THEY HAD A VISION. A vision that premiumisation was a globalised and all- pervading trend, a one-way journey for all to spirits enlightenment. That vision has started to show signs of interference.
Just last month we learned that spirits companies’ joyride through new frontiers of emerging economies has started to run off the road. Many of the heralded new middle classes of the world have been blighted by inflation and currency devaluation. They might still aspire to premium spirits, but they can’t necessarily afford them.
That’s not how the titans of the industry have described the situation, but macro-economics and consequential sales trends have forced a rethink. Diageo has spoken of its strategy for ‘mainstream brands’, with more effort and marketing now to be directed towards the cheaper journeymen of its portfolio.
No category more than whisky has felt the brunt of economic instability in Latin America (recession and political instability), Russia (currency devaluation and EU sanctions) and China (government clampdown).
Where once a Diageo press conference would have dripped with Johnnie Walker references, the spirits producer has started to talk up standard blends brands such as Black & White, particularly as a focus in Latin America. In Africa, its cheap-as-chips United Spirits brands have been drafted in – less as recruiting sergeants, more as plain old infantry.
Pernod Ricard, meanwhile, has refocused its sights on occupying the ‘centre ground’ and has rebranded and repackaged its once ‘standard’ range (now called Introduction to Scotch – catchy) for the new marketing age.
The language may differ between the companies, but the sentiment is largely the same. This is the rebirth of standard spirits. And if the trends continue in many key emerging markets, these lean, once-neglected brands, will increasingly fill the breach that premium left behind.
“Brazil and Russia have had huge issues with inflation and currency issues,” says Mark Thorne, global brand director of Introduction to Scotch at Chivas Brothers. “Consumers’ standards haven’t changed – they still aspire to go back to premium – but their capabilities have.”
In scotch, the standard segment grew 2.3% (IWSR) for the five years to 2014, but the signs from the sector’s leading brands (such as Passport, William Lawson, Vat 69 and Black & White) are that growth has accelerated since then.
Indeed, standard scotch now has a larger share than premium (standard 36%, premium 35%, super-premium 26%, ultra-premium 2%, prestige 1%, according to IWSR).
“Normally companies do not talk about this segment,” says Thorne. “We’ve been chugging along but we’ve had great growth recently – double digit for four years.”
In the year to June 2015 Chivas Brothers’ Passport saw volume growth of 18% and value growth of 20% while its 100 Pipers grew 13% and 19% respectively. So consumers are buying more of these brands and are willing to spend slightly more for the pleasure.