, as long as it’s a bit different yet high quality.
Manufacturers, especially small, challenger brands, have a singular opportunity to break into an ancient and established market with something that is truly special and which appeals to a generation that drinks to remember, not to forget!
Matt Dunn is co-founder of Cadello, a new, category-defining spirit produced by a 150-year old family-owned distillery in Italy. A unique flavor combining eight ingredients, Cadello is perfect served neat or in cocktails.
The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer or company.
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