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Two to three big Christmases left for gin amid premium spirits boom

Published:  23 August, 2019

Pernod Ricard is banking on another big hurrah for gin growth this festive season, with its on-going popularity and major presence in the UK’s cocktail culture helping to boost growth of premium spirits.

Spirits were the clear winner in the on-trade last Christmas and the only drinks category to experience growth, the French drinks giant said at its briefing yesterday when it laid out its plans for the latter part of the year.

Much of the on-trade’s spirit growth is down to the popularity of gin, which spurred white spirits to overtake dark spirits for the first time in the UK’s bars and restaurants last year.

The CAGR for gin in the on-trade sits currently at about 30%, which is due to continue to for the next two to three years. Over five years, it will drop to around 12% – a trajectory which is mirrored by the off-trade. 

However, this Christmas is likely to be the third in a row dominated by gin, the Beefeater producer believes.

“There’s definitely another two to three years of growth, due to innovation, new entrants, premiumisation, and the way outlets have the opportunity to increase their range and offer,” said James Bremner, on-trade channel director at Pernod Ricard UK.

“So there is definitely value there. We believe there’s another few years of solid growth, with scope to improve ranges, give better visibility on menus, experiment with different serves and use flavours more dynamically. There’s also space in the liqueur market which is fuelling entrance into gin.”

Premiumisation and the growth in premium and super premium is informing all of Pernod’s messaging going into Christmas across the on- and off-trades.

In the off-trade, it said convenience could do more to capitalise on premium wines, beers and spirits, while in the on-trade, a quality premium drinks experience would help encourage consumers to “come back to outlets, stay longer and spend more".

Premiumisation has been evident across all categories in the UK on-trade over the past few years, particularly at Christmas when consumers are willing to spend more.

Premium spirits accounted for 24.4% of volume spirits sales in December 2018, up from 20.9% in 2016. Meanwhile, share of standard volume sales dropped from 79% in 2016, to 75.6% in 2018.

“Consumers are willing to pay more to get a better quality drink at Christmas, and 43% of consumers consider themselves to spend more on drinking out during the festive period than the rest of the year,” said Bremner.

“The on-trade is booming, with value growing £2.5bn since 2015 and experiencing the largest growth last year. 2018 was also a good year for the on-trade. However, we anticipate outlets will need to work harder this year to maintain sales and value growth.”

According to figures from CGA, spirits had 26.6% of sales over the Christmas period in 2018, compared to 10.2% for wine and Champagne (beer, cider and softs accounted for the remainder.)

In line with this, Pernod Ricard is anticipating more interest in spirits going forwards, with growth anticipated to emulate US trends where sales of spirits are in line with beer.

“We’ve seen spirits growing steadily over the past 10 years to account for a greater amount of total beverage sales, putting the UK on the same trajectory as the US. When we look at Christmas last year, spirits were clearly the winner in terms of growth.

“Consumers are looking for something different at this time of year, with celebratory occasions offering lots of opportunities to excite them. This is in line with what we’ve seen in the rise in cocktail culture and premium and super premium taking a larger and larger slice of the pie. Gin but also premium and super premium are driving this across categories and also spirits like premium whisky,” Bremner said.

Hot serves, themed glassware and no and low are all at the heart of Pernod’s strategy this year aimed at capitalising on the desire for differentiation and increased spend around Christmas time.

It is also increasing its investment in the “Christmas occasion” to £5m – nearly a 70% increase on last year.

This is partly due to falling visitor numbers in the on-trade in 2018. While consumers visited bars and restaurants more often last Christmas, the number of actual visitors fell over Christmas 2018.

It is therefore “more important than ever to secure repeat visits and higher spend,” said Bremner.