Unpacking the growth of glass spirits

In the June issue of National Liquor News, IRI Insights Director Daniel Bone provides a snapshot of what is driving growth in glass spirits.

Australian households have upped their purchases of glass spirits to create cocktails that they would previously have enjoyed in a pub or bar.

Flourishing demand for glass spirits, which was already evident before the pandemic, is apparent once again in 2020-21 sales data. The category gained +1.3 percentage points in value share over the last 12 months following the +25.1 per cent sales increase (and a 22 per cent volume lift). The outcome: an additional $1 billion in incremental spend on the category, and that compares to an industry leading +$351 million gain in 2019-20.

An international lens reveals Australia is not unique in recording this surge. Aggregated POS category reads in other markets also reveal pronounced double digit sales growth. Glass spirit value sales in both the US and the UK have soared beyond 20 per cent amid the pandemic, reflecting a preference shift we are seeing locally whereby drinkers are reallocating dollars away from beer and wine.

Headline metrics derived from IRI’s new ‘LiquorLens’ shopper panel solution reveal a total household purchase penetration gain of 4.6 percentage points (MAT to 29/03/21) for the category, with the average shopper spending an additional $25 extra on glass spirits versus the prior year. Liqueurs, vodka, blended scotch, and gin, all which figure in the top performing segments from a sales perspective, were the four segments to reveal the most significant gain in penetration. Category wide, the most notable increase in propensity to buy came from frequent buyers (those buying the category more than three times).

Familiar enduring themes

A focus on the highest performing category segments reveals some familiar and enduring growth themes.

• Gin: With a growing number of at-home occasions, gin sales surpassed the eye-watering growth recorded in the prior year when Australians spent an additional 31 per cent on the segment in what amounted to +$94 million in growth. The pandemic-led boon to retail liquor meant that gin sales soared by 44 per cent in 2020-21, adding nearly +$174 million in absolute sales growth. Over the last two years, the gin segment has accounted for nearly a fifth of glass spirits growth and accumulated +3.1 percentage points in category value share. With flavoured gin product development still relatively limited in Australia compared to the UK, there is still opportunity for gin to gain share for at least the next two years. But preferences may become more ephemeral as drinkers migrate to the newest sensory delight.
• Bourbon: Over the last 12 months, the bourbon segment has provided the most significant dollar contribution to category growth. The 25.5 per cent annual dollar growth of all bourbon reflects the wider category performance at large; this is also apparent with bourbon’s percentage contribution to category growth (17.8 per cent) almost precisely aligned to its share of sales (17.6 per cent). This narrative was also somewhat apparent from our LiquorLens data whereby gains in bourbon penetration have been marginal relative to the segments.
• Vodka: Again a leading category growth contributor in absolute terms, vodka bears resemblance to bourbon. The segment grew at an impressive 18 per cent, with strong performance from brands across the price spectrum. But vodka’s percentage contribution to glass sprits’ overall growth (12.0 per cent) under-indexed relative to its share of sales (15.4 per cent). So that suggests that other segments (beyond gin) have disproportionately impacted the vibrant performance of spirits overall.
• Single malt Scotch: When we cast the net wider, single malt Scotch and spiced rum stand out as the most significant segments over-indexing in dollar growth contribution. The former has long been a beacon of premiumisation in the category (i.e. pre-COVID too), but the +46.7 per cent annual increase in sales is clearly influenced by the migration of spend from travel retail especially.
• Spiced rum: Touted by many to be the ‘next gin’, spiced rum recorded the most significant increase in household spend according to our LiquorLens read, although household penetration remains less than half the level evident in gin. From a sales perspective, spiced rum’s sales zinged with absolute growth in the latest 52 weeks (+$53 million) amounting to a near sixfold increase versus last year. Top performing brands reflect a combination of NPD, and an enduring (and accelerated) growth trajectory. Looking forward, there remains opportunity for more upscale (and potentially local) premium rum brands to spice up the range further.
• Dark rum: Meanwhile, traditional dark rum sales growth amounted to a near twelvefold increase versus the marginal growth recorded last year. A household penetration gap between traditional dark rum and spiced rum accounts for the former still outselling the latter; household penetration of dark rum is 1.6 times higher than spiced rum, only marginally higher than the dollar sales differential.

The pandemic has accelerated the manner in which Australians have embraced at-home mixology, making at-home occasions set to remain significant for the foreseeable future.

The above-mentioned shopper penetration metrics highlight an ongoing opportunity to recruit drinkers into the category. We anticipate plenty of NPD activity, for example with Haig Club’s new Mediterranean Orange spirit recently launched in the UK. The new 35 per cent ABV spirit drink uses specific wording to appeal to ‘non whisky drinkers’, tapping into the seltzer trend with its broad array of enticing and accessible flavours to provide an approachable option for novice dark spirit drinkers.

A similar theme will be the way contemporary flavour forward brands like Squealing Pig and Kopparberg use NPD to optimise cross-category sales opportunities. It will likely be another year in which intra-category competition will intensify as purveyors find more interesting ways to entice novelty-seeking buyers into traditionally complex segments.

Finally, sustainable packaging looks set to be a major theme to impact the category on a global scale. Given the iconic nature of many bottles and associated brand codes, the glass spirits category is suited to make an impact with packaging-themed NPD activity. Watch out for an array of new bottle prototypes and limited editions that are anchored around the 4R’s of Removing, Reducing, Reusing, and Recycling.

Find this article and more in the June issue of National Liquor News.