One of the overriding themes across the drinks industry in the 21st century has been the premiumisation of brands. Thousands of spirits producers coming to market describe themselves as premium, super-premium or, more recently, ultra-premium. But with impending financial crises looming in mature booze markets, the horizon is a mixed bag for the top end of the industry.
According to a report in December by IWSR Drinks Market Analysis, the first half of 2022 saw the value growth of beverage alcohol reach historic highs, driven by a combination of post-pandemic demand and price increases. However, IWSR’s recent survey also indicates that consumer confidence is starting to weaken in many markets.
The report read: “As costs of living continue to increase, consumer confidence is starting to wane in many countries, especially across Europe, and particularly in the UK. This sentiment, however, contrasts with the relatively optimistic APAC region, with consumers in India and China much more positive about life and finances. The picture in the US is more mixed, and while American consumers remain relatively positive overall, they are growing increasingly cautious. This is especially evident across mid-to-lower income groups.”
The same data suggests that pockets of down-trading are especially evident in markets with neutral-to-negative levels of consumer confidence.
“In the UK, there are signs of decreases in net spend across most categories within premium-and-below price bands,” the report said. “The US shows a significant minority of superhigh spenders who continue to drive spend in super-premium+ segments.”
On a more positive note for premium producers, the report also suggested that consumers are “primarily moving away from high-volume, lower-value beverages, such as wine and beer, and moving into lower-volume, higher-value categories such as whisky, tequila, gin and cognac”.
It seems, therefore, that while the trend for moderation was first born out of health concerns and younger consumers wanting less volume and better quality, a similar theme is developing within the financial troubles caused by the pandemic and inflation generated by the war in Ukraine.
On the one hand, premium brands are now dealing with a nasty combination of inflation increases and consumers with less spending money, but on the other it’s encouraging to see that quality is still taking some priority over quantity in the more mature markets around the world.
