1. food and drink
2. beverages
3. alcoholic beverages
4. cocktails and beer

The IWSR Magazine has exclusive access to the full IWSR database, which
tracks 20,500 brand lines across 125 countries with the annual input of more
than 1,850 companies.
this
Issue
4 Spirits news
7 News analysis Diageo sees
profits tumble, but looks to
fight back
8 Finance review A look at
what 2015 holds for the
spirits industry
10 New products & marketing
12 Cocktails How brands can use
a signature cocktail to their
best advantage
16 Profile: Cointreau The brand
taps into the cocktail culture
17 Absinthe The category plays
on a youthful image
19 Sambuca The Italian spirit’s
suppliers see scope for growth
22 Premium white spirits Is
there a ceiling on the
sector’s potential?
26 Interview: Synergy As the
vodka market in Russia faces
challenges, the company
expands its portfolio
28 Scandinavia Nordic consumers
rebuild their confidence
30 Wine news
31 Silicon Valley Bank The
latest report forecasts a
break-out year for US fine wine
32 Supply and demand How is
the balance working in wine?
33 Interview: Foncalieu The
co-operative’s view on its
region’s potential
34 Future regions Where will the
next great wine come from?
35 Beer, cider and pre-mix
news
All details contained in this publication
are believed to be correct at time of going
to press.
All rights reserved. Nothing may be reprinted
or reproduced in whole or in part without the
written permission of the publisher.
Published by System Three Communications
(London) Ltd 2015 ©
Printed in the UK by Rapidity.
Comment
Alexander
Smith
The IWSR
Magazine
Editor-in-Chief
This month we look at the premium white spirits segment, an
area of the drinks market that continues to be vibrant despite
challenges. Taken in aggregate, total premium-and-above white
spirits enjoyed a very healthy 5.4% compound annual growth rate
(CAGR) over the past five years. Vodka, which accounts for just
under three-quarters of this total volume, is still growing on a global
basis. Yet it faces challenges.
In the US, vodka is coming under pressure from a number of
different sources. The whisk(e)y revival, and the popularity of
flavoured spirits, in particular, is a real threat. The larger challenge is
generational. US Baby Boomers came into the spirits world through
vodka, adopting brands like Absolut and, later, Grey Goose. Now, the
ensuing Generation Xers and Millennials are looking to differentiate
themselves from their parents by drinking other spirits, particularly
whisk(e)y. Vodka is still a vast and highly profitable category in the
US, but it undoubtedly will have to work harder to maintain its
pre-eminence.
The problems are not confined to the US. Russia is the
second-largest premium vodka market. The slowing economy, falling
consumer confidence and a contracting on-premise sector has
impacted high-end vodka purchasing.
While it is undoubtedly going to be a tougher road to hoe in these
core markets, there are opportunities elsewhere. Brazil, the UK,
Canada, Australia and Israel are all showing high-end vodka growth
from smaller bases. Duty free has been particularly hospitable,
adding some 440,000 cases over the past 10 years.
“Premium-and-above vodka has hardly made
a dent in Asia, with just 200,000 cases”
Perhaps the greatest untapped opportunity for high-end vodka lies
in Asia, which on surface should be a natural market, given Asians’
proclivity for drinking for status. Yet vodka has scarcely made a
dent, with total premium sales across the region standing at just
200,000 cases.
There are a number of theories as to why Western white spirits
have failed to gain traction in Asia – and that is worth an entire
article in itself. However, one of these is that generational cycles are
probably as relevant in Asia as in the West. There are signs in
important premium markets, such as South Korea, that younger
consumers are also looking for something different. In east Asia
Cognac and Scotch have been around a long time. Given the
broader international view of younger consumers, this would
suggest the time has come for vodka, as well as more contemporary
whiskies such as Jack Daniel’s or Jameson. There is a subtle change
in the Asian consumer from buying for display ‘face’ to buying as
part of lifestyle (that is, less to impress and more to buy because
they can). This favours categories other than Cognac or Scotch.
The potential for Western white spirits to succeed in Asia is there.
It hasn’t and won’t succeed unless there is a deeper understanding
of Asian culture, tastes and requirements – probably on a
country-by-country basis. Only then will they gain a role in Asia’s
premium drinking repertoire.
Editor-in-Chief
Alexander T Smith
Email: [email protected]
Production Editor
Eluned Woollven
Editorial Assistant
Thalia Fourie
Email: [email protected]
Publishers
Val Smith
Alastair Smith
Marketing & PR
Helen Windle
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Subscriptions
Stefano Giacoia
Email: [email protected]
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Rina Maiden
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Researchers
Adam Zdan Michajlowicz
Agata Andrzejczak
Alastair Smith
Ania Zymelka
Daniel Mettyear
Giles Gough
Guy Shingles
Helen Windle
Humphrey Serjeantson
José Luis Hermoso
Konstanze Kugler
Piotr Poznanski
Roza Prosser
Sandra Newman
Simon Molony
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Tim Simmons
Tommy Keeling
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ISSN 2046-5769
February 2015 3
spirits news
shorts
a brief round-up of news from across the industry
General
USA During 2014, nine-litre
spirits case sales in the control
states grew at 2.5%, more
than doubling 2013’s growth
rate of 1.1%, but lagging
2012’s 3.6%. Shelf dollars grew
at 5.1%, eclipsing 2013’s 4%
and were close to 2012’s 5.6%.
As reported for 2013, 2014’s
volumetric growth, although
improved, remained soft
relative to control states’
average growth during the past
15 years. On the other hand,
growth is trending up, which
suggests 2015 will be a more
robust year than that delivered
by 2013 or 2014.
Brandy/Cognac's 7.4% annual
growth rate, compared to 2013's
2%, is noteworthy. However,
once again, Irish whiskey lapped
all categories with an annual
growth rate of 11.6%, down
slightly from 2013’s 12%.
past year or so. That
relationship has worked out
very well indeed and we are
ready to take the next step.”
At the same time, Van Gogh
Imports will change the name
of the company to 375 Park
Avenue Spirits to better reflect
its diversified product portfolio.
Mergers & acquisitions
Mexico Pernod Ricard has
signed an agreement with Grupo
Bepensa for the sale of Caribe
Cooler, a major brand in the
Mexican ready-to-drink market.
The transaction also includes
the bottling line related to the
production of Caribe Cooler,
together with the relevant
inventories.
This disposal is in line with the
group’s strategy to focus on its
priority spirits and wine brands.
Italy Gruppo Campari has
agreed to sell the Limoncetta di
Sorrento business to the Italian
company Lucano 1894 for
€7m ($7.9m).
In another deal, Gruppo
Campari has agreed to sell the
federated pharmaceutical
division of J Wray & Nephew (a
fully owned subsidiary) in
Jamaica to Kirk Distributors.
The purchase price is $14.4m.
The company said these
transactions underline the
Gruppo Campari strategy of
strengthening its focus on its
core high-margin spirits
business via streamlining of
non-core businesses.
Denmark Altia's alcoholic
beverage plant in Svendborg,
Denmark, will be closed down
during 2015 as the contract
production at the plant ends.
Earlier this year Altia relocated
its wine and glögg production
from Denmark to Rajamäki,
Finland.
The reasons for closing down
the plant are Altia’s cost-saving
programme and the decision
made by one of Altia’s contract
customers to take over of the
production of its own brand.
Altia’s logistics centre and
sales of Altia own and partner
brands will continue normally in
Denmark.
Distribution
USA Van Gogh Imports is to
become a fully integrated sales
company inside Sazerac,
effective 1 March 2015.
CEO and chairman Norman
Bonchick said: “We have been
working closely with the
Sazerac Company through its
SLS logistics division over the
USA The Charmer Sunbelt
Group, one of the leading
distributors of wines and spirits
in the US, has acquired its
partners’ interests in United
Distributors in Delaware and
Beverage Distributors in
Colorado.
Over the past few years
Charmer Sunbelt completed the
4 February 2015
acquisition of its partners’
interests in Virginia with
Associated Distributors and in
South Carolina with Ben Arnold.
In September 2014 CSG
acquired its partners’ interest in
R&R Marketing in New Jersey.
“The completion of these
five acquisitions marks a major
milestone for Sunbelt,” said
Charles Merinoff, CEO of the
Charmer Sunbelt Group.
“Having accomplished our goal
of simplifying our ownership
structure, we are well
positioned to maximise our
strategic alignment with our
suppliers.”
South Africa KWV has taken
over from RGBC as the
exclusive distributor of
Stolichnaya vodka in South
Africa from 1 January 2015.
Stoli Group, part of SPI Group,
extended its strategic
agreement with KWV to include
South Africa and a further eight
markets in the region.
KWV sales director for spirits
Werner Swanepoel said: “The
SA liquor industry has become
extremely competitive, with
new trends, categories and
brands entering the market.
With globalisation, the SA
consumer is looking for new
and trendy products, mainly
driven by international brands.
With international brands like
Stoli and Lucas Bols, a leading
international liqueur (for which
KWV has also signed a
distribution agreement), added
to the KWV portfolio, this
extends our entry into new
categories and new channels.”
Financial
Poland Stock Spirits Group, a
leading Central European spirits
producer, said that the
shipments slowdown resulting
from a duty increase in Poland
continued through the fourth
quarter ended 31 December
2014. Poland had raised excise
duty by 15% in January 2014.
The company said: “In
November 2014 the company
reported that the third quarter
had been a difficult trading
period, particularly in Poland
where we had seen disruption in
the supply chain resulting from
the duty increase. This
disruption continued throughout
the fourth quarter. Despite
continued aggressive competitor
activity in Poland, Stock Spirits
Group has maintained its value
share in the market, but has
seen a small decline in volume
market share.”
Poland accounts for 60% of
Stock’s total revenues. The
company noted that the total
market data indicated that
consumer volume trends in
Poland slightly deteriorated in
October and November, giving
a year-to-date (end November
2014) decline of -4.4%.
Netherlands At press time,
Lucas Bols Holding, a
440-year-old Dutch spirits
producer, was due to launch an
initial public offering (IPO) on
Euronext Amsterdam.
Gross proceeds of the sale of
new ordinary shares by the
company are expected to be
around €125m ($141m) and
will mainly be used to refinance
the company and further
strengthen its financial position.
Lucas Bols CEO Huub van
Doorne said: “We see the
intended IPO as a logical next
step in the development of our
company. After our buy-out in
2006, our current main
shareholder, AAC Capital, has
supported us in our strategy to
focus on brand building and
innovation. The company is
now fully prepared for a
standalone future with an
enhanced capital markets
profile to support our
international growth strategy.”
spirits briefs
People
France The Rémy Cointreau
Group has confirmed Valérie
Chapoulaud-Floquet as CEO.
Chapoulaud-Floquet has
announced a management
reorganisation. The executive
committee has been increased
from six to 12 members with the
addition of the managing
directors for the markets (EMEA,
Americas, Asia, and global travel
retail), as well as for the brands
(House of Rémy Martin, Louis
XIII and Mount Gay, liqueurs and
spirits, Bruichladdich and The
Botanist), who will now report
directly to Chapoulaud-Floquet.
UK Bacardi has announced the
promotion of Dmitry ‘Dima’
Ivanov to chief marketing officer
of Bacardi and president of
Bacardi Global Brands. Ivanov
will also serve as a member of
the Bacardi Global leadership
team and report to Bacardi CEO
Mike Dolan.
Ivanov most recently served as
the vice-president – global
category director of rums. He will
remain based at the Bacardi
Global Brands headquarters in
London. He succeeds Andy
Gibson, who will leave Bacardi at
the end of March to ensure a
smooth transition.
USA Patrón Spirits International
has appointed Matthias Knoll as
vice-president Europe, Middle East
and Africa. Knoll will report to
Dave Wilson, president
international and global COO.
He joins Patrón from Bacardi
Germany.
USA Constellation Brands has
appointed Bill Newlands to its
executive management committee
as chief growth officer reporting
directly to president and CEO Rob
Sands, a newly created position to
help manage Constellation's
long-term growth strategies.
Newlands will be responsible for
leading corporate strategy and
business development.
A veteran of the beverage
alcohol industry, Newlands has
30 years of leadership experience
with companies including Beam
Inc., Allied Domecq, Wine.com,
LVMH and E&J Gallo Winery.
USA Brown-Forman Corporation
has made several new
appointments. The company has
promoted John Hayes to senior
vice-president, chief marketing
officer of Brown-Forman brands.
Most recently, Hayes was
global managing director, Jack
Daniel’s brands.
Mark McCallum has been
appointed to executive
vice-president and president –
Jack Daniel’s brands, effective 1
February 2015. McCallum most
recently held the position of
executive vice-president,
president for Europe/Africa,
Asia-Pacific and travel retail.
Tim Nall has been appointed
to chief information officer. Most
recently, Nall served as director
of technical services on the
global production team.
Gustavo Zerbini has been
named country general
manager – India, based in Delhi.
Since joining Brown-Forman
Brazil in 2011, Zerbini has served
as commercial director of sales
and marketing.
USA The Charmer Sunbelt
Group, one of the US’ leading
distributors of wines and spirits,
has announced the promotion
of Greg Baird from his current
role as chief operating officer,
to president, effective 1
January 2015.
Baird will oversee the Charmer
Sunbelt organisation – with
expanded oversight of legal,
government and regulatory affairs
and corporate development. Baird
will report to Charles Merinoff,
chairman and CEO.
February 2015 5
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news analysis
Diageo takes the hit... and moves on
Despite a fall in first-half profits of -18%, Diageo claims there is improving momentum in its business
Diageo said that reported net sales in the
half to 31 December fell -1% to £5.9bn
($8.9bn), with volume down -1.9%. Operating
profit fell -18% to £1.66bn ($2.5bn).
Reported net sales and operating profit were
significantly impacted by negative foreign
exchange, driven by the strengthening of the
pound against many currencies, in particular
the Venezuelan bolivar, the Russian rouble and
the euro. The overall currency drag on
operating profit was £268m ($403m) for the
period. Diageo CEO Ivan Menezes said: “There
was a huge currency hit. Our profit decline was
essentially due to currency movements. If you
take currency out our organic profit grew 1%.”
He added: “We have already taken action to
improve the performance of those brands and
markets that have not performed as well as we
would expect. This contributed to our stronger
second-quarter performance and I expect to
maintain this momentum through the year.”
Speaking to journalists in London, Menezes
said: “Overall, the business has improving
momentum; our business was stronger in the
second quarter than the first quarter in a lot of
the markets. Top-line growth is strengthening.”
He also noted that Diageo witnessed strong
margin expansion.
“In the developed world our business is solid
and stable. Over the past 18 months Western
Europe has been steadily getting better. The US
is a tale of two consumers. The high-end
consumer is very strong and our top-end brands
are doing very well. The middle-market
consumer is hopefully coming back, but we are
still a little cautious about pronouncing a
consumer recovery in the US. Two-thirds of our
emerging markets are in good growth. A third of
the business is still challenging – Russia,
Venezuela and Nigeria, in particular, are
struggling with some of the oil impact… The
world is still economically and politically uneven.
We are not counting on a big bounceback or
improvement. However, what we are counting
on is our performance to improve and a lot of
the fundamentals that we are putting into the
business are beginning to pay off.”
Net sales in North America were flat, while
volume fell -2%. High stock levels impacted
Smirnoff net sales which were down -8%, while
Captain Morgan net sales were down
-9% as the brand suffered from increasing
competition in the spiced rum category.
Menezes attributed the problems with those
two keys brands to aggressive price increases
in past years. He said that any pricing increases
in 2015 would be more moderate and that
promotional activity would feature more heavily.
Ivan Menezes, CEO: ‘huge currency hit’
“We are growing about 2.5% in value
depletions in North America. Within that, the
space that got most competitive was the midmarket, especially in vodka. Smirnoff has been
underperforming and lost share. The high end
of North America has been doing extraordinarily
well. All our top-end brands are doing well. The
US is just a fantastic market for us. We have
come through a period where we have slightly
underperformed. We have every intention to
get our business performing there.”
Commenting on the whisk(e)y revival in the
US, he said: “The quality, craftsmanship and
taste of whisk(e)y is gaining currency in North
America. It is evident in popular culture that
whisk(e)y is back and hot. Johnnie Walker,
Bulleit, our single malts or competitor brands
are bringing interest back to the category.
Taste profiles have moved to appreciate
whisk(e)y more. It is a trend that has been
building for several years and is one that is
good for Diageo.”
Africa was a bright spot – sales increased 5%
and volume 9%. Within that, beer sales grew 4%
and spirits 19%. Menezes said: “We are growing
pretty much across the board in all African
markets… It is a really good growth engine for
Diageo and it is great to see momentum
improving.” On the long-term prospects for
Africa, he said: “The economic growth
projections are good and the demographics are
extremely good, so when you put the two
together it is very favourable. You can add
urbanisation to that. We start from a position of
strength there. It all bodes very well for our
categories.”
Net sales in the Asia region fell -5% and
operating profit -7% as China’s crackdown on
luxury consumption took a toll. Diageo has
reduced its marketing outlay in the region by
-15% in response. Diageo said that the
performance for Asia-Pacific reflects inventory
reductions and a tough comparison against
high shipments in south-east Asia last year,
and weakness in Scotch in China.
Sales in Europe were down -4% on a 1%
volume decline. “We are now outperforming the
competition. It is the results of actions like
expanding our sales forces in Europe and
increasing our marketing spend. Europe is still a
tough environment, but we are playing a more
offensive game and stepping up investment and
execution. You are starting to see that pay off.”
Diageo took majority control of the USL
business in India during the period. It said that
it was now moving from the governance phase
to the operational phase. Menezes said: “We
are pleased with how it is going. The
integration is going fine. We are in control. We
are making all the changes. We are upgrading
the portfolio. The strategy is clear.
Operationally the business is getting in better
shape and it is performing well for both the
USL brands and Diageo brands. When you look
at where this business was and where we are,
we are on track. If anything, the economic and
consumer environment in India is only getting
better. Johnnie Walker was up some 50% in
India in the half year. When we put the USL
and Diageo brands together, India will be a
good accelerator for the company.”
Menezes noted that the continued strong
performance of high-end Reserve Brands, up
10%, was a key driver of positive overall
price/mix. “[The] Reserve Brands [are]
growing really strongly around the world. It is
still very early days in terms of what we can do
at the luxury end of spirits.”
Diageo has scaled back its planned investment
in Scotch whisky production. Diageo CEO Deirdre
Mahlan said: “Certain aspects of that investment
programme have been slowed rather than
suspended. We are still investing in a number of
those expansion projects. There were new-builds
and projects that we had planned to start, but
we have put those on hold. We will put them
back on when we see a need. We are looking at
long-term trends in Scotch.”
Diageo also announced that it took a £145m
($218m) charge before tax during the period
to settle a long-running dispute with Korean
Customs over duty on spirits imported between
2004 and 2010. ■
February 2015
7
finance review
A changing landscape
GRAPHIC: TOM WELCH
Financial analyst Graeme Eadie looks at the changing prospects for the spirits industry in 2015
Factors due to affect the market include a collapse in the oil price. Meanwhile, American whiskies are selling well
Stockbroking investment analysts habitually start the year by
outlining their expectations for the 12 months ahead in terms of trying to
anticipate the key industry trends and themes on the sectors they cover.
The aim is to help identify which stocks would be the winners and losers
within the environment they envisage. It is with much relief that I no
longer have this unenviable task, as the outlook for the spirits sector has
never looked more uncertain.
In a relatively short period of time there has been a dramatic shift in
the underlying fundamentals that helped shape the growth of the spirits
industry over the past decade. In our last edition, when outlining some
of the important management changes taking place in the sector, we
wrote: “The industry will always continue to evolve and often the
challenges that those changes create are best met with new ideas and a
new approach from new management”. With the benefit of hindsight,
that comment is looking particularly prescient.
Many of the drivers that helped to underpin the growth of the spirits
industry for a number of years now appear to be under threat. For many
years the US spirits markets, given its size, provided the cornerstone of
growth for many companies in the industry. Now, however, many of the
major players appear to be struggling in this key market. In pre-Christmas
conference calls with investors, Diageo described Thanksgiving sales as
“OK”, whereas Pernod Ricard said that they had been “soft”. Part of the
problem for both firms is the dramatic slowdown in the growth of premium
vodka. Both groups are losing share in their largest market as a result.
Outside the US the outlook for many important emerging markets is
equally uncertain. The collapse in the oil price, which we will refer to
later, is likely to precipitate a fall in demand for imported premium spirits
in a number of important markets, such as Russia, Venezuela, Brazil,
8
February 2015
Mexico and across the Middle East. The problems in China as a result of
the government’s anti-corruption measures is well-known, but likely to
continue to act as a drag on growth in 2015. Therefore China, the US,
premium vodka and many key emerging markets, all of which have been
the key drivers in the past, are now under pressure to varying degrees.
Share price movements
Before looking forward to the future it is useful to consider how the
stocks in the sector performed last year. The table below looks at the
respective share price movements of the principal quoted alcoholic
beverage companies in 2014. We include the brewers as a point of
reference as they, too, had a strong 2014, with the exception of
Carlsberg due to its high Russian exposure. The strong performance of a
number of companies in the spirits sector in 2014 may seem at odds
with the slowdown in growth experienced last year. However, the
stockmarket – at least in theory – is a discounting mechanism that
Share price performance 2014
Spirits
% change
1. Beam Suntory
24.0
2. Brown-Forman
20.0
3. Pernod Ricard
14.0
4. Diageo
-4.0
5. Rémy Cointreau
-6.0
6. Campari
-16.0
Beer
% change
ABI
26.0
Heineken
23.0
SABMiller
11.0
Carlsberg
-19.0
Source: Bloomberg
finance review
focuses on the future rather than the present value of companies.
Therefore the strong performance of a number of companies in the
spirits sector, particularly towards the end of last year, reflects two
important dynamics that will help to boost their profitability in 2015. The
first is currency and the second is oil.
The strength of the dollar over the past six months and the concurrent
weakness of both sterling and the euro are unequivocally good news for
the spirits sector. The US is the industry’s largest market and many
emerging markets have their currencies pegged to the dollar. Given that
most of the revenues generated in these markets are from products
imported from Europe, the transactional exposure of the major exporters
will see them enjoy a significant boost to margins. The difficulty for
investors is trying to quantify the impact as hedging helps to smooth out
the effect of currency fluctuations over the short term. But with costs
largely insulated from the gain in the dollar and revenues benefiting from
its appreciation, it is a significant net gain for the European groups.
The fall in the oil price is a major positive for consumer stocks. While,
as previously mentioned, certain oil dependent markets will be hit, in
overall terms, spirits companies should benefit from lower energy costs
and higher demand for their products as their consumers will enjoy a
boost to their disposable incomes. Again, as with currency, it is difficult
to quantify this benefit, given the impact of hedging on major costs such
as oil. The impact on the consumer is equally problematic to determine,
given the varying price of oil across the world due to different duty levels
and the uncertainty as to how long prices will remain low. But again, it is
a net benefit for the sector.
Bourbon’s renaissance
It is not an accident that the two best-performing quoted spirit stocks, in
terms of share price appreciation in 2014, were Beam Suntory and
Brown-Forman. Both groups are the major beneficiaries of the recent
revival in US whiskey sales. Over the past five years, whisk(e)y has been
the top-performing category within premium global spirits, driven by the
strong growth in demand for Irish and US whiskey. While the success of
Irish whiskey is well-known, the turnaround in both US and Canadian
whisk(e)y has been a more recent and surprising phenomenon. Long
seen to be in terminal decline, their renaissance has been driven by their
unexpected success in the US. While Jack Daniel’s and Crown Royal have
long transcended their respective categories, the increase in the
popularity of US whiskey has been led by the successful launch of
flavours, helping to broaden the appeal of the category. Equally, the
heritage and premium qualities of US whiskey clearly resonate with
today’s consumers, who are seeking greater authenticity within alcoholic
beverages. Vodka looks to have been the principal casualty in this
change of consumer behaviour. As the chart above right illustrates,
volume growth has slowed dramatically.
Whisk(e)y: volume growth 2008-2013
Category
1. US whiskey
2. Scotch whisky
3. Irish whiskey
4. Japanese whisky
5. Canadian whisky
Total
% CAGR
5.0
1.0
10.0
6.0
3.0
3.0
Incremental (m cases)
7.5
4.2
2.5
1.8
1.8
18.0
Source: Brown-Forman
US premium vodka growth –
standard-and-above segments (%)
Source: The IWSR Database 2015 ©
New challenges for 2015
The fundamental dynamics that recently shaped the growth of the spirits
sector appear to be changing. Industry consolidation, premium vodka and
emerging markets can no longer be relied upon to deliver the same pace
of growth. The same can also be said for the US spirits market. While the
slowdown in many emerging markets is likely to prove ephemeral, there
can be little doubt that the biggest fundamental challenge facing the
industry is the threat from increased fragmentation. We see the
turnaround in US whiskey and the fall in growth of premium vodka in the
US as part of the same dynamic. Consumers are seeking greater choice
within alcoholic beverages in terms of flavours, pricing and the provenance
of the products they buy. The growing number of craft brewers and smallbatch distillers is helping to both stimulate and facilitate the growing trend
towards greater promiscuity within alcoholic beverages. This is a new
threat as well as an opportunity for the major spirits groups.
The big question for 2015 and beyond for the incumbent spirits
companies is how they respond to this new challenge? Further industry
consolidation would clearly be seen as a retrograde step. Greater focus
rather than a dilution of effort is likely to be necessary. With many longestablished brands seeing their growth rates slow as a result of this
threat, we see the industry having to increase marketing efforts behind
the major brands. Those efforts are likely to centre around the core
values of premium brands, with a greater emphasis on the authenticity
and heritage of those products. Line extensions and new products are
likely to require greater care and consideration. The industry cannot
afford to be outmanoeuvred by new entrants to the market – nor do we
think they will be. But it could come at a price.
While there is little evidence to support this at the moment, we would
not be surprised to see marketing expenditure rise as part of this
strategy. With margins set to increase in any case due to positive
currency movements and lower oil costs, it is a highly apposite moment
to boost investment. It would also not be the first or last time that the
stock market is caught out by focusing too much on the short term,
while ignoring some of challenges that the industry needs to face in
order to achieve longer-term profit growth. ■
February 2015 9
new products
Patrón’s Year of the Sheep
W-Wodqa enters Germany
Adnams’ apple spirit
Patrón Añejo tequila is celebrating the Year of
the Sheep, 2015 Chinese New Year, with the
launch of a collectable, limited-edition gift tin.
German-based Qonzern, a producer of topquality spirits, has launched W-Wodqa in the
German on-premise sector.
English brewer Adnams has launched Adnams
Pomme Pom Apple Spirit, an innovative cider
aged in oak casks.
Now available in global duty free and selected
domestic markets, the tin was designed by
Chinese artist Peach Tao who was inspired by
the classic Chinese design ‘three rams
bringing bliss’.
W-Wodqa is produced from mineral-rich
spring water and wheat harvested in the
winter when the crop is said to be milder than
spring wheat.
It is currently available in Adnams stores and
online, with numbers limited to 2,000 bottles.
The red tin sports black and gold accents
alongside images of an agave plant and the
iconic Patrón bee.
The design also includes images of goddesses
around a lotus flower (symbolising good luck)
and other modern and traditional Chinese
symbols, such as a lantern, a ship and the
phoenix. A leaping sheep on the lid reflects
the wish for a year of happiness and
prosperity.
Dave Wilson, Patrón Spirits president,
international, and global COO, says: “This
new eye-catching tin not only celebrates the
Chinese New Year holiday, it’s also a
wonderful way to remember the year, long
after the bottle has been enjoyed.”
Brand: Patrón Añejo Year of the Sheep
Edition – $54.99 RRP (75cl)
10 February 2015
It is distilled seven times and never filtered, in
order to preserve its fine grain flavours. Free
from any additives, even legally permitted
ones, W-Wodqa is bottled at 40% and
packaged in an innovative metal bottle,
designed to stand out on shelves.
Qonzern describes W-Wodqa as “an extremely
soft and aromatic vodka that has not been
filtered to death, but is a true aqua vitae.”
In Germany there has been an ongoing shift
towards the higher end of the vodka market,
with premium and super-premium brands
outperforming the rest of the category.
Overall, the top end of the market saw a
compound annual growth rate of +11.7%
between 2008 and 2013, ahead of both the
standard and value segments.
Brand: W-Wodqa – €59.90/$67.55 (1L)
Adnams distiller John McCarthy distilled a
batch of Hogan’s English Cider in copper pot
stills, resulting in a high-strength spirit that
was then transferred to new European oak
casks to mature over three years, before
being cut down to bottling strength of 40%
abv.
Pomme Pom Apple Spirit picks up on two key
current trends: the growing popularity of cider
and the rising interest in barrel-ageing across
a number of different spirits categories. Cider
is performing particularly well in the UK
market, where annual consumption jumped
by 385,000 hectolitres between 2012 and
2013, making it one of the fastest-growing
categories in the market.
A rich and smooth apple spirit, Adnams
Pomme Pom is suitable for serving neat, in
cocktails, or with a splash of ginger ale.
Brand: Adnams Pomme Pom Apple Spirit
– £37.99/$56.92 RRP (70cl)
& marketing
By Sophia Holliday and Thalia Fourie
Innovation
Spotlight
The ready-to-drink (RTD)
industry in Japan is booming
and continuing innovation plays
a key role in its success.
Alongside whisk(e)y, the pre-mixed drinks
sector remains the most exciting category
in the market and has been attracting a lot
of hype and investment in recent months.
Many of the large brewers – Suntory, Kirin
and Asahi – have been refocusing their
efforts on the canned cocktail segment to
offset a long-term decline in beer sales.
Price, convenience and a preference for
low-alcohol products have been driving
demand for vodka- and shochu-based
RTDs (chu-hi), and the range of flavour
offerings is on the increase.
JW’s Year of the Ram
Franzia’s Frozen assets
A special Year of the Ram edition for Johnnie
Walker Blue Label has been released in Hong
Kong. The ram sheep has long been regarded
as the symbol of luck and good fortune in
Chinese culture.
Japanese producer and wine retailer Mercian
Co, a group company of Kirin Co, has
launched Franzia Frozen Wine in Japan.
This release was inspired by the famous
Chinese brush painting Three Rams, created
during the Emperor Qianlong era, and builds
on the Chinese fortune phrase ‘san yang kai
tai’ (meaning ‘three rams will bring luck’).
Harking back to the Chinese tradition of
celadon porcelain, the royal blue-tinted bottle
is adorned with white brushstroke characters
for ‘ram’, as well as a representation of the
Three Rams painting, which appears on the
bottle’s four sides, an image which is best
viewed when four bottles are placed side by
side.
Drew Mills, marketing director for Diageo
brands, said: “The Year of the Ram Special
Release truly marries the best of Chinese
ceramic art with the very finest blend of
Scotch whisky. This classic combination
introduces unrivalled creative elements to the
global whisk(e)y market, and I’m confident it
will quickly become the premier choice for
discerning collectors.”
Brand: Johnnie Walker Blue Label
Year of the Ram – HK$1,888/$243.56
RRP (75cl)
Available in fresh, fruity red and white
California-born varietals, the frozen wine, in a
slush form, comes in a specially designed
dispenser with a twisted lock seal which
ensures the wine holds its quality when
frozen. The dispensers are currently available
in around 50 locations throughout the Tokyo
area.
The Franzia Frozen serve involves putting a
few ice cubes in a glass, then filling the glass
half-full with chilled white or red Franzia wine.
The frozen wine is then poured on top from
the dispenser to create an iceberg-like shape
in the glass.
Kirin acquired the Japanese rights for Franzia
in 2003 from Suntory and then transferred it
to Mercian in 2007.
Franzia Frozen aims to popularise wine in
Japan, a country where beer is still the
main alcoholic beverage consumed.
Franzia wines are also available in standard
bottles and boxes.
Brand: Franzia Frozen – Around
¥600/$5.07 RRP
The latest flavour addition to Kirin’s
Hyoketsu RTD range, Framboise, was
released as a limited edition in January,
while new variations including acerola
cherry and a high-strength Okinawa citrus
fruit version are already being lined up to
be launched throughout the year. One of
the company’s most innovative flavours
was the launch of a bitter-flavoured chu-hi
variant. An intentional move away from the
predominantly sweet flavour offerings of
most other brands, the bitter flavour was
intended to attract male drinkers looking
for an alternative to mainstream beer.
Products such as Kirin’s Franzia Frozen
Wine point towards the growing interest in
convenient and approachable products that
provide a point of difference. Furthermore,
Suntory’s recently released French Rouge
beer, which features blackcurrant juice and
is intended to display the qualities of red
wine, also shows that the Japanese are not
afraid of experimenting and blurring
category lines. Given the still large and
declining traditional beer and shochu
markets, these innovative new products
are likely to continue fuelling growth for a
long time yet.
Radius, the IWSR’s product
innovation tracker, is an IWSR
publication, produced and
created by Vandal Ltd.
For more information, contact
[email protected]
www.IWSR-Radius.com
February 2015 11
spirits review
Cocktails: all in the mix
Major brands are learning that a signature cocktail can really add to their marketing message, finds Simon Molony
Increasing engagement from bartenders
and consumers, both of whom are now driven
by a willingness to play with the classics and
experiment more than ever, is expanding the
cocktail market. The popularity of the classic
cocktail has boosted sales of spirits that offer a
simple yet sophisticated flavour profile, which
can be easily incorporated into cocktail recipes,
although well-executed serves still play a
significant role.
The trend for introducing a variety of
different flavours in spirits, first seen with vodka
and now in gin, is likely to have some influence,
although it will not replace exceptional spirits.
Liqueurs have also been given a new lease of
life; the role of the aperitif and digestif reflects
a modern take, revitalising the after-dinner
drink in many top venues. The on-premise
cocktail trend gradually translates into home
consumption, driving spirits sales in the offpremise accounts as well, particularly in the US
and in major cocktail cities.
Mixologists and bartenders have played an
important part in the expansion of the gin
category in the Americas. Gin has become the
Megs DeMeleunaere, winner of Martin Miller’s Gin’s We Are the Tastemakers contest
hot category in trend-leading cities such as
Fentimans and Fever Tree are only just
New York, San Francisco and Chicago, with the
frequented bars and favourite bartenders.
beginning to penetrate the market, but are
spirit dominating cocktail lists where once
Exposing esoteric ingredients is the perfect
nowhere near becoming mainstream.
vodka prevailed. And the trend is beginning to
way to popularise them.
filter out to second-tier cities and on-trade
While baijiu may not be considered a niche
Popularisation of niche categories
accounts as more bartenders begin
product in a global context, given it is the most
Beyond the more popular spirits, cocktails
experimenting with the category. Martin Miller’s
highly consumed spirit by some distance, the
provide the perfect foundation for the more
Gin CEO Jacob Ehrenkrona remarks:
white spirit is relatively unknown in Western
niche categories, making them more
“Mixologists in many key cities have really
markets. Having added the baijiu brand Shui
accessible for the consumer. The calibre of the
embraced gin over the past five or six years,
Jing Fang to its portfolio, Diageo launched Baijiu
liquid and the drink is always the benchmark,
but now we see this spreading to other cities
Cocktail Week last year and is running the same
although increased experimentation also
and young consumers especially are picking up
event in February 2015, to coincide with Chinese
highlights the number of distinct, exciting
on the trend. Vodka has lost its allure among
New Year. A spokesperson for Diageo said: “New
ingredients. Consumers enjoy mixing cocktails
the younger generation and gin is now the
baijiu cocktails were created to hit the spot for
themselves, taking inspiration from their most
trendy drink of choice. Brands like Martin
cocktail aficionados – people looking for
Miller’s are now becoming an
something different and unique.
aspirational, mainstream luxury.”
Two years ago, no one had heard of
Whereas in Europe the revival of the
baijiu, but all that is changing.”
gin-and-tonic has been the driving
New baijiu cocktails, such as
force behind gin’s resurgence, gin
Baijiu Baby, will be served at
cocktails have been leading the
around 16 exclusive London bars
category’s growth in the US. Broker’s
and restaurants for Baijiu Cocktail
Gin director and co-founder Andy
Week this year, as Diageo seeks to
Dawson says: “While in the UK ginraise the profile of the spirit and its
and-tonic accounts for about 90% of
premium brand Shui Jing Fang.
gin consumption, in the US it accounts
“Baijiu is the largest spirits
for less than 50%. American
category globally and has been
consumers are much more likely to
part of Chinese culture for more
drink a martini or another gin cocktail.”
than 2,000 years. Leveraging
Part of this lies in the fact that the
Diageo’s global network we are
US is not very well prepared for the
now bringing Shui Jing Fang and
gin-and-tonic; tonic water in bars is
its rich culture to new consumers
Dragon’s Claw and Baijiu Baby, two of the cocktails using
Shui Jing Fang for Diageo’s Baijiu Cocktail Week this year
often low-quality and brands such as
globally,” a Diageo spokesperson
12 February 2015
Carefully handcrafted in the Scottish Highlands, Caorunn expertly infuses five locally
foraged botanicals. Artisanal and small batch, beautifully mixing the rugged charm
of Speyside with the urban sophistication of modern Scotland.
Discover at www.caorunngin.com
Please savour Caorunn Gin responsibly
spirits review
Cocktails
says. “Shui Jing Fang’s unique palate and
complex characteristics are creating
opportunities for drinks connoisseurs to
explore and enjoy.”
Soju, another white spirit with high-volume
consumption in the Asia-Pacific market, is also
being afforded exposure in the UK thanks to its
inclusion in cocktail menus. At a small but
popular cocktail bar in south London, a sojubased cocktail infused with lemongrass
flavouring was on the menu during the
summer last year. However, the bar adjusts its
offering to appropriate seasonal tastes, and
currently one of the offerings instead utilises
Mozart chocolate liqueur in the Mochatini
cocktail: “It is a twist on the traditional
espresso martini,” says Carmella Beastall,
mixologist at Seven at Brixton.
Despite the lack of a soju-based cocktail, a
fig liqueur from France and a British vodka,
Element 29, infused with pink peppercorn,
demonstrate the scope, versatility and
seemingly infinte prospects for spirit beverages
in the context of the cocktail market.
Popularisation of brands
The cocktail market is also an important driver
of brand awareness. Spirits that prove
themselves to be very versatile are more likely
to be built into cocktail recipes, which in turn
are recognised by the consumer and thus
become increasingly popular.
A spokesperson for super-premium Scottish
gin Caorunn says: “Ensuring the bartenders
have a basic knowledge of the brands they serve
is key, specifically their provenance, heritage,
basic tasting notes, production method and any
drink recommendations. The more bartenders
can engage and display passion, the greater the
impact is on the sales of spirits.”
Some brand owners have sought to
entrench their brands in the cocktail market
through the creation of signature serves –
cocktails which are made with a specific brand
as an ingredient rather than a generic spirit of
a certain category. For example, Rémy
Cointreau’s signature serve, the
Cointreaupolitan, is a twist on the familiar
Cosmopolitan cocktail, and has Cointreau as an
ingredient, whereas a typical Cosmopolitan
could use any brand of triple sec.
Max Warner, global brand ambassador for
Chivas Regal whisky, says: “Signature serves
are a unique way for brand companies to offer a
straightforward ‘teaser’ into how their drinks
should be served.” Although consumers are
becoming more aware of the choices they have,
they can be easily confused, regardless of their
14 February 2015
London still remains a mecca for the experimental side of cocktail culture
knowledge. Brand owners do their due diligence
and research before they decide to bring a new
product to market; however, they need a way of
enticing the consumer from the get-go.
Although signature serves may not appeal to
Brands
such as
Element 29
vodka are
used in
cocktails at
Seven at
Brixton,
London
everyone, they do make the flavours more
approachable for some consumers, but others
will find it satisfying enough to conduct their
own experimental way of tasting the spirit.
Simon Brekon, global brand director for
Grey Goose vodka at Bacardi-Martini, says
consumer interest in cocktails is helping to
entice new consumers to the brand. He
claims: “Grey Goose has established the
category and was the leader; it did defy
expectation and I think it also does that in the
on-premise because what we are seeing is the
exploration around cocktails.” Cocktails appeal
to consumers’ curiosity and encourage them
to buy better-quality spirits products for
consumption off-premise. “It is about the
experience,” says Brekon.
Similarly, the experience is an important factor
in driving cocktail consumption in the onpremise sector, although there is a big difference
in what is consumed: “You think about the onpremise and you go to the other extreme. It is
about pure craft and skill at the top end, but
they use their own signature spins with their
own variants, their own bitters, etc,” Brekon
says. Referring to the Artesian bar in the
prestigious Langham hotel in London, Brekon
spirits review
points to the “cutting edge” vodka mixology.
“They serve a cocktail called Forever Young,
made from Grey Goose vodka, Martini Extra Dry,
eucalyptus, maraschino and citrus – so very
complex flavours that are beautifully served.”
Cocktail trends
London still remains a mecca for the
experimental side of cocktail culture, with
many bars pushing the boundaries of what can
be done to entertain, tantalise and engage
consumers around the complexities of how
alcohol can be served. This requires a good
understanding of the classic drinks that have
popularised the menus for the past decade and
will always have their place.
Warner sees tradition mixing with technology
in the cocktail market: “People get excited by
the heritage of cocktails. I don’t anticipate that
trend quietening down any time soon. I predict
bottled cocktails will be making a bigger hit in
the future, while the science around service
matching the flavour, the senses and textures
will remain for some time to come.”
A spokesperson from Caorunn also identifies
the importance of brand heritage: “Brand
owners invest a lot in educating and engaging
bartenders. The more staff feel empowered
and take ownership of their own favourites,
the more passionate they will be to sell the
signature serve; it will then become second
nature to engage with their customers better.
Caorunn focuses its efforts on staff education
and provides masterclasses and complex
education kits to key trade partners to improve
staff knowledge.”
The gin revival has certainly filtered into
current cocktail trends, both in
London and further afield.
There is a strong focus
on simple cocktails using
high-quality spirits and
ingredients, proving
that, when it comes to
the perfect cocktail, less is
often more. Seasonality and
locality are one of the hottest
current trends, with seasonal,
fresh ingredients coming to the
fore, in addition to foraged
ingredients and an eye on
sustainability. For Caorunn gin this
is positive trend: “Caorunn gin is
infused with five wild, foraged,
Celtic botanicals, which are all
perfectly balanced, meaning few
additional ingredients are needed to
make a great-tasting cocktail.”
Classics such as the Daiquiri (right) and
Mojito (below) are available regardless
of the season
The trend is evident in the success of Seven
at Brixton, where fresh ginger is sourced
locally for the Daiquiri-based cocktails, and the
popularity of the Mojito with fresh basil
ensures it remains available regardless of the
season. The niche cocktail bar has expanded
with a second outlet after opening three years
ago, having set its focus on providing quality
cocktails at an accessible price. Josh
McGurgan, speaking on behalf of 'Seven', says
it's all about finding creative ways to keep
costs down. “If you're making £5 cocktails then
you need to make it cost-effective and fast.”
Innovation and attention to detail are also
on-trend and brands are working hard to
produce their own modern twists on the classic
cocktail. “Caorunn gin lends itself to a range of
modern and traditional cocktails. The brand
offers its own spin on the well-known classics,
such as its unique take on the iconic martini,
as well as a selection of seasonal cocktails,
including the heart-warming Caorunn Winter
Gin & Tonic,” a spokesperson commented.
High-end mixologists and bartenders are
keen to differentiate their cocktail offerings
using bespoke local botanicals and handcrafted
ingredients, syrups, tinctures, bitters and tonic
waters in some cases.
Premiumisation of cocktails
The advantage of drinking high-quality,
premium spirits over cheaper alternatives is
that they are good enough to drink neat,
combined with a simple mixer, such as tonic
water, or incorporated within a
cocktail. With the current
rise in the popularity of
cocktails, premium
spirits do not do themselves
a disservice to mix with other
liquids, and those that are the
most versatile stand well above
the rest in a competitive market.
“In the world’s best bars and
people’s homes, the use of
premium ingredients is key,” says
the spokesperson.
People often drink cocktails in
the on-trade or at home on special
occasions when they want to treat
themselves, so the quality of a serve
should be reflected in its price and
when customers pay more, they
receive more in terms of the drinking
experience.
There is
definitely a
demand for premium
cocktails out there. Ago
Perrone, one of the world’s
foremost mixologists, has
created a number of cocktails
specifically for Chivas Regal 18
to mark the launch of Chivas’
partnership with Italian design company
Pininfarina. “These cocktails are perfect
for someone looking for a more complex
serve at the top end of the on-trade
offering,” he says.
“London’s better bars are developing a fully
comprehensive ‘Bar Program’, which
encapsulates the drinking experience from
start to finish. It’s not simply the cocktail
selection, but includes the attitude of the staff,
the styling of the cocktail menu, music
selection, careful selection of spirits, seasonal
selections which deliver more appropriate
experiences and the sophisticated, yet relaxed
and welcoming service, which leaves the
audience feeling like they have been truly
looked after. When they get this right – and
more and more places are I can assure you –
who wouldn’t want to pay more for a top
cocktail with a premium spirit?”
An exclusive range of Chivas Regal Extra
cocktails has also been developed by Max
Warner, to meet the needs of the more
adventurous discerning whisky drinker. Chivas
Regal Extra is the fifth permanent expression in
the Chivas Regal family, sitting within the
super-premium range, positioned between
Chivas 12 and Chivas 18. The range includes
six recipes featuring Chivas Regal Extra, with
the addition of fortified wines to evoke the
richness from the sherry casks which are at the
heart of Chivas Regal Extra’s flavour profile.
This further demonstrates the potential
that established brands have in occupying
the space facilitated by the interest in the
cocktail market. ■
February 2015 15
spirits review
Cointreau eyes cocktail culture
Rémy Cointreau liqueurs division CEO Panos Sarantopoulos explains how the firm is tapping into the cocktail culture
The leading traditional full-strength liqueur
brands, such as Cointreau, are making the
transition from their primary after-dinner role
towards cocktail usage. The growth of the
cocktail culture around the world has presented
these brands with a lifeline and brand owner
Rémy Cointreau is grasping it with both hands.
The brand has largely stalled over the course
of the past three decades. Cointreau is currently
selling virtually the same volumes that it sold
back in 1985 – just over 1m cases. While the
brand can be found on most back-bars, the
challenge is to inspire consumers to begin calling
for it again en masse. The company is doing so
by immersing itself in the cocktail scene.
Foremost, it is re-establishing its credentials
within the trade and reminding bartenders that
that orange-based Cointreau played a role in
such original classic cocktails as the Sidecar,
White Lady, Margarita and Cosmopolitan.
At the same time the brand owner is seeking
to move the brand beyond being a mere
ingredient in these classics and become the
primary or base ingredient in new signature
cocktails. Panos Sarantopoulos, CEO of the
group’s liqueurs and spirits division, explains:
“Classic cocktail lovers are attracted to the taste
of Cointreau. It has a large appeal and it works
well in a cocktail. People like the taste of
Cointreau within their cocktails, but don’t
always know what gives them that taste. Our
job is to make them aware that it is Cointreau
that they are tasting and enjoying. Given that,
there is a good chance that it can almost take
centre stage by itself and rather than just
calling for a classic cocktail, perhaps all those
who love the taste of Cointreau will want to call
for a ‘Cointreau something’. Bringing Cointreau
centre stage and establishing a name that
people call for is a big priority for us.”
As a means of achieving that, the company
is promoting the Cointreau Fizz cocktail,
comprising Cointreau, lime and sparkling
water. That same drink is called the Cointreau
Rickey in the US. Sarantopoulos says:
“Cointreau Fizz and Cointreau Rickey are
critical pieces for what we are doing as we
move forward, in the sense that they allow our
consumers to reach for Cointreau in a much
more overt and, from our standpoint,
constructive way.” Other key signature
cocktails include the Cointreaupolitan
(Cointreau, cranberry juice and lemon juice)
and the Mademoiselle Cointreau (Cointreau,
basilic, cucumber, lime juice and soda).
Beyond that, Rémy Cointreau is seeking to
tweak the brand’s marketing and express the
fact that Cointreau embodies the free spirit of
16 February 2015
Cointreau is reminding bartenders that it played a role in the original classic cocktails
the Parisian woman. Sarantopoulos explains:
“This je ne sais quoi (an inexpressible
something) that Parisian women have is
admired all over the world – from knowing
which clothes to wear and how to twist them
so that they are always elegant and always
expressing themselves freely. The free spirit of
the Parisian woman appeals to women and
attracts men as well, so that is what we are
looking at [in upcoming marketing campaigns].”
Innovation role
Innovation, particularly premium innovation, is
also playing a role in the revitalisation strategy
and, earlier this year, the company introduced
Cointreau Noir. The extension is a blend of
Cointreau orange liqueur and Cognac, modified
by adding macerations of walnuts and almonds,
which give the dark spirit a sophisticated aroma
and complexity. The basic difference between
the base Cointreau and Cointreau Noir is that
one is a white spirit and the other a dark spirit.
Beyond that, Noir’s richer flavour can add a
dimension to cocktails that don’t necessarily
come through with the parent brand.
These and other initiatives seem to be
making a difference and Cointreau is back in
growth. Rémy Cointreau reported that liqueurs
and spirits sales totalled €129.5m ($160.2m)
for the fiscal half year to 30 September, an
increase of 9.1% on the previous period. The
company said that Cointreau posted a “solid
performance”, thanks to strong momentum in
its major markets and a favourable phasing of
shipments to the US over the period.
Cointreau today derives some 21% of its
sales from the US market. Sarantopoulos says:
“Cointreau is firmly positioned in the premium
spirits segment in the US. Beyond that, I see
our signature Cointreau Rickey starting to
make inroads in the on-trade as well as slowly
entering ‘at home’ entertainment. We are
looking at creating a virtuous cycle of moving
forward on both value and volume in the US.”
France, the UK, Germany and Belgium are
the next-largest markets for Cointreau.
Sarantopoulos adds: “Cointreau has a presence
in more than 120 countries and a rather large
footprint. It has a historical presence in the US,
driven to a great extent by the classic cocktail
business. As the cocktail culture expands
throughout the world, Cointreau’s footprint
gets stronger and stronger. We are looking at
going forward by focusing on the top cities,
rather than looking at top countries, because
that is where most of the interest from
Cointreau consumers lies.”
Sarantopoulos also expects Cointreau to
benefit from Rémy Cointreau’s strong distribution
network in Asia, particularly China and Japan. To
date, the import market in China has chiefly been
about Scotch and Cognac. He believes that is
going to change. Commenting on China he says:
“Because of the sheer size of the country and the
changing demographics, you are bound to have
opportunities. The appeal of the Cointreau
(orange) flavour is quite strong in this part of the
world. It all stacks up very nicely and leads us to
look at the market more seriously. We are really
well positioned for future growth.” ■
spirits review
Absinthe overcomes growing pains
Absinthe’s long absence from many key markets makes it a youthful category, as Joe Bates reports
A checklist for anyone writing about
absinthe has to include enough tick boxes to
cover the spirit’s colourfully chequered history.
Along with slotted spoons, ice-cold water and
sugar cubes, mention must be made of
absinthe’s championing by artists such as
Vincent Van Gogh and Edward Degas. Finally,
no feature on absinthe is complete without
detailing its long exile ordered by European
governments convinced (erroneously) of its
dangerously psychoactive qualities.
Yet despite all this weighty ‘baggage’,
absinthe is a comparatively youthful spirits
category in many markets. It arguably continues
to benefit and suffer from this immaturity in
equal measures. Global sales volumes are still
tiny, reaching just 208,000 cases in 2013,
according to the IWSR’s figures, which suggests
this reborn category has a considerable distance
to travel before fulfilling its potential.
Sales of absinthe took off at the turn of the
Millennium as first France, then other European
countries and finally the US legalised it
following decades of prohibition. A wave of
new energetic producers, creating absinthes of
all kinds, strengths and qualities, helped kickstart the category, as did the drink’s historical
notoriety among a group of in-the-know
younger consumers.
However, the global recession led to a slump
in sales. Compound annual growth rate
Tanya Sklar, international director,
Wine & Spirit International, owner
of Hapsburg absinthe (right)
(CAGR) sales volumes for absinthe
between 2008 and 2013 fell -3.3%.
Since then, sustained efforts by suppliers
to educate consumers and the on-trade, along
with absinthe’s gradual
reappearance on upscale
cocktail lists as bartenders and
mixologists have ‘rediscovered’
it, appear to have arrested the
decline. Global sales rose an
encouraging 5.4% in 2013.
George Rowley, founder of La
Fée, the first absinthe to be sold
legally in France after the ban was
overturned in 2000, reveals 2013
was a year of strong growth for
the brand, with new distributors
signed up in Ireland, New Zealand,
Switzerland, Germany, the
Netherlands, the Canadian province
of Quebec and US state Michigan.
He adds that 2014 saw the start
of his ‘La Fée World Education Tour’,
which seeks to educate consumers
about the absinthe category. Rowley
has already taken the tour to Dubai
and Australia and it will continue to
Canada and California later this year.
“In 2015 we also plan to open new
markets in Eastern Europe, Africa and
Asia, as well as completing our coverage
of Canada with a new partner in Ontario,”
Rowley reveals. “Our partner for Latin
America has finalised agreements for
distribution in Mexico and Peru, so we look
A question of classification
One of the biggest concerns for many high-end absinthe
producers in the traditional absinthe-producing countries of
France and Switzerland is the category’s continuing lack of
official regulation, despite recent efforts by the European
Parliament in 2013 to pin down a common definition.
The current rules are somewhat thin on the ground.
Absinthe doesn’t have to contain any thujone – the chemically
active ingredient in the spirit’s key ingredient wormwood. The
maximum level of thujone permitted is 35 millograms per litre.
Aside from this one stipulation, the term ‘absinthe’ is a blank
sheet, which perhaps explains why today absinthe is not just
produced in its traditional base of France and Switzerland. It is
made everywhere, from Spain to Italy and the Czech Republic,
using a range of recipes. No longer just green, consumers can
purchase it in a rainbow of colours and flavours. Some varieties
contain no thujone at all.
In 2010 Swiss absinthe producers in the country’s Val-deTravers region won protected designation of origin status for
their products from the Swiss Federal Department of
Agriculture. However, last year that ruling was overturned by
a Swiss court after complaints by rival absinthe producers in
France and Germany.
George Rowley, founder of La Fée, argues for a more wide-
ranging classification agreement. “Some of us in the market
(French producers) are looking to the EU (and ideally
reciprocated by the US) for an agreed classification for the
category,” he explains.
“Due to the various types of product calling themselves
‘absinthe’, it’s likely we can only split absinthe into an upper
and lower levels: ‘Absinthe supérieure’ – traditional, natural
spirit with traditional herbs and spices (wormwood, fennel and
anise), and the rest. This is ongoing work and may take
several years to be agreed. This will be to the benefit of the
category and consumer as it should give a clear understanding
as to what real absinthe is in substance and not just in name.”
Unsurprisingly, others in the industry see the issue differently.
Dan Bolton is managing director of drinks distribution and
marketing firm Hi Spirits, which handles the Czech, Italian and
French absinthe brands Sebor, Hapsburg and Louche in the UK.
“There’s really no reason for that kind of intervention in the
market in the case of absinthe,” he argues. “There are drinks
categories, from Champagne to sambuca, where there’s a
need to protect a regional speciality, but absinthe has a panEuropean heritage stretching back centuries with many elixirs
and remedies made using wormwood. Every tradition deserves
equal respect.”
February 2015 17
spirits review
Absinthe
forward to those becoming active as well. We
are also targeting continued our growth in duty
free and [plan] to give a higher focus on a few
states in the US with our Absinthe Supérieure
range and La Fée Fountain Program.”
“We had a good year last year, growing our
existing markets and opening up new
international markets in Singapore, Hong
Kong, Vietnam, Thailand and the Czech
Republic, with a few more countries to come
onboard shortly,” says Sven Olsen, founder and
CEO of Metropolitan Spirits, the owner of rival
French brand Fontaine Absinthe.
“In many of these countries absinthe is a
relatively new and unexplored category, but
our focus is on premium cocktail bars, five-star
hotels, as well as the more quirky bar outlets,
has proven quite successful.
“London remains a key market as it’s such a
beacon for the rest of the world and we’re
seeing growth in virtually all our markets,
albeit from a low level, which has been driven
by our distributor network training and
education programmes. Clearly, there’s also a
greater understanding of quality absinthe and
the versatility of the product.”
Andrea de Vincenzi is regional manager EU
at Allied Brands, the owner of Italian absinthe
Xenta, the best-selling absinthe in Russia. “We
have a 70% market share in Russia and an
even higher share in Ukraine despite the war
there,” he reveals. “We are also doing
fine in Kazakhstan, the Baltic States
and Greece. We also feel it is the
right time to move into the Chinese
domestic market.”
Cocktail approach
De Vincenzi says the company avoids
the promotion of the traditional way
of serving absinthe where iced
water is tickled over a
sugar cube. Instead, it
is trying both to support
the revival of traditional
cocktails, such as the
Sazerac, which were
once made with
absinthe, and the
creation of new
cocktails, which use the
ingredient.
“We made a joint
venture with a former
world champion
bartender who created
a new range of cocktails
18 February 2015
Encouraging trial
How challenging is it for absinthe
producers to encourage consumers
new to the category to try a
product, which routinely sells for a
high price? “While Fontaine
Absinthe clearly is an ultrapremium product both in terms of
quality and price, we are still
operating in the ‘affordable luxury’
space,” argues Sven Olsen,
founder and CEO of Metropolitan
Spirits, owner of Fontaine
Absinthe.
“Anybody with a real interest to
taste Fontaine Absinthe can afford
a £10 Fontaine cocktail or a
traditional absinthe drip. The
classic absinthe ritual is clearly an
intriguing experience for any
consumer wanting to try Fontaine
Absinthe for the first time.
“Other easily accessible ways of
trying absinthe for the first time is
one of our simpler signature cocktails, such as the Pontarlier Mule, which is Fontaine
Absinthe over ice mixed with ginger ale and a squeeze of lemon and lime. Fontaine
Chocolat over ice with sea salt is clearly also an easy sideways entrance to the
absinthe category.”
“In the on-trade price isn’t the main driver,” agrees Hi Spirits MD Dan Bolton.
“Consumers are looking for new and interesting drinks and a genuine ‘big night out’
experience on the more limited number of occasions they’re out. We’re seeing
absinthes used in a wider range of cocktails than ever. In the off-trade it’s a question
of crossover, as consumers who’ve enjoyed absinthe mixed drinks seek to replicate
the experience with a spot of home mixology.”
for us. This guy invented a great range of
cocktails for China too, using ingredients such
as lychee and green tea, which are
appreciated there.”
Gearing up for a major launch into
the US in 2015, Hapsburg is
another Italian absinthe brand
convinced that cocktails,
mixology and innovation are the
way forward. Says Tanya Sklar,
international director at brand
owner Wine & Spirit
International: “Most of our
consumers are looking for both
novelty and tradition in their
absinthe and we can definitely
provide this. We maintain that
Sebor Absinth (left),
Above: Hi Spirits illustrates
the ritual way of drinking
absinthe
people who buy our absinthe are not just
looking for a regular one-off drinking
experience. Drinking Hapsburg is a lifestyle
and people love to be part of something bigger
than themselves.
“The cocktail culture, mixology and
innovation are a quintessential part of our brand
identity and bringing out new and exciting
products is something that we have always
done in order to ‘shake things up’,” she adds.
“For instance, this year we will launch Hapsburg
X.C Red Summer Fruits and Hapsburg Absinthe
X.C Black Fruits of the Forest to join our existing
Traditional and Cassis range.”
Few spirits categories feature such a lack of
agreement as absinthe among producers in
terms of the way it is produced, how it should
be defined, served and promoted (see box).
However, the global surge in interest in
classic cocktails and cocktail culture in general
bodes well for all absinthe producers in the
years ahead. ■
spirits review
Sambuca: scope for growth
Humphrey Serjeantson analyses the opportunity for Italian staple sambuca
Global consumption of sambuca declined
in 2013 by nearly -3.5% in volume terms,
falling from 2.37m nine-litre cases to 2.29m
cases. Against this backdrop, however, the
share of sambuca consumed outside Italy has
been rising gradually; in 1999 only 43.9% was
drunk outside Italy, but by 2013 that figure had
risen to 51.5%. While sambuca’s initial spread
outside its domestic market can be put down
to the spread of Italian restaurants around the
world, in recent years growth in many markets
is just as likely to have been driven by
consumption in bars and nightclubs as new
occasions of consumption arise.
In Italy itself sambuca declined -2% in 2013,
slower than the general decline for spirits and
much slower than declines in brandy and
liqueurs overall. Italy’s total consumption of
sambuca in 2013 was exactly the same as it
was in 2004, having grown and fallen in the
interim. On the positive side, the decline in
2013 was slower than the 2009-2013 average.
So against the backdrop of a challenging
economy and particularly high unemployment
among younger people, this is not such a bad
result. The Italian market is dominated by the
Molinari brand, a bottle of which can be found
behind the counter at almost any bar up and
down the country.
Of the top 20 markets only two were able to
bring any growth to the category in 2013: the
Netherlands, which grew 2.2% and travel retail,
which saw an impressive 7.2% increase. 2014
has been a good year for Molinari in travel
retail, according to international division
manager Giuseppe Bellotti: “Molinari has shown
good vitality in travel retail, where it is the only
sambuca in the top 100 global spirits brands.”
Molinari’s largest export market is Germany
and here 2014 saw a change of distributor for
the brand. “After an initial period of adjustment,
in the second half of the year the brand showed
good progress in both the off- and on-trade,”
says Bellotti. “In a declining market for
sambuca, mainly driven by the fall in privatelabels, Molinari has gained market share.”
Of the top 20 brands of sambuca only two
saw growth in 2013: Antica and Ramazzotti
(owned by Pernod Ricard). Summing up his
brand’s performance last year, Nicola dal Toso,
export director at Rossi d’Asiago, producer of
the Antica brand, identifies the UK, Germany
and Italy as the key drivers of growth. “In
Germany we have noted particular interest from
retail chains, although this market is basically a
new one for us. We are present mainly in the
off-trade channel, but this year [has seen]
several activities in the on-trade, including PR
consideration of the tough economic
environment in Europe and of the very difficult
market conditions in a number of markets”,
says Bellotti. “In export we had a positive
performance in significant markets such as
Benelux, Switzerland, Austria, Denmark, Spain
and Brazil, where Molinari has reinforced its
strong leadership in the sambuca category.”
Russia and Ukraine, by contrast, saw falls in
sales for Molinari in 2014 – likely to be the
case for many international brands.
US decline slows
Molinari’s Basilicum Signature Cocktail
events and so on. In general we are very happy
and satisfied with the results achieved so far.”
While Italy may be the biggest sambuca
market in the world, for dal Toso, he says: “It’s
also the most challenging due to several
players at worldwide level.” Despite this,
growth is coming. “Last year we more than
doubled our sales of Antica in both the
off-trade and on-trade, thanks to several
promotional activities. Italian consumers
recognise the high quality of the product.”
Globally Molinari grew slightly in volume in
2014, “which we see as a positive in
The US saw continued growth in spirits overall
in 2013 and +2.3% growth in flavoured spirits,
and while this did not translate into a return to
growth for aniseed or for sambuca, the latter
did slow its decline to just -1.1%. Sambuca
remains by far the largest aniseed segment in
the US, accounting for over half of the entire
category. Here the market is dominated by
Diageo’s Romana brand, which accounts for
75% of the total. Romana may sell in 40
markets around the world, but in 2013 just
under 90% of those sales – 162,000 cases –
were in the key US market. In all the other
markets in which it sells, volume does not
exceed 3,000 cases in any single market.
Molinari’s Bellotti senses an opening in the
Americas, saying: “The weakness of the euro
represents an opportunity in the US and Latin
America.” As such, two dedicated brand
ambassadors will be working to expand the
distribution of Molinari in the on-trade in the US.
However, dal Toso of Antica explains the
difficulty of penetrating this key market. “The
US is a very challenging market. Sambuca is a
very niche category and the wholesalers don’t
encourage sales. A bottle of sambuca can
spend up to a month on a bar’s shelf – this is
Sambuca: top 10 markets
Country
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Italy
UK
USA
Germany
Canada
Russia
Duty Free
Australia
South Africa
Netherlands
Others
Total
Volume
2009
Volume
2012
Volume
2013
1,194.3
391.0
252.0
193.0
116.3
36.8
39.5
47.7
51.0
18.5
154.1
2,494.0
1,068.0
394.0
218.0
185.0
106.0
63.8
47.0
54.0
41.0
23.0
167.7
2,367.4
1,047.3
366.0
215.5
182.0
103.0
62.0
50.3
49.2
37.5
23.5
151.3
2,287.5
All volumes in ’000s of 9-litre cases
% CAGR
% change
2008-’13 2013 on ‘12
-3.0
-0.2
-5.3
-1.4
-3.2
9.8
4.3
-0.3
-6.3
3.0
-0.9
-2.2
-1.9
-7.1
-1.2
-1.6
-2.8
-2.8
7.2
-9.0
-8.5
2.2
-9.8
-3.4
Source: The IWSR Database 2015 ©
February 2015 19
spirits review
Sambuca
Sambuca: top 10 brands
Brand
Owner
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Molinari
Rossi D'Asiago
Diageo
Pernod Ricard
Luxardo
Luxardo
Lucas Bols
Lucas Bols
Branca
DGB
Molinari
Antica
Romana
Ramazzotti
Luxardo
Dei Cesari
Galliano
Vaccari
Borghetti
Zappa
Others
Volume
2009
Volume
2012
Volume
2013
% change
2013 on’12
% CAGR
2008-’13
757.8
163.4
230.7
181.8
157.2
41.8
43.8
27.50
30.2
34.00
825.98
732.2
226.2
185.9
160.5
132.9
41.3
41.1
35.0
32.4
30.0
749.8
704.5
233.8
180.4
171.9
104.5
41.3
37.2
34.8
31.6
30.0
717.8
-3.8
3.3
-3.0
7.1
-21.4
-0.1
-9.6
-0.5
-2.5
Nil
-4.3
-2.2
11.6
-6.6
-0.8
-8.3
-2.3
-3.3
4.0
0.9
-3.0
-3.3
All volumes in ’000s of 9-litre cases
why the wholesalers’ agents spend little time
for a product with low sell-out.”
Molinari performed well in Brazil in 2014,
according to Bellotti, showing growth from a
small base. “The sambuca category is very tiny
and we are working to position Molinari as a
premium after-meal treat,” he says, noting that
the traditional Italian occasion of consumption
is the focus: “Through the use of specific
point-of-sale material we will educate
consumers to the ritual of ‘Molinari caffé
corretto’” – a way to enjoy Molinari with
espresso coffee, which in Italy is a kind of
‘institution’. Molinari will also be introduced to
Colombia in 2015, which Bellotti identifies as
“an interesting opportunity”.
The UK market more than doubled in size
between 2005 and 2011, but declined to
366,000 cases in 2013. Growth has been
driven in the UK in recent years by bars and
nightclubs serving sambuca in shots rather
than the traditional after-meal occasion. Two
brands – Luxardo and Antica – have been the
key players and while Luxardo grew fastest
to 2008, since then Antica has been the
market leader and, as dal Toso points out,
this is in part driven by recently introduced
smaller bottles. “The 50cl bottle size is selling
very well in the UK. Antica Sambuca [was]
the second best-selling product after Smirnoff
during the first week of sales at Booker. Also,
the price under £10 ($15) is very attractive
to younger consumers, who represents
Antica’s target.”
Further afield, Molinari is looking to southeast Asia “as a region to develop in the medium
term and where Molinari has to take its place as
the category-leading brand. Sambuca volumes
are still quite limited, but we see the
globalisation of consumers’ habits as an
opportunity for an international brand. During
20 February 2015
Source: The IWSR Database 2015 ©
2014 we appointed a new distributor in
Thailand, which will also cover the tourist areas
and will supply King Power duty free where
Molinari gets its rotation from the flow of Italian,
German, Russian and Scandinavian tourists.”
Other markets in the region are also in
Molinari’s sights. “We are in the process of
defining a cooperation with one company,
which will cover a number of markets in southeast Asia where Molinari does not have a
presence yet, such as Indonesia, Vietnam,
Philippines,” adds Bellotti.
While he expects Molinari’s growth in its core
export markets to come from gaining market
share, “in the medium-/long term we see Asia
and India as a good opportunity for growth,” he
says. “In more mature markets we expect that
the success of brands with solid history and
heritage will continue, supported by the
‘rediscovery’ instigated by mixologists who look
for brands and products with credibility.”
At Antica, dal Toso sees 2015 as a “a very
challenging year”, which will see “important
investments and new opportunities to grasp”.
The company is targeting Russia, Germany,
Italy and India in particular.
Mixology a key focus
One key potential growth channel for niche
spirits categories the world over is cocktails.
Consumers in many markets are becoming
more interested in cocktails, almost regardless
of their economic situation. While these
symbols of drinking sophistication might seem
obvious to markets experiencing strong
economic growth, what has also been seen in
some cases in recent years (Greece is an
example) is markets where the economic
situation is tough but cocktails are capturing
consumers’ imaginations despite, rather than
because of, their relatively high cost.
Consumers continue to aspire to sophistication
in what they drink, and simple cocktails,
requiring little skill to prepare, can often be had
for a relatively reasonable price.
Molinari launched a mixology project in
2013, aiming to get closer to bartenders and
to show the versatility of sambuca “beyond its
traditional ways of consumption”. The brand
has been seen at bar shows in Athens and
Moscow, says Bellotti, “which have shown us
how receptive bartenders are regarding this
completely new aspect of our category”. This,
in turn, has led to masterclasses in Russia,
Greece, Italy and India – and not just in capital
cities. For 2015 the company is planning more
of these events in Italy, Greece, Turkey and
India. The reception so far has been positive,
claims Bellotti: “In particular, countries where
already there is a sambuca consumption
tradition, such as Italy and Greece, have
shown a surprising interest in the versatility of
sambuca as basis for cocktails.”
But can sambuca succeed in this channel?
Sambuca’s chief asset – its strong aniseed
flavour – could actually be the biggest obstacle
to its growth in cocktails, as dal Toso agrees:
“The anise spirits are not the easiest products
to mix due to the particularity of the flavour.”
Nonetheless, Antica is also looking for growth
in this direction: “The mixed drink is increasing
and consequently there are consumers to
reach. Our signature cocktail ‘A Star’ works
very well and our new brand ambassador,
Bruno Vanzan, is developing a cocktail menu
with Antica Sambuca.” Outside cocktails the
one mix in which sambuca has been proven to
work well is in coffee – where the strong
flavour of the aniseed and that of coffee
complement each other. It begs the question,
has anyone tried a cocktail made with
sambuca and coffee liqueur? ■
spirits review
Premium white spirits stay in play
Premiumisation in white spirits is continuing, but is there a limit to its reach? Agata Andrzejczak reports
Premiumisation has been taking place
across almost all wine, spirits and beer
categories. The global white spirits market, in
particular, has seen this trend, as brand owners
of vodkas, white tequilas gin or, most recently,
white rums have been focusing on growing the
value of their products and not just volume.
Trading up to premium-and-above quality
products has been evident in almost all markets.
However, it is the US that leads the way,
accounted for more than half of the total global
premium-and-above white spirits market in 2013.
While overall vodka growth has slowed in
many markets, the trend towards higher
qualities has been continuing. Vodka is the
largest premium-and-above international spirits
category, with total global consumption reaching
almost 27m cases in 2013, of which over 70%
was in the US. Absolut is the largest vodka
brand in the premium-and-above segment in
the US, at 4.4m cases, but other brands have
successfully entered the segment. Grey Goose,
one of the creators of the super-premium
category in the 1990s, reached 2.8m cases in
2013 and remains the leader of that quality
segment, followed by Cîroc and Belvedere.
Grey Goose global brand director Simon
Brekon explains: “Grey Goose has established
the super-premium vodka category. Much of
the success is the fact that there is a lot of
exploration around cocktails. Consumers are
curious and more willing to experiment than
ever before.”
While vodka in the US is growing much more
slowly than in the past, there are some brands
showing high growth. Cîroc, in particular, saw
significant volume growth, rising from almost
nothing a decade ago to 2.2m cases in 2013.
The hottest brand at the moment is Tito’s
Handmade vodka, which gained more than 1m
cases over the past five years. One of the
original craft spirits, the brand has been
gaining volumes year on year and without the
addition of flavour line extensions.
International appeal
After premium and then super-premium vodka
made its initial breakthrough in the US, the
question arose as to whether the trend was
transferable to other markets. The answer is a
resounding yes and premium-and-above vodka
continues to expand its appeal in markets
including France, the UK, Switzerland,
Germany, Italy, Portugal and Turkey.
Brekon of Grey Goose says: “We are seeing
good super-premium vodka growth in lots of
areas around the world. If you are going to
spend your money, many consumers want the
22 February 2015
Grey Goose VX, launched last year
finest. That is universal. Super-premium vodka
overall has got some good momentum in
Europe. I think the UK will continue to grow.
The same holds true for Israel, France and
Germany. There is a continued relevance in
the category for both consumers and trade.”
However, some think there is a limit to how
far vodka can extend upwards. Diageo CEO
Ivan Menezes recently told journalists in
London: “If you look at what is happening in
whisk(e)y, tequila and other categories, there
has been a real build at the above-$40 and
$50 price points. I don’t think that is going to
happen in vodka. People are trying, but I
personally don’t think there is a big space for
vodka producers to move upwards. Now, the
$25-$40 area – the place where Cîroc plays –
is still growing fast. If you look at Cîroc around
the world, it is exploding. Just look at the UK.
We doubled the volume of Cîroc in the UK.
That price point still has a lot of room to grow,
but going beyond that I am cautious. There is
a limit to how far you can take vodka up. You
don’t have an age dimension in vodka that you
do in whisk(e)y, rum and tequila. It will be
more limited.”
While standard and premium vodka fell in Italy,
wealthy consumers unaffected by the economic
downturn continued to flock to the super-premium
segment. Similarly in Turkey, the lower end of the
vodka market stalled, while super-premium vodka
experienced double-digit growth as consumers
increasingly traded up in the on-trade.
However, in some markets such as Portugal,
Premium-and-above white spirits by category
Category
1.
2.
3.
4.
5.
Vodka
Gin
White tequila
White rum
Cane
Total
Volume
2009
Volume
2012
20,771.3
25,701.4
3,899.8
5,102.8
2,178.2
3,430.2
165.5
199.7
35.4
57.1
27,050.1 34,491.2
All volumes in ’000s of 9-litre cases
Volume
% change
2013 2013 on ‘12
26,666.3
5,615.0
3,897.3
212.9
62.3
36,453.8
3.8
10.0
13.6
6.6
9.2
5.7
% CAGR
2008-’13
4.3
6.7
12.5
11.3
16.0
5.4
Source: The IWSR Database 2015 ©
Premium-and-above vodka: top markets
Country
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
USA
Russia
Brazil
UK
Canada
Spain
Australia
Israel
South Africa
Kazakhstan
Others
Total
Volume
2009
Volume
2012
Volume
2013
% change
2013 on ’12
% CAGR
2008-’13
15,538.0 18,870.0
2,797.8
2,969.3
225.0
613.3
159.1
257.4
207.8
287.3
384.5
305.8
163.7
235.3
44.3
114.5
41.0
77.8
73.8
126.0
743.5
1,215.7
20,378.3 25,072.1
19,185.0
3,102.5
685.5
334.4
308.3
285.3
278.8
155.5
124.5
116.8
1,367.5
25,943.8
1.7
4.5
11.8
29.9
7.3
-6.7
18.5
35.8
60.1
-7.3
12.5
3.5
3.9
-3.2
33.4
17.3
11.4
-6.2
19.7
41.7
23.0
20.8
17.2
4.1
All volumes in ’000s of 9-litre cases
Source: The IWSR Database 2015 ©
spirits review
super-premium vodka’s growth is being
overshadowed by the gin category, while in
Spain super-premium growth has been driven
entirely by tourism and a trade push rather than
genuine demand among locals.
Premium gin doubles volumes
Gin is the second-largest premium-and-above
international white spirits category behind
vodka, with global volumes at 5.6m cases.
Outside the US, which again remains the top
market for premium gin at 2.8m cases, highend gins have been faring well in Europe – in
particular the UK, Spain, Germany and Belgium.
The European market for premium-and-above
gins has doubled in volume over the past five
years to reach almost 1.5m cases in 2013.
Super-premium brands are
continuing to see substantial ontrade growth, becoming the
preferred status drink among many
young professionals. The popularity
of the Hendrick’s-and-tonic and
cucumber serve has driven other
gin brands to focus on creating
an experience around their
brands and, increasingly,
bartenders have been pushing
this trend forward. In markets
such as Germany and the UK
the popularity and success of
premium international brands
has encouraged a vast
number of smaller local
players to launch their own
premium variants.
In mature gin markets such
as the UK and Spain superpremium brands like Caorunn
are increasingly focused on
marketing the credibility and authenticity
behind their product to establish a position
within the market. The flourishing interest in
boutique brands shows consumers are
responding well to this.
Although growing, the premium-and-above gin
category remains heavily concentrated in a
handful of markets, with the US, the UK, travel
retail, Spain and Canada accounting for over
80% of the global sales. However, there are
other regions where it seems to be emerging.
James Chase of Chase Vodka says: “South
America, India and north Asia are the hottest
Diageo has launched Jinzu, a gin with a
‘Japanese twist’ (above). Belvedere
claims to thrive with innovations such as
the BelveBear (right)
Premium-and-above gin: top markets
Country
1.
2.
3.
4.
5.
USA
UK
Spain
Canada
Germany
Others
Total
Volume
2009
Volume
2012
2,337.5
354.5
170.8
156.8
42.8
502.2
3,564.4
2,682.0
458.2
433.3
216.6
98.8
723.8
4,612.6
All volumes in ’000s of 9-litre cases
markets for us and the Elegant Crisp Gin, at RRP
£45 a bottle, is doing especially well in Spain,
Germany and Italy.”
On-premise focus
The premiumisation of the vodka and gin
category has been particularly noticeable in the
on-trade. Premium-and-above vodka is ever
more present in top-end on-trade venues taking
market share from categories such as
Champagne. Belvedere CEO Charles Gibb tells
the IWSR Magazine: “Belvedere’s sales are
growing steadily in the on-premise sector,
which has been a traditionally strong
business element for the brand. Belvedere is
a leader in the trendiest hotspots; a position
it maintains by constantly presenting new
products and rituals to energise the brand
in the nightlife scene. Belvedere thrives with
innovations such as the BelveBear and the
luminous Silver Sabre bottles that excite
consumers and the industry influencers.”
Volume
% change
2013 2013 on ‘12
2,838.5
562.5
460.0
228.0
127.5
872.1
5,088.6
5.8
22.8
6.2
5.3
29.1
20.5
10.3
% CAGR
2008-’13
2.1
11.0
26.2
9.1
22.8
13.2
6.6
Source: The IWSR Database 2015 ©
Caorunn gin global brand manager Ibolya
Bakos-Tonner comments: “Palates have
become more sophisticated, and drinkers
more discerning. The modern gin age is
central to the revival of cocktail culture. Truly
great gins offer a depth of character and taste
that is very appealing for bartenders and
consumers alike. The sustained growth in the
premium gin category has been supported by
the on-trade channel, but we can see some
movements towards in-home mixology as
discerning consumers are becoming more and
more adventurous.”
There has been an interesting entry into the
gin category with Diageo’s launch of Jinzu, a
gin with a ‘Japanese twist’ – traditional gin
infused with Japanese botanicals and sake.
Nick Temperley, head of Diageo Reserve GB,
comments: “We are very pleased to see Jinzu
launching to market. The intention of the Show
Your Spirit competition was to create a product
for bartenders, by a bartender. We feel that
who better to inform our brands than those
that work with them the most? We believe that
Jinzu will be a strong addition to our gin
portfolio, sitting alongside Tanqueray Ten as a
super-premium offering.”
Tequila surges
Tequila is another important white spirits category
where premiumisation has been very evident.
The market, led by Patrón Silver, gained 1.7m
cases over the past five years to reach just under
4m cases in 2013. Most premium-and-above
tequilas sell in the US, which accounts for over
90% of the global sector.
Patrón ticks all the trend boxes important to
today’s American consumers: high price points;
white; aged and crafted. Few brands can really
claim to have transformed the broader white
spirits industry. Absolut made the first big
breakthrough by pioneering the premium
vodka space almost 30 years ago. Then came
Grey Goose in the 1990s and the many superpremium vodkas that followed. Patrón really
February 2015 23
spirits review
Premium white spirits
Premium-and-above tequila: top markets
Country
1.
2.
3.
4.
5.
USA
Mexico
Russia
Canada
Australia
Others
Total
Volume
2009
Volume
2012
4,023.5
544.7
93.3
26.6
4.9
115.9
4,808.8
5,755.0
688.0
176.9
49.0
26.1
191.5
6,886.3
All volumes in ’000s of 9-litre cases
marked the next evolutionary stage by
establishing the ultra-premium ($45+) white
spirits market and white (or silver) tequila.
Patrón international president and COO Dave
Wilson says: “We have had meteoric sales
increases over the past decade. A lot of our
opportunity is international. We need to
replicate the same things that we have done so
well in the US in other parts of the world. We
will be investing very heavily to do just that.”
In addition, there have been a lot of recent
brand launches, often with celebrity
connections. For instance, Sean ‘Diddy’ Combs
teamed up with Diageo to launch luxury
tequila brand DeLeon.
Yet despite pockets of growth and increased
interest in niche tequila brands, the category is
struggling to develop beyond its small base in
many markets. There have been signs of
premiumisation in markets such as the Czech
Republic and Denmark and a nascent interest
in mezcal in markets such as Switzerland, but
over the last year much of this remained
limited to the specialist on-trade. For the most
part this under-development is due to a lack of
understanding and under-appreciation on the
part of European consumers. With markets
dominated by standard mixto brands and a
lack of investment on the part of operators
relative to other categories, many European
markets continue in this cycle.
The UK market is still in its infancy in terms
of understanding the tequila category.
However, the market is so heavily influenced
by the US, that the category’s popularity
across the water is expected to filter over to
the UK in the near future.
Looking at other spirits categories, premiumand-above rums have struggled somewhat to
convince consumers to try the product, as
many perceive rum as low-priced product. The
good news is that many key brands are
targeting this area with attractive products,
such as Barceló Gran Platinum, Botran Reserva
Blanca, Brugal Titanium or Stolen White. These
24 February 2015
Volume
% change
2013 2013 on ‘12
6,350.0
800.7
162.5
54.8
36.1
210.0
7,614.0
10.3
16.4
-8.1
11.9
38.6
9.7
10.6
% CAGR
2008-’13
10.3
4.5
0.4
23.6
58.6
14.8
9.6
Source: The IWSR Database 2015 ©
have been slowly expanding their distribution.
Consumers are gradually beginning to
understand concept of premium white rum.
On the move
Travel retail is an important channel for
premium-and-above white spirits. with all
categories experiencing healthy growth,
particularly for gifting occasions.
White spirits have lagged behind brown spirits
in travel retail as the category tended to be more
standard-priced. But the recent proliferation of
high-end white spirits has made it more
attractive to travel-retail operators and they have
started to focus on it to a greater extent.
Room for future growth
Although still heavily focused on the on-premise
market, many brand owners believe that there is
plenty of room for growth for the premium-andabove white spirits category due to its relevantly
small off-premise presence. The growing
consumer base in the on-premise sector will
certainly benefit the off-premise channels.”
Brekon of Grey Goose says: “The skill levels
and the presentation among top-end bars and
mixologists are rising. They are upping their
game all the time, because consumers are
demanding it, and that is leading into better
knowledge and experimentation at home, so
we are seeing growth in both channels.”
Still, the category faces future challenges.
The whisk(e)y revival in the US and reported
vodka fatigue could present an obvious
roadblock to future progress. Flavoured
whiskies, in particular, are appealing to
younger females to some extent at expense of
vodka. SPI export director Robert Cullin says:
“Obviously brown spirits are very hot right
now, particularly the honey-infused whisk(e)y,
so it is a very competitive landscape. That is
primarily true in North America, but also in the
UK and some other more Western-focused
markets where everyone is competing for the
same consumer.”
There is also a sense that bartenders are
now suffering from vodka fatigue and tending
to promote more exotic spirits. Consumers
are also tending to look towards the spirit
rather than mixers for flavour. Cullin adds: “I
don’t think there is vodka fatigue as much as
there is a lot of innovation going on in other
categories. We see boutique gin becoming
very popular and brown spirits are finding a
new niche with this generation. We are even
seeing cider coming into the fold. There are
just a lot more categories competing for the
traditional vodka consumers, so we have got
to be quite innovative and unique going
forward. It is not vodka fatigue. It is just
more competition.”
Some vodka brands, though, such as Tito’s,
have managed to meet the demands of the
new zeitgeist, albeit with some detractors.
Tito’s competes on price with the altogether
more slick-looking Absolut, but others are
approaching the ‘age of austerity’ issue in an
altogether different way. A new vodka price
category of ‘premium standard’ has been
created in the US – vodkas priced at relatively
low levels, but with an image of exclusivity
which rewards the mainstream vodka
consumer without commanding high prices.
The most successful example to date has been
Gallo’s New Amsterdam.
There is also a growing desire for
authenticity and a back story, in part as a
reaction to the many bling vodka brands that
proliferated prior to the financial crisis. Brekon
says: “More than ever consumers do care
deeply about where spirits come from, so the
drivers of luxury will be a focus on authenticity,
craftsmanship, provenance and almost
discovering the story of their favourite brands.
With Grey Goose we are going back to our
compelling story and our Cognac roots to
distinguish ourselves.” He cites the recent
launch of Grey Goose XV, which contains a hint
of Cognac alongside the base vodka.
Perhaps the biggest challenge, at least in the
US, is generational. Many of the Baby Boomers
came into the spirits world through vodka. The
Generation Xers and Millennials are now
differentiating themselves by drinking whisk(e)y.
Cullin says: “Younger people are looking for
something that differentiates them from what
their father or older brother drank. Vodka can
capture that if it is well executed. Tito’s has
done that with the retro packaging. Let us
remember that there are big vodka brands that
are substantial and have been around for a very
long time and still possess a large and loyal
consumer base. That won’t change.” ■
spirits review
Synergy spreads its bets
With a vodka market under pressure, Russian firm Synergy has broadened its portfolio significantly
The vast Russian vodka market has been
in the throes of consolidation since the
privatisation phase of the Yeltsin era. Gradually
a number of leading producers have emerged.
One of those companies vying for market
leadership is Moscow-based Synergy.
Synergy, established in 1999, was originally
a food company based in eastern Russia, but in
2002 it diversified into spirits through the
acquisition of Ussuriysky Balsam, one of the
leading distilleries in the Primorsky region of
eastern Russia. That was followed by a handful
of other acquisitions throughout Russia and the
company now operates seven distilleries across
the country, with a total production capacity of
some 15m decalitres. Synergy is also one of
the few suppliers with comprehensive national
distribution through which it funnels its
portfolio of leading brands.
serious issue for everyone, both for legal
producers and for the government. The
government is using taxation to address public
health issues, which we agree is quite
important. They are also taking some extra
measures against illegal producers, such as the
seizure of equipment. This is especially
important for the government during a period
when world oil prices are coming down and
government revenues are falling. The spirits
market is seen as an important source of
taxation and income. If the government really
wants to control the black market, then they
need to moderate spirits taxation.”
Slowing consumer demand
Squeeze on vodka
The Russian vodka market has been squeezed
in recent years by rising levels of taxation and a
slowing economy. Consumer confidence has
started to wane, as the cost of living continued
to rise, but incomes failed to keep pace. The
International Monetary Fund (IMF) says Russia
is now in recession. The capital outflow
following Russia’s invasion of Crimea has had a
deflationary impact. Meanwhile, excise increases
have resulted in a dramatic rise in minimum
retail prices for vodka and rendered it
unattainable for some Russians. The minimum
price now stands at RUB185 ($2.68) for a 50cl
bottle. Compared to other countries, Russia has
one of the highest duty levels relative to income
in Europe. Following pressure from the industry
and calls for a halt or slowdown in the tax
increases, the government has now agreed to
freeze excise. Tax was due to rise by 20% in
2015 to RUB600 ($8.70) per litre of pure
alcohol, but in light of a surging black market it
has decided to rethink the issue.
Synergy CEO and chairman Alexander
Mechetin says: “2014 was quite a shaky year
for the Russian industry, mainly because of the
sharp rise in excise duty, which was increased
twice last year. Vodka has become quite
expensive. It clearly affected consumer
demand and, subsequently, we saw the [legal]
market drop by roughly -15% in 2014
compared to the previous year. Consumers
were not prepared to accept this new price
point. This year or maybe the year after,
consumers will begin to accept the new pricing
and the situation should improve.
“Despite 2014 being quite shaky, Synergy’s
volume decrease was only -7% to -8% over
26 February 2015
Alexander Mechetin, chairman and CEO,
Synergy: ‘We are doing better than
others, but it is still a challenge’
the year. So we are doing better than others in
the industry, but it is still a challenge.”
While the legal market fell by some -15%,
real consumption didn’t fall by nearly as much,
as the black market offset most of that decline.
Mechetin says: “Unfortunately consumers
have switched to the black
or grey market. It is still
possible to find spirits
produced by some
industry players who
aren‘t paying taxation or
are finding a way not
to pay the full
amount. I don’t
believe the decline in
the market is really a
decrease in
consumption – more a
movement in demand
from the more
expensive legal part of
the market to the
‘grey’ area of the
market.”
The government has
taken some action to
control the black
market. “Taxation is a
Rising taxation and the growth of the black
market are only part of the problem, however.
With consumer confidence low, Russians are
reining in their expenditure. Mechetin says: “As
the Russian economy slows down, so does
consumer demand. We see that clearest effect
in the decline of the on-trade. People are
visiting the on-trade less often. That is a
change in the pattern of previous years.”
Mechetin explains that the mainstream or
mass-market segment of the vodka category is
currently the most challenging, as Russians
move from branded to more generic products.
“The consumer still wants a good product,
while not necessarily wishing to pay 20%-30%
more for the brand. Consumers of premium
products will remain loyal to a brand, but midlevel consumers are much less likely to show
such loyalty to a middle or sub-premium
product.” Synergy has the largest mainstream
brand in Belenkaya and Mechetin concedes:
“It is a challenging time for Belenkaya.”
While Belenkaya, sitting in the mainstream,
may be under pressure, other Synergy brands
are actually benefiting from the current
environment. “In Russia our strategy is to
be a multi-branded company, covering all
segments. For example, in the economy
segment, we market Gosudarev Zakaz,
which sold around 1m cases in 2013 and
around 2m cases last year. We are playing
with different brands for different
channels. We use one mix of brands for
the traditional trade and a more premium
mix for the on-trade or key multiple
accounts – and that is the key to success.”
Synergy believes that while times
are tough for its mainstream
Belenkaya brand, its upmarket
Beluga brand can take advantage
of the current market situation
spirits review
He adds: “We believe our super-premium
Beluga brand can actually take advantage of
this situation. People are coming back to
traditional Russian spirits and moving away
from expensive imported spirits such as
Cognac and whisk(e)y. However, they are
keeping to the high-end premium products.
This year I believe some people will come
back to traditional vodka while remaining in
the super-premium category. That is where
Beluga sits. Beluga is growing at a doubledigit rate in Russia and has a near 80% share
of the super-premium segment.”
The sharp depreciation of the rouble is a big
problem for imported brands. This doesn’t
necessarily bode well for Synergy. The company
has diversified beyond vodka in recent years
and now carries a full portfolio of Western-style
products. It is the exclusive importer for William
Grant & Sons, representing in Russia Scotch
whisky and malt brands such as Glenfiddich,
Grant’s, Clan McGregor, The Balvenie, as well as
Hendrick’s gin and Irish whiskey Tullamore Dew.
In addition, the company also distributes
products from Camus Cognac and its import
portfolio also includes Ron Barceló rum,
Amarula liqueur, Milagro tequila, brandy Tsar
Tigran, Yerevan Traditional and the Latvijas
balzams range. At the end of last year, Synergy
signed an agreement with Spanish company
Torres to distribute its brandy portfolio.
“Diversification is important, which is why we
entered the Russian brandy market recently
and we’re currently selling roughly 1m cases
with our Zolotoy Reserv brand. We already hold
a 10% market share of the brandy category. In
addition, we have a full portfolio of imported
products, with whisk(e)y, in particular, doing
well in recent years but now struggling.”
“A weaker Russian economy and increasing
prices, especially for imported products, will
make 2015 quite a difficult year for whisk(e)y,
rum and premium wines. With the Russian
rouble depreciating by -40% during 2014, it will
be difficult to avoid quite substantial price
increases this year. The inevitable result will be
a drop in volumes across all import categories.”
Synergy has also pushed into the wine
category recently. “We have already started to
develop our sales force accordingly to handle
these new categories. We have also been
establishing supply agreements, introducing to
the market brands such as Croix de Vignes,
Pierre Fontaine, Gran Castillo, Fleur du Cap, etc,
from the leading producer countries, including
France, Italy, and Spain.” It also recently inked a
distribution agreement with Chilean company
Cono Sur, part of the Concha y Toro Group.
“We see it as an
opportunity to take
market share from our
weaker competitors”
– Alexander Mechetin, CEO, Synergy
Growing retailer clout
Adding to the pressure is the growing clout of
the major multiple retail chains. This obviously
provides benefits in terms of expanding
distribution, but also brings pressure on
margins and profitability. “We see it has both
an opportunity and a threat. The big multiple
accounts in Russia have considerable
purchasing power to wield against the
producers. They use this to try to get a lot of
discounts and bonuses. We are addressing this
by providing a variable mix to the retailers – a
combination of premium brands and price
fighters. It is a challenging situation for all the
producers in Russia and especially for spirits
producers, but the way to counter it is by
offering the right mix of products and
investment in brands. If a company has strong
enough brands, then they are in a position to
negotiate. If your brands are weak, you have
no market power and are very vulnerable. That
applies everywhere, not just Russia.”
He notes that a worrying trend, at least from
a supplier perspective, is the trend towards ownlabel products. “Russian retailers are trying to
launch own trademarks/labels and, at the same
time, they are attempting to get favourable
terms from unknown producers, in order to
maximise profits, while selling less wellestablished brands. This is especially true during
these tough times when people are moving from
one brand to another based on price.”
Potential market shake-out
It all adds up to a much more difficult
environment and Mechetin believes this could be
a catalyst for a market shake-out. “Companies
with strong brands, strong distribution platforms
and who are in good financial health will survive
and will have many more opportunities than
those companies that are ill-prepared or
otherwise suffering. It will lead to opportunities
for stronger companies. That is always the case.
“We see it as an opportunity to take market
share from our weaker competitors. That is not
to say we will be looking to acquire another
company or brands. We have a strong
portfolio, with brands performing well in
different price categories, and we have quite a
strong import portfolio in almost all spirits
categories. We will continue to invest in our
brands and our distribution platform, so that
we are the best in the market and the best in
the industry.”
It seems the rating agencies agree. The
Fitch rating agency recently gave Synergy a B+
rating and said: “Synergy enjoys a leading
market position in Russia, which is supported
by a portfolio of strong brands, a more
developed distribution platform and larger
scale of operations compared with most
competitors. We expect Synergy to be able to
protect its sales volumes in 2015-2016. The
ratings also factor in Synergy’s financial
flexibility, resulting from a strong liquidity
cushion and limited exposure to foreign
exchange risks, which largely protects the
company from the potential negative
implications of the current economic situation
in Russia. The ratings are also supported by
Synergy’s leading market position, improving
product diversification and adequate pricing
power, demonstrated in 2013-2014 despite
sharp excise duty increases”.
Synergy reported that its volume sales for
the full year 2014 decreased by 12% and
amounted to 11m decalitres (12.2m nine-litre
cases). In the second half of 2014, sales
totalled 6.6m decalitres (7.4m cases), which is
14.6% less than for the same period of 2013.
Total volume of Synergy’s export operations
significantly increased in 2014, rising by
639,000 decalitres (710,000 cases), which is
33% higher than in 2013. Import volume of
partners’ brands grew by 37% to 350,000
decalitres (388,000 cases).
Mechetin remains bullish about the Russian
market’s long-term prospects. “Although Russia
is a challenging market, it remains a vast spirits
market and one that is tied into the country’s
traditions. The next few years will be difficult
for everybody, but five or even 10 years in the
future it will be a great place to be.”
Outside Russia, Synergy’s prospects are also
looking rosy. Thirty per cent of Beluga volume
is now derived from export markets and the
brand is growing at a double-digit rate.
“Exports are very important to us and Beluga
exports are growing fast. We’ve had a
successful launch in the US, and strong growth
in duty free and Asia. Europe is also
developing quite well too. Beluga is on course
to become a real global brand.” ■
February 2015 27
spirits review
Scandinavia regains confidence
Nordic consumers are slowly rebuilding their confidence following the economic crisis, as Konstanze Kugler reports
Slow gin renaissance
The resurgence of the gin category has been
taking hold in almost all key markets across
Europe over the last year. The Nordics have not
shied away from this trend either, although it
appears to be taking off much more slowly
there than in southern Europe.
Laila Rosendahl Schmidt, brand manager for
Belvedere Scandinavia, looks optimistically into
the future, however: “I have a feeling that it is
just about to start to get really exciting for the
premium-and-above gin category.” She believes
the gin trend will be long-lasting and with the
company’s gin brand Bulldog being rolled out
across the Nordic markets, her hopes are high
for the brand to go from strength to strength
across the region. The brand grew from a mere
350 nine-litre cases in 2011 to more than
3,000 cases in 2013 in the Nordic countries
and Rosendahl Schmidt is most optimistic
about Bulldog’s strongest market, Denmark. “It
seems the Danes have been waiting for a
premium gin. We are getting very positive
feedback on the taste, the bottle and coolness
of Bulldog gin,” she says.
New premium-and-above niche brands are
pouring into the Danish market and bars with a
sole gin focus are opening in its capital,
Copenhagen, as demand for the spirit booms.
Consumers are interested in the story behind the
brands and opt for smaller high-end products.
Rosendahl Schmidt outlines the reason for the
category’s growing popularity: “The desire for
quality and better times are factors that attract
the consumers towards this category, and as it
attracts more people, it attracts more brands.
28 February 2015
PHOTO: KONSTANZE KUGLER
Most of the Nordic markets have been hit
hard by the economic crisis and consumer
confidence decreased drastically as a result.
People cut down on their spending and stalled
unnecessary purchases – in particular luxury
goods such as alcohol.
The Nordic markets are known for their high
taxes and as, with the exception of Denmark,
all the countries’ alcohol markets are controlled
by state monopolies, trends are much slower to
enter and influence those markets and
consequently give certain categories a boost.
Nevertheless, the markets have not come to a
standstill and things are looking brighter than in
the past. Whether this equates to an increase
in domestic sales remains a big question, as an
investigation into the latest developments of
the Nordic spirits market reveals. The bigger
picture shows consumers are regaining their
confidence and new spending and consumption
patterns are emerging across the entire region.
Danish town Helsingør has alcohol shops directly aimed at Swedish shoppers
We are seeing new products in the premiumand-above gin category every month, and
Denmark now has gin bars, blogs devoted to
gin, gin walks, articles about gin and so on. I
think this gin party is just getting started.”
In Sweden there has been a more moderate
rise in the top-end gin segment. Brands such
as Hendrick’s have been growing well, but
much of the interest in the category is being
driven by bartenders rather than retailers or
consumers at present.
Good growth for rum
The growing buzz around the aged rum category
in many markets across Europe has not missed
the Nordics either. Super-premium aged rum in
Denmark grew from 750 cases in 2011 to a
healthy 5,500 cases in the space of two years,
which is an impressive development given the
high price point of the quality segment. Danish
consumers are moving over from Cognac, which
was hit by a price increase due to the increasing
demand in Asia, but also from premium
whisk(e)y. Both men and women are enjoying
the drink neat as they prefer the sweeter taste.
The top end for spiced rum is also enjoying
increased attention as The Kraken quadrupled in
2013 and reached 1,000 cases in the Danish
market. The standard segment’s growth is led by
Captain Morgan, which, at just short of 58,000
cases, dominates the segment. Sweden is
following the course of its neighbouring country,
with the super-premium dark rum segment
growing from 1,500 cases in 2011 to 3,850 cases
last year. Norway is still pacing itself, but
following suit. The spiced rum segment is
performing well in that market, however. Captain
Morgan Spiced has seen a healthy volume gain
last year and reached 29,580 cases in 2013. It is
widely believed that the category has reached its
saturation point, though, and young consumers
are turning to other trendy shooter liqueurs.
Similar trends are happening in the Finnish
market, where spiced rum was growing healthily,
with a volume gain of over 32% in 2013, as
young consumers enjoyed the sweeter taste
compared to the non-flavoured rum category.
Fireball shoots forwards
Sweet shooter liqueurs are enjoying growing
popularity among young Nordic consumers.
Since its launch in Europe three years ago,
Sazerac’s cinnamon shooter Fireball continues to
gain momentum in the Nordics. It has taken off
in the Swedish market, growing from 4,650
cases in 2011 to 18,450 cases in the space of
two years. The brand has benefited from a
general trend among younger Swedes towards
sweeter shooters. In neighbouring country
Norway the brand is also showing steady growth.
In 2013 it grew 140% from a small base – a
trend widely believed to be fuelled by Swedish
bartenders working in the Norwegian on-trade
and promoting their drinking habits from back
home. Fusion drinks mixing Fireball and cider, as
seen in the US and Canada, have not yet
reached the Nordics and shot consumption
remains most popular. Sweet shooter liqueurs
have been popular for a number of years, but
low-strength vodkas, flavoured as well as
spirits review
premium spirits in the off-trade and using online
tutorials to learn how to mix them. There has
also been increased demand for top-end
Bourbons in the on-trade for use in cocktails, but
these are also increasingly being drunk neat.
Meanwhile, in Sweden the expanding selection
of rye and small-batch US whiskies in monopoly
shops is being driven by consumer demand.
Blended Scotch is losing share to malt Scotch in
Denmark and Sweden as consumers begin
making more active choices about the products
they are purchasing. An increasing numbers of
consumers are willing to spend more to trade up
to single malt brands, although overall volumes
remain small and are still dwarfed by the blended
Scotch market. In smaller markets such as
Denmark, more brands are becoming available in
the off-trade as retailers increase their
assortment. In mature whisk(e)y markets such
as Sweden, local Swedish whiskies are beginning
to gain some traction. While the category
remains very niche, with just over 8,000 cases
compared to the overall size of over 700,000
cases in 2013, there are an increasing number of
local distillers who are moving away from
traditional spirits to experiment with other
categories, including local whisky.
Cross-border trends
Border trade and private imports are an
increasing occurring problem across the entire
region. The border openings and the free trade
between EU member states made shopping
abroad, in particular for alcohol, a lucrative
alternative to domestic purchasing. The Danish
town of Helsingør marks the narrowest point of
the Øresund and is consequently a hub for
Swedish tourists and offers great shopping
PHOTO: KONSTANZE KUGLER
unflavoured, are gaining momentum across the
region. Reasons here lie in the “on-going health
trend as consumers still want to consume spirits,
but they are looking for products with lower
alcohol level”, as Petri Pentikäinen, market
intelligence manager at Altia Finland, explains.
High taxation on spirits adds to this movement
towards lower-abv spirits as they are naturally
cheaper. Vodka, Finland’s prime category, is
losing domestic volumes year on year and has
seen a compound annual growth rate (CAGR) of
-4.7% over the past five years.
Consumers are looking for bargains on the
one hand, but are opting for more premium
and high-quality drinks as drinking occasions
decrease. So the Nordic markets are polarising,
with a widening gap between more expensive
international brands and cheaper domestic
brands. Pentikäinen explains that Nordic
consumers’ interest in premium products is not
merely explained by a focus on the brand or
production method, but that the “high-quality
image is more related to purity, naturalness,
craft and provenance”.
Similarly, premiumisation is playing a stronger
role in all the Nordic markets – in particular
Sweden and Denmark in both the on- and offtrade. The premiumisation of the vodka category
has been particularly noticeable in the Danish ontrade. Premium-and-above vodka is evermore
present in top-end on-trade venues, taking
market share from categories such as
Champagne. Super-premium bottle sales as a
status symbol have been a strong driver of this
trend. In Denmark consumers are bringing ontrade fashions into the home, with a strong trend
to making cocktails indoors spreading across the
country. They are buying cocktail kits and
Ferries from Helsinki harbour to Estonia offer a lucrative trip for day tourism
and private passenger imports
opportunities for Swedes. While Swedes come
to Denmark, Danish consumers go the extra
mile and take a trip to Germany and its
specifically designed border shops, targeted at
Danish consumers, stocking their preferred
products. As might be expected, Finnish
shoppers cross the Baltic Sea to purchase
alcohol in cheaper Estonia. High taxation on
alcoholic products in Finland drives priceconscious consumers towards private imports.
The beer tax, in particular, which is the highest
in the EU, is five times higher than Estonia’s
beer tax and is the main reason for purchasing
alcoholic beverages abroad.
Pentikäinen of Altia in Finland worries about
the increasing amounts of private imports from
Estonia impacting on the domestic market in
Finland: “We have seen record figures in
passenger imports [in 2013] and, as the rate
was growing, it suggests that passenger imports
increased also during the beginning of [2014].”
The number of ferries between Tallinn and
Helsinki doubled in 2013, which naturally had a
tremendous impact on border trade. Purchases
in duty-free arrivals are a major factor for
consumers travelling back into Norway and
Iceland. Large arrival shops, as seen at Oslo
Gardermoen airport, facilitate this purchasing
behaviour. Volumes from the arrivals duty-free
shops are believed to account for 15% of the
total Norwegian alcohol consumption. Spirits are
naturally most affected by this trend. The spirits
markets in the Nordics are saturated. The state
monopolies are shifting their focus away from
spirits and towards lower-abv products and
even wine. The pressure from high and
continuously increasing taxes and restricted
advertising in most markets makes brand
awareness and profitability tough for
distributors and producers. Consumers may
have gained new confidence and are
frequenting the on-trade in the Nordics more
often again than previously, but their priorities
have shifted. The spirits market across the
region is still suffering from decreasing
consumption as consumers consider their
purchases carefully and opt for either a cheaper
category altogether or premium spirits with
fewer volumes and drinking occasions, along
with growing health awareness. The price point
is moving even closer into consumers’ focus
and, as a result of this, local products are
gaining more attention. They are expected to
increase their traction in the markets in the
future, but international trends will also not halt
and continue influencing consumers in the
Nordics, which will be an interesting
development to follow in years to come. ■
February 2015 29
wine news
in brief
Treasury ahead on H1 20132014; eyes US winemaker
Australia/US According to Michael
Clarke, CEO of Australia's Treasury
Wine Estates (TWE), recovery
measures are making an impact in the
first half of 2014-15. TWE is said to be
ahead on the same period 2013-14. In
August 2014 it posted an annual loss
of over $100m.
The US and Asia are driving growth,
with Clarke observing that increasing
the company's footprint in China was
a key target. The uptick has also
partly been caused by the early
(October 2014) release of high-end
Penfolds wines, as well as increased
spending behind major brands.
Such activity has come amid a
backdrop of cost-cutting, with the
closure of McLaren Vale’s Ryecroft
winery and the lay-off of more than
100 administrative staff. TWE has
been racked by problems in the US for
some time now and Clarke confirmed
the company is close to downsizing its
US-based portfolio.
While higher volume commercial
brands are likely to lose out, he
admitted that TWE may buy a US
winemaker to increase its access to
widely available, higher-end ‘masstige’
supply. This, he argued, would reduce
its dependence on lower-value wines
and help to grow the company’s
presence in North America.
Jackson Family Wines buys
South African vineyard
South Africa US-based Jackson
Family Wines is set to acquire 120
acres in South Africa, including a
20-acre site in Stellenbosch.
The value of the deal has not been
disclosed, but represents the
continuation of a recent wave of
expansion for the Californian firm,
which now owns more than 20,000
acres worldwide. The US company
plans to release 1,000 cases of 2013
chardonnay from the new site.
Please send any
wine news to
[email protected]
30 February 2015
By Giles Gough
France Champagne's governing body, the
Comité Interprofessionnel du Vin de Champagne
(CIVC), has revealed that shipments of
Champagne are likely to have increased 1% in
2014, surpassing 307m bottles or 25.6m nine-litre
cases and marking a turnaround after recent
consecutive years of decline. Value development
was more positive, up 2.3% to €4.5bn
($5.21bn), despite ongoing sluggishness in
France. Excluding Champagne’s homeland, value
shipments were up 4% to reach €2.4bn ($2.3bn).
While France's situation continues to be of
concern, initial figures suggest this is being offset
by green shoots in the UK and growth in the US,
Japan and Australia. In a recent interview with
the IWSR Magazine, Cattier export director
Philippe Bienvenu echoed the region’s sense of
optimism on exports. Of the US, in particular, he
said: “It has great potential, but there is much to
do in terms of education and distribution.”
Australia Exports of Australian wine bucked their
recent negative trend in 2014, according to the
Australian Grape and Wine Authority (AGWA).
Volume shipments were up 1.9% to reach 700m
litres – 77.8m equivalent nine-litre cases.
Value development showed similar progress
with growth, also, of 1.9% to reach AU$1.82bn
($1.49bn). This was the first time Australian
exporters posted value growth since 2007, with
this aided in part by the depreciation of the
Australian dollar in the second half of the year,
but also boosted by demand for premium
Australian wines.
Exports of wines above AU$10 ($7.78)
increased 15% to the equivalent of 1.9m cases.
Meanwhile, wines above AU$50 ($39) increased
by over 50%, though accounted for less than
1% of total shipments in volume terms.
New Zealand Winegrowers are enjoying
increased profitability, according to the Deloitte
Vintage 2014 survey.
The survey divides producers into five
categories according to size: those with turnover
higher than NZ$20m ($14.6m), those between
NZ$10m and NZ$20m ($7.3m and $14.6m),
those between NZ$5m and NZ$10m ($3.6m and
$7.3m), NZ$1.5m to NZ$5m ($1.1m to $3.6m),
and those below NZ$1.5m. For the first time in
seven years it found that all categories reported
profitability before tax. Furthermore, it reported
that since 2010 there has been a general trend
of growing profitability.
This run comes despite concerns over the
impact of oversupply, high levels of external debt,
the financial crisis and the turbulent bulk market.
One of the biggest reasons for growing
profitability is that Kiwi growers have managed
to turn excess stock into revenue. This knack
will be especially important in 2015 and beyond,
following a bumper crop in 2014, where some
445,000 tonnes of grapes were harvested.
Companies with turnover higher than
NZ$20m were the most profitable. Here an
average profit rate of 17.6% was recorded.
Generally, the larger the company the better
equipped it was to realise greater profitability.
The report estimated the total value of the
New Zealand wine industry to be around
NZ$2bn ($1.53bn) in 2014. Of this, NZ$1.36bn
($1.04bn) came through exports.
Tariffs on Chilean wine imports abolished in China Import tariffs on Chilean wines in
China were abolished on 1 January 2015. The Chinese Government has been scaling
back duties on Chilean wine since the signing of a free trade agreement between the
two countries back in 2005. The abolition forms part of a wider opening-up of the
Chinese market, with both New Zealand and Australia also signing agreements with
China in recent years. Between 2008 and 2013 still light wine consumption in China
increased at a compound annual growth rate (CAGR) of 17%. Imported wines
accounted for just below 20% of volumes in 2013.
According to the IWSR, the market in fact declined -7.6% in 2013 to reach 158.5m
cases. ‘Local’ wines were impacted the most as an anti-extravagant spending drive
directed by Beijing hurt the Chinese banqueting sector and corporate purchases.
wine review
US fine wine breakout year forecast
A better economy is resulting in a growing demand for US fine wine, finds Silicon Valley Bank
Silicon Valley Bank’s (SVB) latest Annual
State of the Wine Industry Report forecasts
increasing US demand for fine wine driven by
an improving economy. Based on a survey of
nearly 600 West Coast wineries, in-house
expertise and ongoing research, the report
covers trends and addresses current issues
facing the US wine industry.
”We are seeing real strength in the US
economy going into 2015, which will increase
demand for wine,” said Rob McMillan, founder
of Silicon Valley Bank’s Wine Division and author
of the report. “Declining oil prices are
transferring wealth to oil-consuming countries,
the employment picture is improving, the US
dollar is strengthening and interest rates will
move at a measured pace. As long as the
industrialised world economies can hold their
own, the middle-income consumer will see
improved prospects. We’ll be toasting to that.
Demand grows
Overall wine consumption increased for the
20th straight year. Overturned blue laws, better
employment, relaxed restrictions on direct
shipments, and customers trading up to more
premium-priced wines all lead to the industry’s
improved year-over-year success in 2015.
While overall sales rose, growth accelerated
at the higher end of the market. Starting in
mid-2014, wines priced above $20 a bottle
broke out strongly higher. Trading-up is a clear
trend again. Red wines in particular showed
the strongest growth. SVB expects that to
continue throughout 2015.
Growth in sales of wines priced above $20
was driven by accelerating volume, with little
in the way of price increases getting through
to the consumer. Wines priced below $9 per
bottle performed poorly both in the on- and offpremise sectors in 2014. The poor performance
is likely to continue into 2015.”
SVB argues that the market is hitting a
transition point that could eventually prove
problematic for US producers. The Baby
Boomers, who account for the majority of fine
wine purchasing in the US market, are now
hitting retirement and likely pull back their
purchasing. The Millennials that are replacing
them are bogged down in high levels of student
debt and weak job prospects.
“We cannot stress more emphatically that, one
day, Millennials will be at the centre of fine wine
sales. But the reality is – no matter what a
generation is called, the most active buyers of
fine wine and luxury goods will continue to be in
the 35- to 55-year-old age group. The younger
generation is just now entering an age where
Highest-priced red wines are short
“The heavy volume is
changing the balance in
the supply business”
– Silicon Valley Bank
they can participate in a more meaningful way.
Today, the largest consuming cohort is the
Boomers, and the cohort with the greatest
immediate growth opportunity is Gen X.”
Healthy demand-and-supply scenario
SVB expects to see the third consecutive
harvest of heavy yield and great quality across
most appellations. Most estimates for the 2014
harvest are somewhere around 4m tons,
although SVB believes it will be slightly lower.
Nevertheless, it will rank with the top three or
four crop sizes ever.
The report says: “The heavy volume is
changing the shape of the supply balance in the
business… there is now a fair amount of juice
out there looking for a home.” Although there
are varietals and regions where there is excess
supply that will be needed by the end of 2015
due to heavy demand.
“Today, you can pretty much describe the
shape of supply as long, as you move further
down the ladder of expected price per ton. It’s
very long under $8 and slightly long in the wine
destined for middle-tier bottles, priced between
$9 and $18. However, the highest-priced
bottles, and particularly red wine and North
Coast cabernet, are short.”
Massive bulk imports will continue to
dominate the wine categories at the lowest
price points, but bulk imports should be held
back by the size of the 2014 harvest and
supplies currently in cellar.
Bottle pricing is tied in closely to the supply
and demand equation. The SVB survey indicates
that the expectation of price decreases in 2015
is minimal, but more prevalent in the lowerpriced segments.
“The lower end of the market – below $8
retail – is already trending down. Something will
have to happen to make that trend reverse
course, and we cannot see anything at this point
that would reverse the trend. In fact, a
strengthening dollar could increase bulk imports,
so the lowest end of the market from a price
perspective will probably see price discounting
and perhaps volume declines as well in 2015.”
The report also expects some discounting in
the $10-$20 part of the market where there is a
lot of wine available to be sold, although
négociants and branded wines will absorb some
of that. Wines priced from $15–$18 bracket will
hold their price better, and those above $20
should see some modest price rises.
Healthy financial environment
Most wineries will say 2015 was one of their
best seasons by the end of the year. SVB
estimates that revenue growth for US wineries
through the nine months ending 30 September
2014 was about 8%. It expects to see the
impact of a strong October-NovemberDecember (OND) 2014 selling season boost
end-of-year, particularly when contrasted with a
weak OND period at the end of 2013.
Meanwhile, SVB is predicting a breakout year of
growth in the fine wine category in the 14%-18%
range in 2015. This is up from an impressive 10%
growth in 2014. “Taken as a whole, the financial
performance of wineries in 2014 was pretty good
and ended on an uptick. Looking at reported
financial health from our survey shows that
wineries are making progress.”
“We are especially positive on the year ahead,”
McMillan added. “We expect the fine wine
business will experience accelerating growth. At
the same time, the cellars are full, with several
consecutive years of very good vintages.” ■
February 2015 31
wine review
Surplus or shortage?
Val Smith examines the state of global wine supply and demand
Whether wine supply will be in surplus or
shortage should be an easy question to answer,
but it is not – and there are multiple reasons.
Comparing supply (production) with demand
(consumption) is not straightforward. Production
data is more readily available than consumption,
and is processed every year by the Paris-based
international vine and wine body, OIV, so is
consistent. However, these figures do not include
the very considerable quantities of ‘village’ wine,
produced in the Balkans, CIS, Latin America and
‘Old’ Europe, the sale or consumption of which
virtually always goes unrecorded. These wines
alone could add 450-500m cases to world supply
and demand and there have been only very rare
attempts by local governments to measure them.
The situation is further complicated by the
(largely European) habit of replacing local
below-standard wine, destined for own-label
contracts or five-litre-plus containers, with
slightly more drinkable wine from neighbouring
countries, while until recently collecting a
subsidy to turn unsold wine into alcohol. The
latter was then often sold on to Russian and
other central and south-eastern European
producers to be sold as fine brandy or
worldwide as super-premium vodka. Put
another way, these volumes tend to go under
the wine statistics radar.
Then there is the dilution of grapes with other
substances and/or must-based liquors, which
takes place on a massive scale in the CIS
countries, China, Japan, South Korea, south-east
Asia and across Africa. Also, the fairly widespread
practice of under-declaration of production
and/or sales, to reduce tax, influences the
calculation across the world. Around the year
2000 it was said that 30-40% of production in
the southern Italy and its islands (in the heaviest
Italian production zone) were not recorded.
While this percentage is now somewhat lower, it
still exists, as it does pretty much globally.
With the evident exception of perceived
pressure on prices, does the supply/demand
equation really matter so much? Recent major
volume declines have been concentrated largely
in ‘Old’ Europe’s producing countries and
Argentina. The volumes lost have been mainly
very cheap wines of questionable quality,
directed at quenching thirst, boosting energy
and as a substitute for water. Yet the social
conditions that required this type of wine have
already vanished, or are vanishing. For the first
time in history, probably, the majority of wine
drinkers are drinking wine more for enjoyment
(and social standing) than for slaking thirst or
as an essential element in their diet. So the fall
in demand, as measured in total volumes, was
32 February 2015
inevitable and, within 15-20 years, this
traditional form of consumption will probably
have died out. However, these wines were not
often major profit generators, except for a few
family-owned giants.
A more recent development – the impact of
which has not yet worked through the system –
is that almost all wine now produced is pleasant
to drink. This was certainly not true 20 years
ago and it means consumers can confidently
change to new wines if their preferred wine runs
out. Faith in the buying skills of the major
multiples and discounters is also growing as
each year passes and there is a continual spread
of ‘quality’ wine production into new countries,
almost always of adequate drinkability, even if
quantity is limited. The market for ‘quality’ wines
(over €5/$5.62 a bottle) can now be supplied
from many sources.
The near-total devastation of supply by the
phylloxera virus is increasingly unlikely to recur
on such a massive scale as in the past, as
chemical and other skills in treating disease and
bugs continue to expand. That said, regional
disasters will still occur from time to time.
Changing fashions can also exhaust supplies
from particular regions, usually the top
qualities – Bordeaux top growths recently,
Bourgognes now, Barolo tomorrow? – but
substitutes can easily be proffered.
Well-publicised supply crises will continue and
help, in the short term, to raise prices. But
modern production skills and marketing energy
will be used increasingly to shift consumers to
new alternatives.
So the main danger to supply right now is
from one of two key world trends in alcohol: the
growth in demand and trading up in countries
with large populations, generated by having
disposable income for the first time and by
worldwide media exposure. The other great
stimulator – the availability of stores to buy wine
from – is not yet influencing sales in many of the
large market countries. China dilutes, adds and
uses must to meet the (until recently) rising
demand. India deploys extraordinarily high
tariffs and has few suitable shops. To date, the
main impact of the giant consuming markets has
been to sop up excess bulk from producers. The
future impact could be much more dramatic. But
it has not happened yet and will not do suddenly
– certainly not at a speed that will be too fast for
the seven-year planting-to-sales cycle.
There are, of course, recurrent shortages of
particular varietals, which have often been solved
by novel blending. Most years, the weather
invariably damages supplies in some regions –
occasionally for several years at at stretch. But
wine-making skills have improved so considerably
and across a wider spread than in the past, that
more acceptable alternatives are now available –
in beer and cider as well as wine.
Since 2008 world traceable consumption has
exceeded recorded production by over 200m
cases every year, and by well over 300m cases
in three of these years (much more if the more
questionable ‘other’ wines were to be included).
This throws doubt on the theory that there is
an emerging shortage of wine. Producers
appear to have used their ingenuity to satisfy
all demands until now, regardless of any
production ‘shortage’. ■
Supply vs demand
Volume
2008
Volume
2009
Volume
2010
Volume
2011
Volume
2012
Volume
2013
Production
2,420.0
2,450.0
2,385.0
2,410.0
2,320.0
2,530.0
Consumption
Still light wine
Sparkling wine
Fortified wine
Light aperitifs
'Other' wine
Total consumption
2,390.0
200.0
58.5
35.0
111.5
2,795.0
2,390.0
198.0
57.5
32.5
110.0
2,790.0
2,420.0
210.0
55.0
32.5
112.5
2,830.0
2,460.0
210.0
52.5
32.5
110.0
2,865.0
2,465.0
212.0
46.5
31.5
112.5
2,877.5
2,445.0
215.0
44.0
30.0
111.0
2,845.0
+375.0
+340.0
+445.0
+445.0
+557.5
+315.0
+265.0
+230.0
+332.5
+345.0
+445.0
+205.0
Consumption*
over production
Excluding 'Other'
‘Other’ wine is most likely to be made from must and non-grape ingredients
All volumes in million cases (rounded)
Source: Production: OIV rounded;
Consumption: The IWSR Database 2015 rounded,
(based on 125 countries, plus 21 Sub-Saharan African)
wine review
The two sides of Languedoc-Roussillon
Giles Gough talks trends and the next big thing with Isabelle Pangault, chief winemaker at French co-op Foncalieu
The Languedoc-Roussillon has long been
known for its consistency. More recently,
however, wineries from the south of France and
indeed Sud de France, the region’s trade body,
have focused on promoting the LanguedocRoussillon’s diversity. It’s a natural step given
consumer interest in regionality, and not
surprising given that its vineyard area ranges
from the Rhône Valley in the east to the
Spanish border to the south-west. Even so,
notions of diversity and terroir are a far cry
from the wine lake and the perception of the
Languedoc-Roussillon as a largely commercial
wine-producing area, a perception which still
dogs many local wineries today.
The bid to change the image of the
Languedoc-Roussillon is a long-term, ongoing
process. A quality pyramid of appellations has
been in place for a number of years now, which
has helped many producers to market their
wines and champion quality much more
efficiently. However, declassification of French
wine regulations and the flexibility allowed by
the IGP Pays d’Oc also gives many winemakers
the opportunity to explore other blends, single
varietals and styles. This has formed a key
weapon for many producers in the south of
France as they look to compete with established
brands from the New World, which traditionally
have not been hampered by regulation and
red tape.
As a winemaker, Isabelle Pangault enjoys the
relative freedom that working in the area
affords: “It is one of the rare places where you
have two cultures that meet – the traditional
AOP system, and international grape growing
and a modern way of winemaking with IGP Oc.
There are many opportunities to create things,
to have fun and to experiment. It’s like the OldNew World.” Such experimentation includes
blends of syrah, cabernet franc, malbec and
cabernet sauvignon, which Foncalieu is
producing in IGP Côteaux d’Ensérune, just to
the south of Béziers.
The thought of cabernet sauvignon blended
with syrah may raise the brow of many a wine
aficionado. However, the fact is that, in the
south of France, a more robust cabernet
sauvignon can be grown, unlike cooler climates
to the north. “Blends like cabernet sauvignonsyrah can work (in the Languedoc-Roussillon).
Our cabernet sauvignon is a bit riper than in
Bordeaux, so it can handle spicier wines like
syrah.” In 2014, Foncalieu also made a picpoul
noir rosé, which is already said to be garnering
interest from buyers in the US. Though perhaps
lesser-known than its white cousin, picpoul
blanc, which makes the re-emerging picpoul de
Foncalieu vineyards. Below: two of the co-operative’s brands
pinet, picpoul noir is an ancient grape and is
one of the 13 varieties used to make the
Rhône’s prestigious Châteauneuf du Pape.
It is not just with experimentation that
southern French producers are enjoying
success. The Languedoc-Roussillon also has
the climatic and topographic diversity, often
referred to as terroir, to produce wines more
associated with other regions. Foncalieu, for
example, produces syrah-viognier red and
rosé blends. “You will never get the same style
(as Côte-Rôtie) because the yields are
different. However, because of the
Mediterranean climate, we can get the
concentration we need.”
The beauty, though, unlike smaller
appellations, is that because of economies of
scale, good wines can be produced at affordable
prices. Côte-Rôtie is produced in the northern
Rhône, which has a continental climate, as does
the region to the north, Burgundy. Characterised
by cold winters and hot summers, prime facie
both are very different to the average,
Mediterranean growing conditions seen in the
Languedoc-Roussillon. However, given its sheer
size there are numerous pockets and subregions suitable for growing cooler-climate style
wines. Pinot noir, traditionally associated with
Burgundy, is said to be performing well in the
south of France. Asked about how these match
up compared to the cooler climate, Pangault
responds: “Ours is very similar to what you
would call a Burgundy style; it is light in colour
and delicate with cherry and smoky notes. We
have a vineyard in Puichéric which is a bit more
oceanic. It means nights are cooler and the
climate is generally more suited to pinot noir,
which allows us to have a fresh and delicate
expression – not burnt or overripe.” However,
she admits that the diversity of the region also
means there is a broad range of styles coming
out of the area and, one assumes, different
levels of success in producing leaner wines.
While it seems the Languedoc’s staple of big,
ripe, full-bodied and spicy red wines is here to
stay, there is no doubt that plantings in the
region are diversifying. Moreover, there is real
momentum behind marketing France’s south as
not just capable of producing wines similar to
those from more prestigious regions – and at a
better price – but also as a producer of fine and
quality wines in its own right. ■
February 2015 33
wine review
Your next great wine – where from?
Gregory Dal Piaz looks at some wine styles and origins that are beginning to gain wider recognition in the world
Our view of wines is changing. While it may
still be dominated by Burgundy and Barolo,
cabernet and chardonnay, much of what has
been familiar in the past is inching out of the
reach of ordinary consumers. Prices are rising
for the world’s recognised wine styles and
brands, creating openings and impetus for some
rising stars. That is not to say that öküzgözü
from Turkey is about to replace your cabernet,
but it does mean that you just might have a few
opportunities to try öküzgözü soon.
Today’s wine drinker is less bound by
convention than those of decades gone by. The
classifications of Bordeaux and Burgundy are
less important, and intriguing to many new wine
drinkers than the qvevri wines of Georgia or
even the rieslings of New York’s Finger Lakes.
The reasons behind this are complex, with some
influence coming from rising prices and
emerging wines tending to be well priced. But
other, larger forces are at work, including a
return to the appreciation of what is local and
natural; the thrill of discovery is adding impetus
to the exploration of these lesser-known wine
regions and styles.
While many of us in the trade can be dismissive
of areas that have yet to see the full force and
fruition of investment come to bear, it is worth
noting that these regions are gaining increasing
international attention for their wines, with each
having its own apostles, ensuring access to an
increasingly curious and adventuresome audience.
It is time to start paying attention to wines beyond
the usual suspects, as well as regions that will
teach us a thing or two about the diversity and
beauty of wine. It is time to start paying attention
to the parts of the world we have never paid
attention to before. Here are some regions that
are quickly developing reputations as the next big
thing in wine.
Turkey
Haven’t heard much about Turkish wine? That is
hardly surprising, but no more so than not
knowing that the Turkish wine industry has
roots that stretch back thousands of years,
recognised as having first produced a beverage
known as ‘vino’ between 4000-3000 BC.
Turkey is poised to become a major player in
the wine world over the coming years. Already
one of the most prolific grape-growing countries
in the world, with annual yields over 4m metric
tons1, sixth-highest in the world, Turkey is far
better known for its production of table grapes
and raisins than wine, but that is slowly changing.
Roughly 28m litres2 of wine are produced
annually in Turkey, accounting for perhaps half
their total potential based on current vineyard
34 February 2015
Vineyard on Keuka Lake, New York
plantings. Already a formidable number, the
potential for a doubling of production at a time
when quality is showing impressive
improvements – the average price per litre of
Turkish wines has increased from $1.36 in 2006
to $3.25 in 20113 – means Turkey is truly
prepared to make inroads into the global
premium wine market, something that few
would have considered just a decade ago.
And as for öküzgözü, this may well prove to be
Turkey’s breakout variety. Among the indigenous
Turkish varieties, of which there are many,
öküzgözü strikes a fine balance between
character and drinkability, reminiscent of Dolcetto
with its fresh, fruity flavours and bright character.
China
While Turkey has an impressive vinous history,
and great vineyard to accompany that story,
China is more of an upstart in the wine world.
But as is this case with the Chinese, when they
decided to do wine, they decided to do it on a
large scale. So large in fact that Chinese grape
production swelled from 300,000 hectares in
2000 to nearly 600,000 today4, yielding over
10m metric tons of fruit5, making China the
world’s leading producer of grapes.
While production is exploding in China, wine
production, while growing rapidly, is proceeding
at a slower pace. Investments by international
wine powerhouses, such as Domaines Barons
de Rothschild and LVMH, are ensuring that the
studies of terroir and production in early state
trials are being undertaken with the highest
international standards in mind.
While Turkey has a bevy of indigenous
varieties to promote, China must rely on
imported clonal material and, due to its
domestic market, the terroir, and international
pressures, more than 60% of what has been
planted in China has been cabernet sauvignon6.
It remains to be seen whether the world at
large needs another source of cabernet
sauvignon but, in the short term, if Chinese
cabernets can compete with the world’s best,
these wines will be an easy way to benchmark
the potential that China’s wine regions have.
There is no doubt that somewhere in that vast
country, with the money and the wherewithal
being applied, world-class wines will emerge.
While Turkey and China are the biggest
stories in the wine world it is also worth noting
what have been some of the biggest headlines
of this past year:
New York’s Finger Lakes The region, long
known for its rieslings, is the site of some
international investment that opened more than
a few eyes. Paul Hobbs and Johannes Selbach
formed a joint venture to develop a 67-acre site
on the south-eastern shore of Seneca Lake.
While this is not the first outside investment in
the region, it is the biggest and most widely
covered by the media, portending increasing
media coverage for the great, and largely
undiscovered, wines of the region.
The Republic of Georgia After years of
increasing interest in so-called orange wines
and fermentations in amphorae, Georgia is
finally getting the word out about its qvevri
wines. The traditional wines of Georgia,
fermented in these clay qvevri, are a historical
link that connects the modern day
interpretations of this style of wine to their
roots. While certainly not for every palate,
qvevri wines can be fascinating and have served
to open the door to both the historical and
modern day wines of regions previously
unknown to the wine cognoscenti.
● Gregory Dal Piaz has been involved with wine
for over three decades, beginning on the
restaurant side of the business, before moving to
retail, and now as editor-in-chief of Snooth.com.
Article edited and reproduced courtesy of
ProWein.
References
1 http://tinyurl.com/ogcevfm
2 Durmus Ozdemir Turkey’s Arduous Journey from Vine
to Wine http://tinyurl.com/pxgeqky
3 http://tinyurl.com/ogcevfm
4 Per Karlsson BK Wine Magazine: The world’s grape
growing (vineyard) surface area 2000-2012
http://tinyurl.com/p42umg3
5 http://tinyurl.com/nfrppqf
6 Li Demei Decanter China: Finding the Best Wine Grape in
China http://tinyurl.com/p42umg3
beer, cider and pre-mix news
in brief
By Simon Molony
UK A decade of decline in UK beer sales has come
to an end, with a 1.3% rise in UK beer sales in
2014, according to figures provided by the British
Beer & Pub Association (BBPA). The turnaround in
the fortunes of Britain’s favourite pub drink follows
two historic cuts in beer duty by the Chancellor.
The 1.3% rise in 2014 followed nine consecutive
years of decline, which saw beer sales slide -24%.
The BBPA says that huge tax rises were the major
culprit, with a beer duty hike of 42% from 2008 to
2013, under the beer tax ‘escalator’ policy. This
sent the duty (plus the VAT on the duty) from 42p
($0.63), to 65p ($0.97) on a typical pint. Beer sales
in pubs have begun to stabilise, showing a small
decline of -0.8% in 2014, but this was the smallest
decline in sales since 1996. Off-trade sales grew
3.5%, matching the growth of last year, and taking
off-licence and supermarket sales above on-trade
sales for the first time on record.
BBPA CEO Brigid Simmonds said: “British beer
is back in growth – and we want to keep it
that way. But with 70% of pub drink sales being
beer, the picture for our much loved pubs is
still fragile.”
Africa Diageo reported an overall net sales
increase of 5% in Africa for the six months to
end-December 2014. Performance in the Africa
Regional Markets, where organic net sales were
up 16%, has improved due to strong growth in
beer in Ghana and Cameroon. Across Africa, beer
sales were up 5% over the six months.
Nigeria remained a challenging market as
consumers continued to trade down to value
beer, and the stout category continued to lose
share to lager which impacted Guinness.
“However, the successful launch of Orijin and the
improved performance of Satzenbrau drove
growth in beer despite softness in other brands
and destocking,” said Diageo chief executive,
Ivan Menezes.
Menezes stated: “We have continued to build
our route to consumer and invested in our
brands, with marketing spend up 12%.” Spend
on beer was up 6% as investments on Guinness
and the ‘Made of More’ platform increased
20%, while the Orijin brand was rolled out
nationally in Nigeria.
In east Africa robust growth in beer and spirits
drove an 11% increase in organic net sales.
Double-digit net sales growth of both Tusker and
Guinness in East Africa, and value offerings Balozi
in Kenya and Kibo Gold in Tanzania, more than
offset the continued decline of Senaor that
resulted from excise duty changes.
Globally, beer represents 17% of Diageo’s net
sales, and the category grew 2% during the
reported period. Declines in North America and
Asia-Pacific, and flat growth in Europe were
offset by the increasing sales in Africa and strong
performance in the Latin America region.
Russia The Carlsberg Group has closed two of
its breweries in Russia, following the suspension
of operations at the facilities last year.
Following an evaluation of its brewing
operations in Russia, where market conditions
have deteriorated due to increases in excise duty
and tougher regulations impacting consumption
and profitability, Carlsberg has decided to close
breweries in Chelyabinsk (Baltika-Chelyabinsk)
and Krasnoyarsk (Baltika-Pikra).
A statement from the Carlsberg Group said:
“The sales and distribution organisations will be
maintained in the two cities, but supplies will in
future be sourced from the remaining eight
Russian breweries.”
The closures will result in a pre-tax, non-cash
write-down
of
approximately
DKK0.7bn
($106.4m). “This amount will be included in special
items for 2014 and will have no impact on 2014
operating profits,” according to Carlsberg.
● In other news Carlsberg has embarked upon a
three-year project to develop a biodegradable,
bio-based bottle made from sustainably sourced
wood-fibre. The ‘Green Fibre Bottle’ is being
developed in collaboration with packaging
company ecoXpac, Innovation Fund Denmark
and the Technical University of Denmark.
Andraea Dawson-Shepherd, senior VP for
corporate affairs, said: “If the project comes to
fruition, it will mark a sea-change in our options
for packaging liquids.”
The bottle will be made entirely of bio-based
and biodegradable materials, mainly sustainably
sourced wood-fibres.
Anheuser-Busch to acquire
craft beer producer
USA Anheuser-Busch, the US arm of
leading global brewer
Anheuser-Busch InBev, is buying
Seattle-based Elysian Brewing Co.,
which produces craft beers including
leading brand Immortal IPA and
Loser Pale Ale.
The multinational seeks to
captalise on the increasing popularity
of craft beers in the US market,
where overall sales are declining.
Total volume sales were down -0.8%
in North America during the first half
of 2014.
Elysian sold over 50,000 barrels of
beer in 2014, distributing in 11 states
in the US as well as Taiwan, Australia,
Japan and Canada.
SABMiller reveals Q3 results
for fiscal 2015
USA SABMiller announced group net
producer revenue (NPR) increased by
4% in the three months to
end-December 2014. The group
posted NPR per hectolitre growth in
all regions.
Continuing volume weakness in
China and US shipments saw a
decline of -1% in lager volumes,
although soft drinks performance
remained strong across the board
with volumes up 4% in the period.
“We continued to drive steady net
producer revenue growth,
notwithstanding varied local market
performances, as we benefited from
the breadth of our global portfolio of
businesses,” said SABMiller chief
executive Alan Clark. “Our Latin
America and Africa businesses
continued to grow both volumes and
revenues, together with Europe,
while more difficult trading
conditions, particularly in China, held
back the overall group performance,”
Clark said.
Africa and Latin America posted the
highest group NPR growth of 7% and
5% respectively in the third quarter.
Please send any news on
these categories to
[email protected]
February 2015 35