Spirits: Onwards and Upwards - Onwards and... · 2016-11-25 · Australasia, as well as Asia...
Transcript of Spirits: Onwards and Upwards - Onwards and... · 2016-11-25 · Australasia, as well as Asia...
SPIRITS: ONWARDS AND UPWARDS
September 2013
© Euromonitor International PASSPORT 2 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Disclaimer
Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
companies‟ opinions, reader
discretion is advised.
The prospects for spirits
globally are on the upward
curve, with the category
increasing its share of throat
and spend in the alcoholic
drinks sphere over the 2007-
2017 period. The briefing looks
at why this is happening, and
examines the key dynamics
globally and the opportunities
for growth in both mature and
emerging markets.
Scope
INTRODUCTION
Alcoholic Drinks 2012 251 billion litres
Wine 29 billion litres
Beer 195 billion litres
Spirits 21 billion litres
RTDs/High- Strength Premixes
4 billion litres
Cider/Perry 2 billion litres
© Euromonitor International PASSPORT 3 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
INTRODUCTION
Key findings
Spirits takes greater share
of alcoholic drinks
consumption
Between 2007-2017, spirits‟ share of alcoholic drinks consumption measured
in Litres of Pure Alcohol will increase by 1.5 percentage points to nearly 39%
of all alcoholic drinks consumed globally, and share of spend by 2 percentage
points. This continuous shift is driven primarily by mature markets, as
consumers move away from traditional alcohol products, particularly beer.
Premiumisation goes on Across the globe, consumers are trading up to more premium products, which
in emerging markets includes a shift from domestic products to more premium
international spirits brands. However, in Western Europe, due to the economic
difficulties in some markets, trading down is also apparent.
Asia Pacific and its local
products drive growth
Emerging markets, led by Asia Pacific, are the key growth drivers in many
categories. This includes local spirits such as baijiu, as well as locally
produced products in categories such as rum and whiskies.
Consolidation on hold Following Diageo‟s acquisition spree to rebalance its geographic presence,
further consolidation is likely to be on a smaller scale, as international
companies all wait for the breaking up of Beam. Acquisition activity is likely to
be led by Pernod Ricard, although its debt level prevents action before 2015.
Significant opportunities for
international spirits brands
There are huge opportunities for expansion for international companies in
emerging markets, as growing wealth in these markets makes their products
more affordable. There are also opportunities in mature markets in untapped
markets or new niches, such as super-premium gin.
OVERVIEW
GEOGRAPHIC REVIEW
CORPORATE OVERVIEW
CATEGORY FOCUS
FUTURE PROSPECTS
© Euromonitor International PASSPORT 5 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Between 2007-2012 spirits increased its share of
both throat and spend within the alcoholic drinks
sphere.
In volume terms, based on litres of pure alcohol
(LPA) global consumption of spirits rose by 13% to
8.3 billion LPA, compared to 10% for total alcoholic
drinks. This led to an increase in its share of throat
by nearly a percentage point, to 38%.
The trend was similar in value terms, with
spending on spirits rising by 8% (at constant 2012
prices and fixed exchange rates) to US$433 billion,
compared to total alcoholic drinks growth of just
5%, thus allowing spirits to increase its share of
spend by nearly a percentage point, to 31%.
This shift towards spirits was driven by the mature
markets of Western Europe, North America and
Australasia, as well as Asia Pacific. In the first
three regions, this was due to consumers switching
away from traditional drinks, particularly beer, to
spirits. The opposite trend was seen in strong
spirits consuming markets, such as Eastern
Europe and Latin America, where consumers are
switching away from spirits to beer and wine.
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Cider/Perry
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Spirits increases its share of total alcoholic drinks consumption
OVERVIEW
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© Euromonitor International PASSPORT 6 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
The key growth driver for spirits in both volume
and value terms is Asia Pacific, the world‟s largest
region for spirits consumption. This growth is
driven primarily by China and its local spirit baijiu,
although strong growth has also been seen in India
and the Philippines.
The vast majority of this growth has been driven by
low value local spirits products. This helps explain
why the global constant value growth rate was
lower than volume over 2007-12, as these cheaper
spirits took a greater share of global spirits
volumes, while growth was slower or negative in
the higher value markets of North America,
Western Europe and Australasia.
Growth picked up in volume and value terms in the
latter part of the review period as countries‟
economies recovered from the recession of 2009.
The most dynamic of these regions were Asia
Pacific and the Middle East and Africa, while there
was steady growth in all other regions except
Western Europe, mired in economic difficulties,
and Eastern Europe, which continues to be held
back by the declining Russian vodka market.
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Global Spirits Volume Growth 2007-2012
Volume sales (bn litres) Volume growth (%)
Asia Pacific drives healthy growth
OVERVIEW
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© Euromonitor International PASSPORT 7 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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Global Spirits On- vs Off-Trade Volumes 2007/2012
On-Trade Off-Trade
The off-trade increased its value share by more than three percentage points between 2007-2012, to 46%,
while its volume share increased by only just over a percentage point, to 75%. This was driven by trading
up in emerging markets, as consumers switched from cheaper local brands to more premium brands,
including premium international products such as blended Scotch.
There has also been an accelerated switch from the on- to the off-trade in the high value developed
markets of Western Europe, North America and Australasia. Between 2007-2012, off-trade consumption
increased its share by four, 2.5 and almost one percentage point respectively in these regions. Western
Europe, North America and Australasia accounted for 38% of off-trade value sales globally in 2012, but
only 19% of volume sales. These three regions have been seeing this shift for a while, as consumers
increasingly prefer at-home consumption, and has been exacerbated to varying degrees by a combination
of off-trade price discounting and economic woes.
Consumers still heading to the off-trade
OVERVIEW
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On-Trade Off-Trade
© Euromonitor International PASSPORT 8 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
In both mature and developing markets,
consumers have continued to trade up to higher
value products. This has not just taken place in
terms of switching from local spirits products to
international ones such as blended Scotch, but
also within categories.
In the core 54 markets, which account for 90% of
total volume sales of spirits, the trend has been to
trade up to premium and super-premium products,
with the two segments increasing their shares by
two and 0.5 percentage points, respectively, in
these markets between 2007 and 2012. The same
trend is evident in other categories, such as vodka,
gin, and dark and white rum.
Nor is the trend only evident in international spirits
categories. The same can be seen for the largest
spirits category in the world by volume – Chinese
baijiu – as well as in many of the local spirits
categories in India.
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Chinese Local Spirits (Baijiu) Volume Sales by Price Band 2007/2012
Premium Upper Mid-Range Lower Mid Range Economy
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Other Blended Scotch by Price Band 2007/2012
Super-Premum Premium Standard Economy
Premiumisation drives spirits growth
OVERVIEW
OVERVIEW
GEOGRAPHIC REVIEW
CORPORATE OVERVIEW
CATEGORY FOCUS
FUTURE PROSPECTS
© Euromonitor International PASSPORT 10 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Asia Pacific saw its share of global spirits sales
rise from 48% to 56% in volume terms between
2007-2012 thanks to the region seeing volumes
rise 2.5 times faster than the 12% global volume
growth over the period. This was further aided by
declines in the next three biggest regions in volume
terms (in 2007), Eastern Europe, Latin America
and Western Europe.
Asia Pacific also saw its share of value sales rise
between 2007-2012, by five percentage points, to
38%. The slower increase in share than in volume
due to the dominance in volume growth terms of
cheaper local spirits, notably baijiu in China and
local Indian spirits brands of whisky, rum, vodka
and brandy. The dominance of cheap spirits also
explains why Asia Pacific‟s share is much lower in
value than in volume.
In contrast, due to the more premium nature of the
spirits sold in North America and Western Europe,
these regions accounted for only 19% of global
volume in 2012, but 38% of value.
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Global Spirits Volume Sales by Region 2007/2012
Western Europe
North America
Middle East and Africa
Latin America
Eastern Europe
Australasia
Asia Pacific
Asia Pacific the driving force in spirits
GEOGRAPHIC REVIEW
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Australasia
Asia Pacific
© Euromonitor International PASSPORT 11 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Emerging markets (Asia Pacific minus Japan and
South Korea, Eastern Europe, Latin America, the
Middle East and Africa, and Turkey) have been,
and will continue to be the key growth drivers for
spirits. Sales in developed markets are forecast
grow by 300,000 litres between 2007 and 2017,
while emerging markets will grow by 6 billion litres.
Much of the emerging market growth in volumes
has been, and will continue to be in locally
produced products, such as Indian whiskies, baijiu,
Filipino gin and brandy. However, emerging
markets will also become key growth areas for
international spirits categories and brands.
This can be clearly seen in blended Scotch.
Emerging markets have been the key growth driver
for the category since the mid 2000s. This
continuing and accelerating trend mean that
volume sales in emerging markets will exceed
those in developed ones by 2015.
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Forecast Growth for Blended Scotch Whisky 2012-2017
Developed Emerging Emerging Markets
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Global Spirits Volume Sales Split Developed vs Emerging 2007/2012/2017
Emerging Developed
Emerging markets key growth driver
GEOGRAPHIC REVIEW
© Euromonitor International PASSPORT 12 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Between 2007-2012, spirits consumption fell by an annual average of 3% (395 million litres) in Eastern
Europe and 1% (104 million litres) in Latin America. There have been changing dynamics within the two
regions, with consumers switching from traditional spirits categories, such as vodka in Eastern Europe and
other spirits in Latin America, to international spirits categories, such as Scotch and cognac, as well as to
other alcoholic drinks categories such as beer and wine.
These historic declines will ease between 2012-2017, with the Eastern Europe spirits category declining by
an annual average of only 1% (183 million litres) while Latin America will grow by a 1% CAGR (139 million
litres), due in part to increases in sales of local spirits categories, but also as consumers trade up to
international spirits categories, such as blended Scotch in both regions, and vodka in Latin America
Changing consumption habits in mature emerging markets
GEOGRAPHIC REVIEW
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International Spirits Categories (White Spirits, Whiskies (excl others) and
Cognac) Performance 2007/2012/2017 in Latin America
Volume sales of international spirits categories (mn litres)
% Total regional spirits volumes
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International Spirits Categories (Gin, Rum, Tequila, Whiskies (excl others) and Cognac) Performance 2007/2012/2017
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% Total regional spirits volumes
© Euromonitor International PASSPORT 13 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
The Middle East and Africa remains comfortably the most underdeveloped region in terms of spirits
consumption. In 2012, consumers in the region drank only 0.3 litres per head, or 324,000 litres in total. 43%
of that total was in just one market, South Africa.
Spirits consumption potential is limited. A large proportion of the region, notably most consumers in North
Africa and most of the Middle East, eschew alcohol for religious reasons. There are also other factors
holding back consumption, notably low disposable incomes, combined with high taxes and, perhaps more
importantly, a lack of spirits /cocktail drinking culture, which other emerging market regions have.
However, rising disposable incomes have led many of the major international spirits companies to increase
their investment in the region, especially in sub-Saharan Africa, as they aim to enter the markets at the
beginning. Diageo, with its brewing operations, and South African company Distell are among the most
advanced. However, a large numbers of other companies, led by Pernod Ricard and including Rémy
Cointreau, LVMH, Edrington and William Grant, are all increasing their investment in the region. This
investment, combined with growing wealth, should help spur stronger spirits volume growth in the future.
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Middle East and Africa the underdeveloped spirits region
GEOGRAPHIC REVIEW
© Euromonitor International PASSPORT 14 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Emerging markets offer great volume growth potential over the 2012-2017 period. This is not always the
case in value terms, with growth in a number of these markets driven by cheaper local brands, especially in
vodka in India and Turkey. However, this will gradually change as growing prosperity in these markets
allows consumers to trade up.
A large number of other markets offer growth potential, such as blended Scotch in Poland, South Africa
and China, tequila, cognac and whiskies in Russia, to name but a few.
In addition, there are increasing opportunities in local spirits categories, as consumers trade up, as
witnessed in Campari‟s acquisition of the premium cachaça Sagatiba, in 2011, and Rémy Cointreau‟s joint
venture with the Sula Winery to develop a premium brandy in India.
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Leading Emerging Markets for International Spirits Categories 2012-2017
Volume growth (million litres) % CAGR
Most dynamic markets in emerging countries for international spirits
GEOGRAPHIC REVIEW
© Euromonitor International PASSPORT 15 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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Blended Scotch Forecast Volume Growth (2011)
Blended Scotch Forecast Volume Growth (2013) -
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Blended Scotch Volume Sales in Latin America 2000-2010
While the growth prospects in emerging markets are undoubtedly healthy, there are still numerous risks to growth in these markets, either through changes of government policies or economic conditions.
In China, the decision of the Chinese government to cut back on conspicuous consumption and gift giving in the latter part of 2012 has halved the forecast growth rate from a double digit CAGR to mid single digit growth. Nor is China unique, as legislation passed in Turkey in June 2013 restricting the sale and promotion of alcohol is likely to dampen rates of growth for international spirits categories.
The other major danger is economic turmoil. International spirits brands, while increasingly affordable to consumers, are a discretionary item and thus volumes suffer when turmoil hits. This is what happened to blended Scotch in Latin America during the Argentinean economic crisis of 2001-2002, with volumes not recovering peak until 2005. The region was also impacted by the financial crisis of 2008, but less so, as it was not so exposed (unlike Eastern Europe which suffered a double digit decline in 2009). Nevertheless it saw volume growth slow in 2008, then sales decline slightly in 2009, before returning to healthy growth.
Dangers remain in emerging markets for international spirits
GEOGRAPHIC REVIEW
© Euromonitor International PASSPORT 16 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
While emerging markets offer the greatest growth opportunities, the developed markets of North America,
Western Europe and Australasia still offer scope for growth. Many of the biggest growth markets remain in
the US, but not uniquely, as vodka in both Canada and the UK, offers healthy growth, as does
bourbon/other US whiskey in Germany.
In addition, there are a number of other categories which will perform well in particular markets. These
include single malt Scotch and cognac in the US, Irish whiskey in Germany, Canada and Australia, and
bourbon/other US whiskies in France and Australia
There are also opportunities in categories. This include niches within categories, such as super-premium
English gin, or specific brands in categories, such as in bitters, where brands Aperol and Jägermiester
continue to perform well, despite minimal overall category growth.
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Leading Growth Categories in Developed Markets 2012-2017
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Most dynamic markets in developed markets
GEOGRAPHIC REVIEW
© Euromonitor International PASSPORT 17 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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US vodka has shown the way forward for driving growth in mature markets. The category‟s 5% CAGR (140 million litres) between 2007-2012 would have been smaller if not for new flavours and premiumisation.
Flavoured vodka variants more than doubled their share of the US vodka market between 2007-2012, to reach 26% of volumes, and in 2012 drove category growth, as non-flavoured variants declined. This growth was driven by constant innovation; however, with flavours becoming increasingly extreme this driver might well be reaching its peak.
In terms of sales by price points, there is an element of polarisation, aided by the economic difficulties during the review period. With the economy improving in 2012, premiumisation took hold.
Other categories, such as bourbon/other US whiskey and, more recently, rum have benefited from these innovations in the US but also in other mature markets. Flavours have been particularly successful in bourbon/other US whiskey, as they have encouraged new consumers to enter the category, notably women and younger drinkers.
US vodka, a paradigm for mature market growth
GEOGRAPHIC REVIEW
© Euromonitor International PASSPORT 18 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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Volume Sales of Hendrick‟s Gin 2007-2012
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Companies can generate growth in a mature market either through developing an underdeveloped brand in
a region, or through innovation.
Diageo has had great success in driving sales in Western Europe of the previously rather underdeveloped
Captain Morgan rum brand. Diageo managed to double the brand‟s volumes (15% CAGR) between 2007
and 2012 in a category that was largely static over the same period. Growth was driven by its core UK
market, as well as the previously non-focus markets of Germany, Austria and the Nordic countries.
William Grant has successfully created growth out of a moribund category – gin – by developing a super-
premium gin brand, Hendrick‟s, which has driven the super-premium gin category. Its focus has been on
the three biggest mature gin markets, the US, Spain and the UK, and the brand seen very strong growth
even in recession hit markets such as Spain, through innovative and quirky promotional activity.
Growth in sluggish mature categories
GEOGRAPHIC REVIEW
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© Euromonitor International PASSPORT 19 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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Economy Standard Premium Super-Premium
Economic difficulties in a number of Western European markets have led to falling volumes and consumers trading down in spirits. This has been particularly apparent in the markets of southern Europe.
In Spain, other blended Scotch volumes fell by 32% between 2007 and 2012, while at the same time consumers increasingly traded down, with economy products increasing their share of volumes by over two percentage points.
In Greece, where the economic woes have been deeper and longer, vodka volumes fell by 26% between 2007 and 2012. Economy products more than doubled their share of volume sales to over 23%, primarily at the expense of standard brands.
However, in these and other markets, the scale of trading down has been masked by heavy discounting by retailers and manufacturers. This has been particularly apparent in other blended Scotch in France. Brands which have not discounted heavily (eg Grant‟s) , have seen steep declines in share, while others more prone to discounting, such as Label Five, William Lawson and Clan Campbell, have increased their share.
Western European woes cause trading down
GEOGRAPHIC REVIEW
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Economy Standard Premium Super-Premium
OVERVIEW
REGIONAL FOCUS
CORPORATE OVERVIEW
CATEGORY FOCUS
FUTURE PROSPECTS
© Euromonitor International PASSPORT 21 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
In 2012, Diageo strengthened its position as the
world‟s leading spirits company by volume. This was
through a combination of acquisitions (eg Ypióca)
and organic growth.
UB Group remained second, thanks to its focus on
the Indian spirits market. However, with Diageo‟s
acquisition of the group likely to go ahead, this
position is temporary. This will mean number three
player, Pernod Ricard, will become the second
biggest player, having grown more slowly in previous
years, as growth slowed for a number of its key
brands, such as Ballantine‟s and Havana Club.
Of the remaining top 10 companies, five are local
companies based in Asian markets, whose growth is
dependent on their performance domestically. This
includes new entrant Alliance Global, a Filipino
company whose Emperador brand product has
continued to grow strongly.
The other two international companies, Bacardi and
Beam, saw differing fortunes. Bacardi continued to
stagnate due to still being too focused on developed
markets, while Beam increased its share thanks to
its acquisition of Pinnacle vodka in 2012.
Diageo stretches lead
CORPORATE OVERVIEW
Spirits: Top 10 Global Companies by Volume
2011-2012
Rank Company
2011
% volume
share
2012
% volume
share
1 Diageo 4.6 4.9
2 UB Group 4.6 4.7
3 Pernod
Ricard 4.5 4.5
4 Hite Jinro 2.8 3.0
5 Thai
Beverage 2.6 2.7
6 Bacardi 1.6 1.6
7 Beam 1.3 1.4
8 San Miguel
Brewery 1.3 1.3
9 Alliance
Global 1.1 1.2
10 Lotte
Chilsung 1.2 1.1
© Euromonitor International PASSPORT 22 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
The global spirits industry has continued to become
more consolidated over 2007-2012, despite global
spirits volumes growing by 10% over the same
period.
The top 10 spirits producers accounted for 26% of
global volumes in 2012, up by three percentage
points on 2007. The leading 10 companies grew at
over twice the rate of the market over 2007-2012, at
24%.
Growth has been driven by a mixture of organic
growth and acquisitions. Key acquisitions that have
helped drive consolidation include Pernod Ricard's
purchase of V&S and Diageo's acquisitions of Mey
Içki and Ypióca.
Two of the fastest growing companies organically are
local, Alliance Global (Philippines) and UB Group
(India). Alliance doubled its global share over 2007-
2012, to over 1%.
The market will consolidate further in 2013 or 2014,
with the Diageo acquisition of UB Group‟s spirits
division. Based on 2012 volumes, the share of the
top 10 players will increase by a further percentage
point.
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Spirits: Global Consolidation 2007/2012
Top 10 spirits companies Others
Growing consolidation in spirits
CORPORATE OVERVIEW
© Euromonitor International PASSPORT 23 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Beam Inc is likely to be the next big company that loses
its independence. The publicly listed company is weakly
positioned in terms of geographic spread, as 88% of its
volume sales are in mature markets – a factor
exacerbated by its 2012 acquisition of US-focused
Pinnacle Vodka.
Beam‟s portfolio of brands could be best described as
good in parts. It has some very strong brands which have
good growth potential in core mature, as well as
emerging markets. These brands include Jim Beam,
Sauza Tequila, Teacher‟s, Courvoisier and Maker‟s Mark.
However, the company has a large proportion of brands
which offer at best good routes to market but are
struggling to maintain, let alone increase volumes. These
include a number of local North American vodkas and
bourbon/other US whiskies, as well as a some Spanish
ones, such as Dyc whisky and Larios Gin.
The whole portfolio will be of interest to one or more
parties, with the strong brands of interest to international
players, while even the local low growth ones will offer
opportunities for local and regional players looking to
expand.
Beam Inc: Volume Sales by Brand 2012
Jim Beam
Sauza Tequila
Teacher's
Courvoisier
Other growth brands
Local Low GrowthBrands
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Vo
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Beam Mature vs Emerging Market Volume Split in 2012
Emerging markets Mature markets
Limited portfolio and public listing leaves Beam vulnerable
CORPORATE OVERVIEW
© Euromonitor International PASSPORT 24 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
The Big Two: Diageo and Pernod Ricard
Due to its relative weakness in North America, Pernod Ricard will have the most to gain and least problems
with competition issues with brands such as Jim Beam and Sauza Tequila. The key issue for Pernod Ricard
is its high debt level, which will limit what it could acquire and when.
Diageo, in contrast, is limited by competition problems with Jim Beam in Australia and LVMH in cognac. In
addition, the company is overly focused on mature markets, where Beam is also strong. Anything other
than the acquisition of a small brand, such as Maker‟s Mark, would greatly hinder its target of achieving
50% of its revenues from emerging markets by 2015.
Other Players
While Bacardi is potentially large enough to acquire one of Beam‟s major brands, the company has already
said that it will not be a major player in any Beam acquisition, and will focus instead on picking up some key
brands. Chief amongst these are likely to be Teacher‟s blended Scotch and Courvoisier.
These two brands are expected to be the most heavily fought over, in the case of Teacher‟s due to its
leading positions in blended Scotch in both India and Brazil. Courvoisier offers a rare chance to enter the
consolidated and premium cognac category. Rivals for Bacardi for Teacher‟s could include Campari, while
Brown-Forman and William Grant could compete for Courvoisier.
Companies that could benefit most relative to their sizes are local North American and Spanish companies,
such as Sazerac or Varma, due to the large number of local brands Beam has.
Conclusion: Any movement on the acquisition of Beam is dependent on Pernod Ricard, which will lead any acquisition of the company. However, with its very high levels of debt, the French company has stated it will not make a major acquisition until 2015.
Pernod Ricard the most likely to benefit from any Beam break-up
CORPORATE OVERVIEW
© Euromonitor International PASSPORT 25 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Following its acquisitive phase, and with Grupo Cuervo negotiations broken off, Diageo‟s M&A activity is
likely to be at an end for the foreseeable future, as it looks to get to grips with its acquisitions. This is
especially the case with United Spirits, which it will control in de facto terms due to its dominance of the
board even if not in actual holding of equity.
Small bolt-on acquisitions
Most, if not all international companies are waiting for the Beam break-up to happen. As that will be reliant
on Pernod Ricard making the first move, and its focus on paying down debt until 2015, most M&A activity is
likely to be small scale, with companies making bolt-on acquisitions, such as Bacardi‟s acquisition of the US
focused St-Germain liqueur, or acquiring smaller companies in particular categories to boost production
capacity, as Rémy Cointreau did in acquiring Larsen Cognac.
Additionally, there are still the opportunities to pick up assets from companies brought down by the
economic crisis – Belvedere and CL WorldBrands. The latter has already sold its rum operations, Wray &
Nephew, to Campari, and Distell has picked up the Scotch whisky division Burns Stewart. This leaves the
Hine cognac brand, which could appeal to existing cognac producers to boost production capacity, or give
smaller international companies, such as Edrington or William Grant, an opportunity to enter the category.
Belvedere, with its focus on the Polish and French markets, is of less appeal to companies, except those
looking to get a route into those markets. One exception might be its international brand Sobieski vodka.
Another opportunity could be United Spirits‟ Whyte & Mackay Scotch whisky operations. When Diageo
gains complete control of United Spirits, it would have 56% of all Scotch grain whisky production and 35%
of malt whisky production, and thus will at least have to sell the Whyte & Mackay‟s grain distillery, which
would offer opportunities for smaller producers in the category, such as Pernod Ricard, Campari and
Bacardi, to enhance their capacity.
Local and regional M&A focus for near future
CORPORATE OVERVIEW
OVERVIEW
REGIONAL FOCUS
CORPORATE OVERVIEW
CATEGORY FOCUS
FUTURE PROSPECTS
© Euromonitor International PASSPORT 27 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Other spirits, a category that consists of local
spirits products such as baijiu, cachaça and anis,
continued to be the key volume growth driver
between 2007-2012, with baijiu in China being the
key factor in this growth. Many other categories
within other spirits, such as cachaça, anis and
pisco, suffered a decline as consumers switched
away from them to international spirits products or
to other alcoholic drinks, such as beer.
Cheaper local brands are also the main volume
growth drivers in other fast growing categories,
such as whiskies (Indian whisky), brandy and rum,
alongside more premium international products,
especially in whiskies.
It is the more premium international brands that
lead to whiskies, in particular, having a far bigger
value share of global sales than in volume terms.
Conversely, due to their local generally low value
character, other spirits have a lower value share
than volume.
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Global Spirits Volume Sales by Category 2007/2012
Brandy and cognac
Liqueurs
Rum
Tequila (and mezcal)
Whiskies
White spirits
Other spirits
Other spirits drive volume but not value growth
CATEGORY FOCUS
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Global Spirits Value Sales by Category 2007/2012
Brandy and cognac
Liqueurs
Rum
Tequila (mezcal)
Whiskies
White spirits
Other spirits
© Euromonitor International PASSPORT 28 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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Brazil: Other Whiskies Volume Sales 20007/2012/2017
Other whiskies accounted for more than half the
2.9 billion litres of whiskies sold in 2012. Other
whiskies are cheaper locally produced whiskies.
Sales are dominated by India, which will continue
to see rapid growth.
Indian whiskies benefit from a tradition of spirits
and whisky drinking, Rising disposable incomes
are allowing Indians trade up from illegal “country
liquor” to local brands, as well as more premium
products in the category.
Indian whisky also benefits from the high tariffs on
imported whiskies, notably Scotch, which makes
these products unaffordable to most Indians.
In other markets where disposable incomes have
risen, these local whiskies have suffered declines
as consumers use their extra spending power to
buy more premium international brands and have
thus traded up and out of the category. This has
been particularly noticeable in Brazil, where
volumes fell by other 30% between 2007 and 2012,
and will stagnate during the forecast period.
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India: Whisky Volume Sales 2007/2012/2017
Other whisky: Mixed prospects
CATEGORY FOCUS
© Euromonitor International PASSPORT 29 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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Mexico Russia Brazil India SouthAfrica
Poland France
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Leading Growth Markets for Blended Scotch 2012-2017
Volume growth 2012-2017 % CAGR
Both blended and single malt Scotch are expected to continue to see growth over 2012-2017. Single malts
are expected to grow by a 2% CAGR (4.7 million litres) and blended Scotch to by a 3% CAGR (115 million
litres). The two categories have slightly different dynamics.
Blended Scotch growth is being driven almost entirely by emerging markets, led by Mexico and Russia, as
aspirational consumers look to trade up to premium international spirits. These markets are driven primarily
by economy products (using malt Scotch aged 3-5 years) and standard products (malt whisky aged 8+
years). These products are also the key growth driver in France.
Single malt Scotch has a broader growth base, with mature markets, led by the US, Canada and Australia,
being key growth drivers, benefiting from consumers willingness to trade up to more premium products.
However, emerging markets are also contributing, as wealthier consumers trade up.
Booming Scotch
CATEGORY FOCUS
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US Taiwan Canada China Russia Australia
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Leading Growth Markets for Single Malt Scotch 2012-2017
Volume growth 2012-2017 % CAGR
© Euromonitor International PASSPORT 30 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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2005 2009 2012
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Malt Whisky Production Capacity 2005-2012
Malt Whisky Production Capacity to be added2013+
Malt Whisky Distlling Capacity
Source: Malt Whisky Yearbooks, various, and desk
research
The strong outlook for both blended and single malt Scotch products has led to companies investing heavily in boosting production capacity. This has taken a number of different forms, from increasing production capacity at existing distilleries (Pernod‟s Glenlivet in 2011), re-opening mothballed ones (eg Pernod Ricard reopening Glen Keith in 2013) and building new ones (Diageo at Roseisle in 2007).
There is also further unspecified capacity, not included on this chart, which will come on line, with Edrington in its 2013 results announcing plans to increase capacity in the next few years, while Pernod has a new distillery planned at its existing Imperial distillery site.
However, it should be noted that due to the long lead times, most of the extra liquid produced will not be available during the forecast period. For example, the malt whisky produced in 2005 will not be able to be used in single malts or premium blended Scotch until 2017, while the same applies to the malt whisky produced in 2009 for standard blended Scotch.
Due to the long lead times, though producers will be increasingly well positioned in the medium to long term, in the short term they are struggling for enough liquid to meet demand. This has led to rationing of Scotch, with Edrington producing non-aged statements on its Macallan brand ie allowing it to use Scotch of any age, and producers pulling out of blended malt Scotch, led by Diageo withdrawing its Johnnie Walker Green Label brand in all markets bar Taiwan.
Supply struggling to keep up with demand for Scotch
CATEGORY FOCUS
© Euromonitor International PASSPORT 31 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Bourbon/other US whiskey continues to be centred on domestic sales. In 2007, 70% of the category‟s global volumes were sold in the US. This is predicted to decrease slightly by 2017, to 66%.
One reason for the slow internationalisation of the category has been the almost continuous growth of sales in the US, where growth is being driven by premium small batch products, led by Beam‟s Maker‟s Mark, and flavoured variants, led by Beam‟s Red Stag, which has attracted younger and women drinkers.
The key players, Brown-Forman and Beam, have historically tended to ignore international markets by; however, this has changed since 2007, with Brown-Forman being particularly ambitious in pushing into new markets, especially since 2009, when it set up its own distribution operations in Russia and Brazil.
The strong domestic focus also means that there is still potential in markets that would in general be perceived as mature, such as Germany, as well as a plethora of emerging markets.
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2007 2012 2017
Vo
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Global Bourbon/Other US Whiskey Volumes 2007/2012/2017
Rest of the World US
Bourbon/other US whiskey becoming more global
CATEGORY FOCUS
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Bourbon/Other US Whiskey: Fastest Growing Markets by Volume 2012-2017
Volume growth 2012-2017 % CAGR 2012-2017
© Euromonitor International PASSPORT 32 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Excluding other/Indian whisky, Irish whiskey saw the fastest rate of volume growth of all whisky categories between 2007 and 2012, with a 7% CAGR, and is forecast an 8% CAGR between 2012 and 2017, making it the fastest growing whisky and spirits category globally.
Growth will continue to be driven by the US. One brand, Pernod Ricard‟s Jameson, accounted for 62% of global volumes in 2012. In most markets, Jameson is the leading if not the dominant brand, having had the benefit of first mover advantage, strong promotional support and a lack of well-resourced competitors. Thus in many countries, Irish whiskey is synonymous with Jameson. There are some notable exceptions where Tullamore Dew gained first mover advantage in markets Pernod did not focus on, such as Germany, Denmark and Latvia, and it is the dominant brand as a consequence.
Pernod Ricard, with Jameson, is in the best position for growth, but with other well-resourced owners now focusing on the category – William Grant, with the world number two brand Tullamore Dew, and Diageo, with Bushmills, the number three brand – it will be interesting to see if they can take share, especially in less established markets, such as Russia, Poland and Mexico.
First mover advantage key to growth prospects in Irish whiskey
CATEGORY FOCUS
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Denmark Poland Latvia
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Irish Whiskey: Fastest Growing Markets by Volume 2012-2017
Volume growth 2012-2017 % Volume share of leading brand
© Euromonitor International PASSPORT 33 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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2011 2012 2013 2014 2015 2016 2017
Vo
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Projected Growth of Canadian Whisky Globally 2011-2017
2011 Forecast 2013 Forecast
Flavour Launches Vitalise Canadian Whisky
Canadian whisky, nearly 95% of which was consumed in North America in 2012, has suffered for a number of years from maturity in its core markets and a low value image.
The category‟s prospects have improved greatly through both Diageo and Constellation Brands launching flavoured variants of their Crown Royal and Black Velvet brands in 2012. Brown-Forman joined them with four Canadian Mist variants in mid 2013 and more are expected, which should mean the category maintains growth.
Short Highball Boost for Japanese Whisky
Japanese whisky volumes are very reliant on domestic sales, which until 2008 were static. Then, helped by recession conditions, the category benefited from the popularity of the 1950s austerity themed highball cocktail, which boosted the category‟s volumes in 2009 and 2010, before consumers moved onto using other whisky categories in 2011. Volumes will remain stagnant to 2017, meaning producers should focus more on exports of premium single malt variants. 0
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Japanese Whisky Sales in Japan 2007-2012/2017
Revitalised stagnant whisky categories
CATEGORY FOCUS
© Euromonitor International PASSPORT 34 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Following a decline in volumes during the 2009
recession, the outlook for cognac is healthy, with the
category expected to see a volume CAGR of 6% (34
million litres) between 2012 and 2017. Most of the major
companies have been making plans to meet rising
demand by boosting production capacity, eg Rémy
Cointreau‟s acquisition of Larsen in 2012. This was
followed by Pernod Ricard‟s acquisition of Le Maine au
Bois, an independent cognac producer, and LVMH‟s
announcing a new bottling plant in the first half of 2013 –
the latest stage in its bid to double capacity by 2025-30.
However, growth is very reliant on just one market,
China. Category potential is huge in China and the
effects of the crackdown on conspicuous consumption
will have little impact on cognac (unlike Scotch) due to its
established nature. However, if things were to go wrong,
it would leave producers highly vulnerable.
While markets such as Nigeria and Vietnam are
expected to grow rapidly to 2017 and will move into the
top 10 markets, many of the leading markets will still be
declining Western European markets. Cognac producers
thus need to do more to develop the category in new
markets. -
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2007 2012 2017
Vo
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Cognac Volume Sales 2007/2012/2017
ROW
Malaysia
Finland
Norway
Taiwan
Russia
France
Germany
UK
China
US
Cognac‟s reliance on China
CATEGORY FOCUS
© Euromonitor International PASSPORT 35 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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Brandy Volume Sales 2007/2012/2017
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Emperador Brandy Volume Sales 2007-2012
Brandy is an intrinsically local product, with no global brands and few regional ones. Volumes are
dominated by cheap local products in both mature and emerging markets. Mature markets are struggling
for growth, as the category is often perceived as being old fashioned. It is the emerging markets that are
driving growth, led by India, in particular South India. Volumes grew particularly strongly in the country in
2012 as consumers switched over from rum.
The Philippines will continue to be the other key growth engine, driven by the world‟s leading brand,
Emperador, from the Philippines. The brand has benefited from strong economic growth and a number of
elections (drinks are offered to voters at rallies to persuade them to attend), as well as strong innovation
and marketing activity for the brand, with a key factor being the launch of a light variant in late 2010. This
allowed it to more than triple its volumes between 2007-2012, and increase its share to 72%.
There are, however, signs of more premium products coming into markets, especially in India, where
United Spirits launched a VSOP variant of the McDowell‟s brand in 2009, and, more recently, Rémy
Cointreau signing a joint venture with Sula Wineries in 2012 to starting producing local premium brandies.
Local products rule in brandy
CATEGORY FOCUS
© Euromonitor International PASSPORT 36 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Between 2007-2012, vodka saw volume growth in six out of seven regions globally, a trend that is expected
to continue in the 2012-2017 period. The only region seeing a decline was Eastern Europe, particularly
Russia. In Eastern Europe, the category suffers from being the traditional spirit and, more importantly,
alcoholic drink, which consumers have moved away from.
Vodka‟s broad geographic growth is due its mixability and popularity across most demographics, especially
women and younger drinkers.
Another noticeable trend between 2007 and 2012 was trading up. Across Euromonitor International‟s 54
core markets, economy products saw their share of volumes fall by four percentage points, to 39%. This
was primarily to the benefit of standard brands, but both premium and super-premium products increased
their combined volume share by over a percentage point, to 18%.
Volume sales in the mature regions will growth at a slower rate between 2012 and 2017, than between
2007 and 2012, as the category matures in these markets.
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Volume Sales of Vodka by Region 2007/2012 and 2012/2017
2007-2012 Volume growth 2012-2017 Volume growth
Vodka‟s global appeal
CATEGORY FOCUS
© Euromonitor International PASSPORT 37 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Gin Volumes Sales by Geography in 2012
Philippines
USA
Spain
United Kingdom
India
Netherlands
ROW
The 560 million litre global gin market continued to be dominated in 2012 by the Philippines, with its local
economy focused Dutch style San Miguel dominating the category. The Philippines will be the key growth
driver of the category in volume terms, but offers little opportunities for outside players.
It is the world‟s next three biggest markets, the US, Spain and the UK, where there is great interest lies, in
what previously was a declining category. Since 2009, these markets have seen rapid growth in premium
and super-premium products, which has helped gin in these markets return to growth, particularly in Spain
and the UK. The key driver within these markets has been William Grant‟s Hendrick‟s brand, alongside
premium and super-premium variants of major brands such as Diageo‟s Tanqueray and Pernod‟s
Beefeater, as well as a plethora of small boutique brands.
Super-premium and premium products are also increasingly being seeded in new markets with little
tradition of gin consumption, such as in Western Europe and Asia, with the focus being on the products
being premium or super-premium white spirits rather than being gins specifically, and thus potentially
broadening the category‟s limited geographic spread.
Premiumisation drives key gin markets
CATEGORY FOCUS
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US, Spain and UK: Gin Volume Sales by Price Band 2007-2012
Economy Standard Premium Super-Premium
© Euromonitor International PASSPORT 38 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Dark rum the universal growth driver
CATEGORY FOCUS
Between 2007 and 2012, rum growth was driven by dark
rum, and this is predicted to continue over the forecast
period. In 2012, dark rum accounted for 72% of global
volumes, a share that is predicted to rise by a
percentage point by 2017.
The key growth driver for the category continues to be
Asia-Pacific – in particular India and, to a lesser extent,
the Philippines. Here, cheap local brands (McDowell‟s in
India and Tanduay in the Philippines) drive growth.
Growth in dark rum is less strong in mature markets,
held back in part by maturity and decline in certain key
markets, such as Spain and Australia. However, there
are opportunities to grow with spiced and flavoured
variants. This is particularly the case in the US, where
brands such as Sailor Jerry, Admiral Nelson and the
Bacardi Oakheart variant have grown well.
Flavoured variants are also helping drive growth in white
rum in North America (Cruzan Rum), where, as a whole,
the category suffers from its over-reliance on Bacardi‟s
eponymous brand, which has reached maturity. The
category also suffers from its maturity in its largest
regional market, Latin America, where, as a traditional
product, it offers little growth potential.
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Rum Volume Sales 2007/2012/2017
White Rum Dark Rum
© Euromonitor International PASSPORT 39 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Tequila (and mezcal) continues to still suffer from its reliance on its domestic Mexican and the US market. In 2012, 86% of the category‟s volumes were sold in these two markets, and will account for 79% of the 28 million litres category growth between 2012 and 2017. The category suffers in part from a lack of major global players willing to push sales. Categories such as tequila need the backing of big players to help educate consumers in new markets not used to such products to start drinking them.
This has been exacerbated by the breaking off of negotiations between Grupo Cuervo – owner of the world‟s leading brand, José Cuervo – and Diageo, in which the British company hoped to buy at least an equity stake. Instead of having the world‟s leading company as José Cuervo‟s distributor in most markets, Grupo Cuervo will rely on generally weaker players. With the world‟s number two brand, Sauza, owned by the narrowly geographically focused Beam, prospects remain bleak for volume growth.
Value growth still offers potential, especially in the US, with the continued strong performance of super-premium brands, such as Patron, but also more internationally, with the emergence of mezcal. Still very much a niche segment in volume terms it is becoming increasingly fashionable in cities around the world such as New York and London.
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Tequila (Mezcal): Leading Growth Markets by Volume 2012-2017
Volume growth % CAGR
Tequila (and mezcal) still too local for its own good
CATEGORY FOCUS
© Euromonitor International PASSPORT 40 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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Liqueur Volumes by Category 2007/2012/2017
Other Liqueurs Cream-based Liqueurs Bitters
Global Consolidation of Liqueurs in 2012 (% Volume Share)
Top 5 Brands
Brands 5-10
Other Brands
Of the three liqueur categories, only bitters will see its volumes in 2017 exceed those of 2007. Globally,
liqueurs suffers from its overreliance on mature markets, which in 2012 accounted for over 70% of global
volumes. Sales in mature markets continue to suffer from the current tough economic conditions in these
regions.
Additionally, liqueurs is a fragmented category, thus growth relies on the performance of individual brands
in individual markets. This partly explains the stronger performance of bitters which is more consolidated,
with the top five brands accounting for 44% of category volumes in 2012 (compared to 21% for total
liqueurs) but also because it has a number of brands, led by Jägermeister, the world‟s largest liqueur, along
with Fernet Branca and Aperol, which have managed to see strong growth by developing appealing unique
selling points (Jägerbombs, Aperol Spritz) in a number of markets and have seen rapid growth.
In contrast, in other liqueurs (De Kuyper, Southern Comfort) and in cream-based liqueurs (Baileys), a
number of the key brands are mature and lack new growth markets.
Brands the key in liqueurs
CATEGORY FOCUS
© Euromonitor International PASSPORT 41 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Diageo‟s Baileys held 43% of global cream-based
liqueurs sales in 2012, thus its performance greatly
impacts overall category performance. This is
especially so in cream-based liqueurs, as this is a
novel concept in new markets and thus it takes time
to educate consumers. The next largest players,
Distell (Amarula) and Campari (Carolan‟s) could help,
but both companies lack Diageo‟s resources for such
activity.
Diageo, historically, has pushed growth for the brand
by focusing on a number of core markets: the US,
UK, Canada, Germany and Spain. This was generally
to the detriment of developing other markets. As a
consequence, once its core markets had matured in
the early years of the review period, the brand, and
thus the category, suffered declines.
Since around 2008, Diageo has started to develop
new markets, notably China and Russia, with some
success. However, their relatively small size means
that while their growth prospects are bright, they will
not compensate for the declines in core markets for
the foreseeable future.
Cream-based liqueurs struggling for growth
CATEGORY FOCUS
-
10
20
30
40
50
60
2007 2012
To
tal vo
lum
e s
ale
s (
mn
litre
s)
Baileys Volume Sales 2007/2012
ROW
Spain
Italy
Germany
Canada
UK
US
0
2
4
6
8
10
12
14
0
500
1,000
1,500
2,000
2,500
SouthAfrica
US Colombia China Russia
% C
AG
R 2
01
2-2
01
7
To
tal vo
lum
e g
row
th (
'00
0 litre
s)
Cream-Based Liqueurs: Fastest Growing Markets by Volume 2012-2017
Volume growth % CAGR
© Euromonitor International PASSPORT 42 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Other spirits consists of a broad variety of local
spirits, particular to a specific country or region. As
a consequence, they are reliant on those markets
for growth.
Due to the maturity of other spirits types in their
respective countries or regions, and consumers‟
increasing ability to trade up to international spirits,
many of these markets offer little growth potential.
This is the case for cachaça, aniseed flavoured
spirits and shochu/soju. These categories‟ core
markets – Brazil, France and Turkey, and Japan
and South Korea, respectively – have reached
maturity.
While cachaça does have a presence in some
markets outside Brazil, notably Germany, its
volumes outside its core market cannot make up
for domestic maturity.
In contrast, products such as baijiu and
aguardente have seen good growth, and are
expected to continue to do so. This due to the
relatively under-developed nature of the market in
the core countries, as more consumers are able to
afford these products.
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2007 2012 2017
Vo
lum
e s
ale
s (
mn
litre
s)
Other Spirits Volumes by Key Categories 2012/2017
Others Aguardente/Aguardiente
Aniseed flavoured products Cachaça
Shochu/Soju Baijiu
Eclectic mix in other spirits still offers growth
CATEGORY FOCUS
OVERVIEW
REGIONAL FOCUS
CORPORATE OVERVIEW
CATEGORY FOCUS
FUTURE PROSPECTS
© Euromonitor International PASSPORT 44 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Between 2012-2017, spirits will continue to increase its share of both throat and spend within the alcoholic drinks market.
In volume terms, based on LPA, global consumption of spirits will rise by 18% to 9.8 billion LPA, compared to 15% for total alcoholic drinks. This will lead to it increasing its share of throat by a further percentage point, to 39%.
The trend will be similar in value sales, although less pronounced, with spending on spirits rising by 22% to US$528 billion, compared to total market growth of just 17%, thus allowing spirits to increase its share of spend marginally, to 31%, with it the only alcoholic drinks category to see an increase in share.
As in the review period, the shift towards spirits will be driven by the mature markets of Western Europe, North America and Australasia, as drinkers continue to move away from traditional alcohol products, predominantly beer but also wine in Western Europe. This trend away from traditional alcohol products will continue to hamper spirits growth in Latin America and Eastern Europe, although, as in all emerging market, the shift to more premium international spirits brands will grow in significance
-
5
10
15
20
25
30
2012 2017
Vo
lum
e s
ale
s (
LP
A b
n)
Global Volume Sales of Alcohol by Category 2012/2017
Wine
Spirits
RTDs/HighStrength Premixes
Cider/Perry
Beer
Spirits‟ upward trend expected to continue
FUTURE PROSPECTS
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2012 2017
Va
lue
sa
les (
US
$ b
n)
Global Value Sales of Alcohol by Category 2012/2017
Wine
Spirits
RTDs/HighStrength Premixes
Cider/Perry
Beer
© Euromonitor International PASSPORT 45 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Spirits‟ 3% CAGR (3.7 billion litres) between 2012-2017
will continue to be driven by Asia Pacific and, within that,
cheaper local spirits, led by baijiu, but also local
offerings in categories such as whiskies, rum and
brandy.
Within these categories, consumers will continue to
trade up, with value sales expected to rise by a 4%
CAGR (US$94 billion). This will take place not only in
emerging, but also mature markets.
Within mature markets, growth will be driven by North
America and Australasia, as consumers continue to
trade up. Economic troubles and changing consuming
habits in Western Europe will lead to value sales falling
faster than volume.
Within emerging markets growth will be aided by trading
up to more premium local brands, as well as to
international brands and categories. As has been seen
historically, with the Latin American crisis in the early
part of the century and, more recently, with changes in
government policies in China and Turkey, these
prospects can change rapidly. However, as quickly as
these prospects darken, they can also equally brighten,
and the long-term outlook in these markets is positive.
0
5
10
15
20
25
30
2012 2017
Vo
lum
e s
ale
s (
bill
ion
litre
s)
Global Spirits Volume Sales by Region 2012/2017
Western Europe
North America
Middle East andAfricaLatin America
Eastern Europe
Australasia
Asia Pacific
Emerging markets lead the way
FUTURE PROSPECTS
-
5
10
15
20
25
30
2012 2017
Vo
lum
e s
ale
s (
bill
ion
litre
s)
Global Spirits Volume Sales by Category 2012/2017
Brandy and Cognac
Liqueurs
Rum
Tequila (Mezcal)
Whiskies
White Spirits
Other Spirits
© Euromonitor International PASSPORT 46 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
Litres of Pure Alcohol (LPA): A method of measuring alcohol consumption taking into account the alcohol
content of each product, regardless of the number of litres of liquid consumed. To convert the various
categories of alcohol into LPA the following measurements have been used:
Beer, cider/perry, RTD/High Strength Premixes: 20 litres of beer etc = 1 LPA
Spirits: 2.5 litres of spirits = 1 LPA
Wine: 8 litres of wine = 1 LPA
Value Sales: All figures for value sales are shown in US dollars at constant 2012 prices and at fixed
exchange rates.
Mature or Developed Markets: North America, Western Europe (excluding Turkey), Australasia, Japan and
South Korea
Emerging Markets: Asia Pacific (excluding Japan and South Korea), Latin America, Eastern Europe, Middle
East and Africa and Turkey
Definitions
REPORT DEFINITIONS
© Euromonitor International PASSPORT 47 ALCOHOLIC DRINKS: SPIRITS – ONWARDS AND UPWARDS
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