Drinks market continues to fragment

Nearly all markets around the world experienced significant trading-up across the majority of categories and across all price points over the last year, according to the recently-released IWSR Global Trends Report 2015.

Growth of the aspirational middle class in developing economies along with increasingly discerning consumers with greater disposable incomes in more mature markets have been the driving force behind this trend as the economic crisis has left a lasting scar on many key European markets. Despite signs of recovery in Italy, Ireland and the Netherlands, consumers in these markets remain pessimistic about their economic prospects according to IWSR’s  Global Trends Report.

In Portugal the crisis has made consumers cautious about spending any surplus income and it will be some time before economic improvement translates to significantly higher spending. In France and Belgium the economic environment remains downbeat despite improving economic indicators.


Tax increases disrupting markets

Recent tax increases in Sweden, Ireland and Poland have caused differing levels of disruption in these markets. In Poland the announcement of a significant 15% increase in duty on spirits led to overstocking at the end of 2013 while in Ireland the succession of duty increases have left their mark on the consumer, reducing the frequency of impulse purchases.

In Turkey the ongoing tax harmonisation process between local and imported spirits, due to be completed by 2018, has seen imports once again benefit from the narrowing price gap with local products.

However in the UK, the excise tax escalator has been stopped and the government has also announced cuts to beer, cider and spirits duty.

Fewer on-trade visits and a reduction in the number of purchases have been damaging the on-trade in Czech Republic, Ireland, Portugal and Belgium.

Internationally, premiumisation remains one of the leading influences on market trends, manifesting itself in a number of ways:


  •  the rising craft movement which is becoming established in more and more countries and across a wider range of categories
  •  the rising interest in malt whiskies
  •  the huge swell in demand for Japanese whiskies
  •  exploration of single-barrel and esoteric US whiskies and super-premium gin’s explosion onto the world stage.


Although premiumisation has played into the hands of some of the larger international brands such as Jack Daniel’s and Hendrick’s, many established brands face a mounting challenge from the rise of the craft sector and the overall fragmentation of the market, reports the IWSR.

As consumers seek to explore, experiment and discover ever more unique offerings, international brands are struggling to compete at this same level. Additionally, in many markets the traditional middle is being squeezed as consumers either gravitate to buyers’ own-labels or trade-up to higher price points.


Growing trend of drinking less but better


The trend for quality over quantity is reflected in markets here and in Portugal where the number of high-end outlets continues to increase.

Vodka bars are expanding rapidly in Poland and more cocktail and concept bars have been appearing in Denmark.


Cocktail scene creating a buzz

Classic cocktails using ingredients with high production values have become extremely trendy throughout many of the more mature key European markets. Innovative and experimental cocktails are also arising as a result of broadening consumer tastes, a fascination with niche, unique products and bartenders looking to give customers more of an experience, reports IWSR. This trend has become most notable in the UK, Ireland, Switzerland, Sweden and Denmark.


Competition increasing among off-trade retailers

Competition among retailers is rising as a result of the continued and increasing success of the discounters; their reputation is improving among consumers.

The stigma once associated with discounters has all but disappeared here with people from all economic and social spheres now shopping in this channel.

Discounters in Ireland, Poland, the Netherlands and Denmark are all continuously gaining share of retail space as consumers become increasingly price-savvy.

Meanwhile, discounters have successfully premiumised their image in Germany to counter the fightback from mainstream chains.


Promotional activity driving off-trade volumes

Promotions have become the driving force behind volumes in the off-trade in a number of markets across Europe including Ireland, Denmark, Portugal, Belgium and Turkey. As well as the increasing quantity of promotions, there has also been an increase in frequency; promotions are becoming more year-round or last for longer periods of time. Retailers in Portugal and Ireland are fighting to win over consumers with heavy discounting; in some cases price reductions have risen to 70%.


White wine experiencing uptick in demand

White wines have seen increasing success across many European markets for a number of reasons according to the IWSR report. A hot Summer led to much-increased demand for white wines in markets including Sweden and Ireland, claims the report, while investment has led to strong growth for local whites in Spain and Germany where aromatic whites are performing well among female consumers.


Light wines growing

Lower-alcohol wines are yet to make a huge impact on any market but there are signs of emerging demand in Spain, the UK, Sweden and Ireland.

This is perhaps most notable in Spain where there’s a definite trend towards locally-produced low-ABV frizzante wines oriented to young female consumers.

In both the UK and Sweden a growing number of low-alcohol brands are entering the market yet perceptions of the category remain broadly negative. Lower ABV wines are making ground in Ireland but this is believed to be mainly price-driven due to the application of a lower tax rate.



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