Cocktails Rise and Shine While Beer and Wine Sales Slip
Beer and wine had a difficult year in 2016, but sales of hard alcohol eked out growth
Source: WSJ
By Saabira Chaudhuri and Jennifer Maloney
June 15, 2017
The world’s drinkers are turning to the hard stuff.
Liquor makers sold more spirits and mixed drinks around the world in 2016 than in the year before-a bright spot in an industry where volumes of almost every other kind of alcoholic drink are in decline.
Overall, last year was a tough one for beer and wine. Global alcohol volumes across all types fell 1.3%, a steeper decline than the average 0.3% drop over the past five years, according to industry tracker IWSR. Beer volumes fell 1.8% around the world in 2016, while wine sales slipped 0.08%. Yet sales of hard alcohol like gin, tequila and whiskey eked out an increase of 0.04%, and mixed drinks, including pre-mixed cocktails and some flavored alcoholic beverages, grew by 1.6%.
The numbers underscore a shift in consumer tastes away from beer and wine and toward drinks that typically pack a higher percentage of alcohol, though intended to be consumed in less volume.
Spirits are growing faster in the U.S. They were up 2.6% last year, in line with the five-year average and more than double wine-sales 2016 growth. Overall alcohol sales in the U.S. inched up 0.1% by volume.
The growth has been helped by liquor makers’ efforts in recent years to attract new drinkers. Makers of scotch and other types of whiskey have been courting women and younger drinkers while internationally, spirits companies are pushing into Africa, China and other developing markets where beer has typically been king.
“Scotch is coming out of the stuffy club room into the cocktail bars and restaurants,” said Bacardi International Ltd. Chief Executive Michael Dolan. Spirits makers, he said, are benefiting from the revival in cocktail culture.
Liquor ads, after years of restrictions, have crept back onto TV screens in recent years. The National Football League, a holdout until recently, plans to accept commercials for distilled spirits in the coming 2017 season. Spirits have also benefited from what executives describe as more fickle consumption habits by millennial drinkers, who tend to sip on a range of different beverages.
Spirits tend to retail at higher prices than wine and beer, providing a bit of a cushion for the alcohol industry as a whole. Despite falling volumes last year, the dollar value of alcoholic drinks sold globally grew 4.7%, according to Euromonitor. In the U.S., dollar sales rose 3.3%.
Liquor makers have started pushing more expensive brands, as have beer and wine companies.
“We continue to look to premiumize,” Diageo PLC Chief Financial Officer Kathy Mikells told investors earlier this year. “You can see across our biggest brands, our global giants and local stars-it’s the reserve brands and variants that are growing faster.” Those brands include Johnnie Walker Green Label and Johnnie Walker Gold Label Reserve, pricier variants of its flagship Scotch whisky.
Make It a Double
As consumers shift from beer to spirits in the U.S., per-capita intake of pure alcohol remains largely flat.
Earlier this year, Diageo launched a new high-end Irish whiskey brand, Roe & Co, which sells at £30 ($39) a bottle in the U.K. Rémy Cointreau SA, which currently gets 50% of its sales from products priced above $50 a bottle, has set a target to bump that share up as high as 65%.
The taste shift has left brewers out in the cold. Beer volumes in the U.S. fell 0.3% last year, according to IWSR, and beer makers experienced big sales drops in key overseas markets. An economic crisis in Brazil sent sales down 5.7%. Chinese beer sales fell 4.2% as drinkers flocked to wine and spirits. Beer sales in Russia fell 7.8% amid economic headwinds and price rises there.
“We need to take back the share of stomach we’ve lost over the past decade to wine and spirits,” said Britt Dougherty, MillerCoors’s vice president of marketing insights and engagement.
Anheuser-Busch InBev NV’s Bud Light, the biggest beer brand in the U.S., continues to lose volume and market share. After a failed bid to revive the brand last year, AB InBev this year launched a new U.S. marketing campaign. The company last month said it would invest $2 billion through 2020 in U.S. capital expenditures targeted in part at “elevating” struggling core brands.