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While a great number of sectors in the food and drink market has felt the impact of the Covid pandemic, arguably few were hit quite as hard as the spirits category. With pubs and bars being closed the hospitality industry got a kick in the shins that it’s only now recovering from, while retailers revelled in the rush of customers looking to create their favourite tipples at home. New formats such as DIY cocktail letterbox kits and monthly memberships blossomed, and some could opine that the ready-to-drink (RTD) sector got a boost too.
Bringing the party home
A newfound thirst for knowledge from discerning customers was a boon for independents and producers of quality spirits alike. “Consumers displayed an insatiable thirst for drinks education and information during the lockdown period, emerging with an appetite for more premium spirits, exciting mixers and a willingness to mix drinks at home,” Nick Gillett, managing director of Mangrove UK observed.
Indeed, according to Sam Jeveons, co-founder of Indonesian rum brand Nusa Cana, the pandemic has raised the bar when it comes to entertaining at home. “Consumers are taking on the knowledge they learned in lockdown, via at-home tastings, tutorials, Instagram Lives and YouTube videos, and are now sharing it with friends and family – there is a real buzz around making and sharing drinks together.” In fact, the very nature of at-home drinking has evolved over the past couple of years, he says. “At-home drinking is evolving from learning and preparing at home for the household to hosting and sharing those drinks, through to hybrid nights with drinks in the home before heading out to a venue.”
It’s not only knowledge around how to serve drinks that shoppers are thirsty for in 2022; it’s the story behind the products themselves, too. “Customers are more conscious than ever of what they are consuming. We are often asked ‘How is it made?’, ‘What’s the origin of the drink?’, ‘Are the ingredients sustainably sourced?’,” says Isabelle Hefford, founder of Drift Drinks. “Consumers want and deserve transparency.”
Global pressures impact spirits sector
Of course, there are wider-reaching forces at play when it comes to the recent reshaping of the spirits sector. “There’s no doubt that global pressures and the pandemic have drastically altered the landscape of the spirits industry in terms of supply, innovation and pricing,” says Nick. While undoubtedly presenting a challenge to producers and distributors, this could lead to a subtle benefit for indie retailers if they choose to focus on smaller-scale and local spirits producers. “We are seeing the inevitable increase in prices as the costs spiral in the supply chain,” he continues. “At the very least this will cause an evaluation of long held consumer price points but also offer a far wider range of quality products from local producers who may not incur some of the larger shipping increases, for example. “Supply disruptions mean that independent retailers may not be able to offer their customers consistent stock levels which provides an opportunity to educate consumers potentially looking to trade up.”
What to invest in now
Gin has ruled drinks cabinets across the UK for years, and while quality gin – especially those boasting interesting stories and combinations of botanicals – will always have a place in the discerning drinker’s arsenal, there are other categories now coming to the fore.
“Gin has enjoyed a meteoric rise in recent years, however, 2021 saw volume sales slip,” explains Alice Baker, senior research analyst at Mintel. “This was mainly due to the steep fall in on-trade sales in the first half of the year due to the closure of the hospitality sector. Also, as with RTDs, poor weather in spring/summer 2021 reduced drinking occasions for gin.”
“We are seeing consumers switch to alternative categories such as rum, Mezcal and tequila,” explains Nick. “Sales of all variants of tequila are through the roof, with premium and prestige tequilas leading the way, but I think the flavoured tequila market might be poised to explode.”
According to Dawn Davies, head buyer at The Whisky Exchange, “rum, Mezcal and whisky are the hot tickets at the moment,” but she advises that “any independent retailer should look at balance in their range and what their customers are looking for depending on where they are.”
Perhaps unsurprisingly, the weather plays a role in the spirits-shopping habits of consumers. “White spirits have a strong bias in their usage towards the warmer months, while 65% of category drinkers/buyers drink white spirits/RTDs more in the summer than in the winter,” explains Alice.
The rise of ready-to-drink
RTD has been a success story of the past couple of years, and as consumers are getting out and about – and taking their food and drink with them – it’s another area of the sector worth spending time exploring.
“RTDs continued their strong growth in 2021, outperforming all other segments in terms of percentage growth with the exception of tequila/mezcal,” begins Mintel’s Alice. “The rise of the RTD sector is fast and furious,” agrees Nick, “and as one of the fastest growing alcohol categories this isn’t going to stop. The original RTD experience was one of mass production of cheap and cheerful products, but with the rapid expansion in the category there is now a polarising effect, with some pre-batch high quality cocktails being created at one end and at the other a more fun approach.”
The lower unit price and alcohol levels are aiding sales of RTD products, according to Alice. “Consumers are economising during the ongoing period of inflation and income squeeze, and there is also a consumer trend towards alcohol moderation, hence RTDs’ future market share is expected to increase in the coming years,” she says.
Helpfully, the move towards RTD fits neatly with another growing segment: low/no alcohol drinks. “There are lots more RTDs in the alcohol-free space and they are really popular, especially for summer picnics and parties,” begins Laura Willoughby MBE, founder of Club Soda. “They are also a great introduction for many people new to alcohol-free drinks. Providing a range of pre-mixed cocktails, perfect serves and even sparkling wines makes it easier to accommodate for everyone at party at a reasonable price point and they are really easy to pick up from the fridge on the go.”
The future of spirits and mixers
Quality is king when it comes to consumers’ thirst for spirits and mixers going forward, with one in three (33%) consumers regarding high quality ingredients as a key attribute for white spirits, and 79% of RTD drinkers/buyers choosing a pre-mixed alcoholic drink made with a high quality mixer over a low quality one according to Mintel.
While ‘normality’ may have returned, some pandemic-era trends are sticking fast. “At-home mixology has proven popular, with 29% of people reporting to make cocktails at home more often now than before the outbreak,” says Alice.
Another Covid trend set to stay the course is the heightened desire for drinks which benefit individuals’ health – both physical and mental. “As consumers are becoming more aware of their physical and mental health needs, they are keen to find products that balance this with their desire for complex flavour experiences,” says Gareth Bath, managing director of Distill Ventures. “It’s a nascent space, but functional drinks could have the potential to meet this demand and shift the non-alc space into all areas of consumers’ lifestyles.”
For Dawn, a bit of creativity is necessarily on the cards for the spirits and mixers market. “Mixers need to evolve away from being reliant on the G&T serve which many are starting to do; they need to evolve. The spirits category needs to go back to focusing on quality and condensing ranges, not releasing 100 flavours or styles but doing core well. This is generally a very exciting time to be in spirits!”
Low ABV, high opportunity
While the proportion of UK shoppers solely consuming 0% alcohol spirits is in the minority, that’s not to say that low/no drinks are a niche product. In fact, more consumers than ever are opting for a combination of conventional alcoholic beverages and non-alcoholic ones as they become increasingly conscious of their health – and alcohol’s impact on it.
“There has been a significant shift in consumer habits towards health and moderation, which has accelerated the low/no sector from fruit juices and sodas to premium, crafted drinks with complex flavour profiles,” says Isabelle. “You can now get replicates of well-known and loved alcoholic beverages in flavour, but are lower-calorie and don’t leave you with a hangover the next morning – consumers are driving the demand of wanting drinks that deliver more, whether they mimic the taste of alcohol or provide specific health benefits.”
Again, Covid has played a role. “Throughout lockdowns, the demand for alcohol-free continued to grow. Availability and visibility of great tasting products has been key to growing social acceptance of having an alcohol-free drink in a social setting where you would have normally drunk alcohol. This includes at home!,” explains Laura.
“Alcohol-free spirits are one of the fastest growing segments and producers are using new techniques to pack alcohol-free versions of tequila, gin, rum and whisky with depth of flavour and bite,” she continues. “Consumers love products with active ingredients that promise a feeling. I think we will see more of this going forward, alongside mimics of spirits, like the range the brand Lyre’s offers, to provide a direct swap in popular cocktails. Just like alcoholic spirts there is something for everyone – there are some amazing craft distillers using local products and ancient production techniques to make beautiful drinks.”
“When non-alc spirits initially hit the shelves several years ago they were considered straight spirit replacements for non-drinkers, but as the category evolved we saw further exploration of flavour as curious consumers sought more experimentation,” explains Gareth Bath, managing director of Distill Ventures. “This led to the development of more non-alc offerings – such as aperitifs – that were suited to all manner of occasions. Now, in 2022, non-alc spirits are more mainstream than ever, and following six years of innovation, distinct zero proof categories have emerged, including: direct spirit replacements; distilled botanicals, dark spirits, aperitifs and digestifs, RTDs and products developed with functional ingredients.”
The category is here to stay. According to IWSR’s No- and Low-Alcohol Strategic Study 2022, the No- and Low-alcohol category is projected to have a compound annual growth rate of 8% from 2021 to 2025, adding 126.4 million cases globally – “this is a really exciting time for the sector,” says Gareth.