The great gin and tonic revival of the previous decade birthed a stable of high-quality, premium tonic brands, resulting in surging sales as increasingly astute G&T drinkers sought quality mixers. It’s a category that has really flourished in the on-trade, and despite bar closures and widespread disruption throughout 2020, has remained in the ascension.
According to Euromonitor, global tonic water and bitters sales grew by 3.4% last year, surpassing 2.2 billion litres. This performance is even more pronounced in Europe. According to Research & Markets, the European tonic water market is expected to enjoy growth of 9.9% CAGR between 2020 and 2026. However, this only tells part of the story.
Last year, tonic brands’ performances were fundamentally decided by their ability to quickly establish themselves within the on-trade.
“Historically, our brand has been 50:50 off-trade to on-trade, so it was quite a blow when we got that announcement from Boris that everything was having to shut,” says Andrew Ronald, UK general manager of FeverTree. “We were fortunate in doing a very good job in pivoting quickly into the off-trade and really pushing our off- trade business much harder.”
The Berlin-based Thomas Henry brand witnessed the disparity between its markets with and without established o-trade links. “For us, the German and Austrian markets were by far the most developed in the off-trade and in these markets, we only had a loss of 2%,” says Sigrid Bachert, managing director of marketing and sales.
“Then we have markets like Italy, where we are only in the on-trade. There we had a loss of about 30%, but that’s only because of the good months of January to March [2020]. In the hard lockdown months, we had zero sales there.”
As the shockwave of the pandemic lockdowns spread internationally, larger, more established brands with expansive ranges were able to navigate the challenges and remain active in the market.
“Our business is extremely diverse, operating across over 85 countries with a range of both so¡ drinks and mixers in both the on-trade and grocery channels,” says Neil Donachie, trade marketing manager at Fentimans. “This allowed us to divert resources into areas of the marketplace, both channels and countries, that were still open to reach consumers.”
For others, the ability to be light-footed and change tack quickly kept them moving forward. “The impact of Covid-19 required us to adapt our plans for 2020. When lockdown was announced, our pipeline of exciting experiential events and collaborations for the summer of 2020 were paused while we moved our world online,” says Ounal Bailey, co-founder of The London Essence Co.
The UK-based brand, which is owned by Britvic, went on to enjoy great success in 2020 after quickly taking advantage of the shift to off-trade sales. As a result, the brand enjoyed “a year-on-year increase of over 1,000% within [British] retail” for its Indian Tonic.
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ACCELERATED TRENDS
The Covid-19 pandemic accelerated trends such as ecommerce and direct-to-consumer sales. “Even businesses that performed exceptionally well, this whole process has caused them to evaluate the way that they work,” says Christian Sarginson, brand controller for Franklin & Sons at Global Brands.
“It’s just accelerated things really, a lot of the stuff that might have been changed was destined to go there anyway eventually.” Global Brands launched Good Time In, its own direct-to-consumer platform, during the lockdowns.
“That became a nice outlet for us to be able to get brand in hand and to give people that at-home experience which has been so important,” says Sarginson. “Ecommerce we see as a good adaptation. It’s been interesting to watch how that’s progressed. Alcohol and mixers under-index on ecommerce quite a lot… because it’s such an impulsive category.”
Donachie at Fentimans adds: “While online and ecommerce-based sales of soft drinks had been growing for years, there was a huge explosion of growth in this channel in 2020 as consumers switched to online shopping platforms.”
“In the last year, retail shopping habits changed more than in the 10 years before. Any brand would be da¡ to not capitalise,” says Ronald at Fever-Tree, which invested in online retail platforms and increased its presence on Amazon. “We’ve all seen these changes coming, but I think it’s accelerated more. We’ll continue having a focus online and a focus on digital, because I think that we’ve all jumped into that bath in 2020 and it will continue as we go ahead.”
As other categories have seen, the online marketplace also benefits the small and the unusual. Rather than spending half an hour reading labels in a supermarket aisle, consumers can make researched choices from the comfort of their sofa.
“It’s certainly been good for small brands because people haven’t defaulted to the mainstream premium choices available in multiple grocers,” says Sarginson. “They’ve taken a bit more time to search through the thousands of products online and have been a bit more adventurous.”
While digitalisation benefited many brands, lockdowns ravaged the on-trade, with many bars unable to survive. The result will see a transformation of cities and towns around the globe, and we will emerge into a different metropolitan landscape. For tonic brands whose primary focus is on-premise, this offers a new set of challenges.
“There will be a big movement in the market, let’s say 20-30% of your [on-trade] partners are gone, there will be new partners that you have to build new relationships with, gastronomy partners and bars will need money,” says Bachert.
To support its existing partners, Thomas Henry launched Helping Hands last year, a program which gave on-the-ground help to struggling bars as they sought to get back on their feet.
“A lot of our on-trade sales force were once bartenders or on-premise owners, so when we were allowed to last year, we went to our on-premise partners and offered to help run the bar for them for three or four days, we brought [customers] in and managed their social media channels. It was very successful, and we are going to do this again this year,” says Bachert. “The guys in the on-premise liked it a lot, o¡en it’s better to be on someone’s side than to give them €200.”
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Beyond bricks, mortar and bytes, consumer trends have been progressing at pace. By design, tonic brands found themselves in the enviable position to feature in a variety.
“There was a phenomenon of a lot of people drinking a lot more at the start of lockdown and after a couple of months of hitting it a bit harder than they otherwise would, either monotony or sense took over, and then we saw quite a big rise in zero per cent and low-alcohol drinks,” says Sarginson.
“It was a story of two halves. People really enjoyed a very much needed drink at the end of a day, but also the low and no occasions really grew. Fortunately, we’re exceptionally well positioned to capture all of those three occasions, be it low, no or the normal old drinking occasion,” adds Ronald.
“We saw occasions where people were still feeling like they were creating that spirit and mixer drink, but without the spirit in there. With the great glassware, ice and garnish but just having the tonic.”
LIFESTYLE CHANGES
The International Alliance for Responsible Drinking reports that more than one in three adults cut down or stopped drinking altogether during last year’s lockdowns, and according to Globescan, 31% of people say they have made major changes in order to live more healthily.
“The pandemic has definitely heightened awareness of the importance of physical health. Healthier soft drinks and lower sugar content options are set to grow as new legislation and consumer needs grow,” says Donachie.
“Drinking habits are changing as people desire a balance of both wellness and enjoyment, and this has been reflected with an increase in demand for non-alcoholic and light options,” says Bailey. “Premium tonic has definitely stepped in to meet this demand as seen with the emergence of interesting and unique flavours.”
This year, many countries are anticipating a return to normality, and a pent-up demand to get back to the on-trade may result in a summer of prosperity for brands. “Everywhere will be full of people, everyone will want to be in a bar or outside,” says Bachert. “It will be the summer of our lives. From a psychological point of view, if the pandemic situation will allow it… people will be going crazy to go out.”
The desire in consumers to go out and enjoy themselves could be a much needed shot in the arm for the on-trade. While at-home drinking has maintained the category, it’s the on-trade where most premium tonic brands have traditionally focused their efforts.
“No matter how great people have got at making drinks at home, the overwhelming majority of those will still not be to the standard of a professional in a bar. The on-trade has the ability to reinvent itself. The on-trade is the ultimate trial hotbed,” says Sarginson.
“We want to be there for all of customers, to support them as much as possible and do everything we can to get them back to running at full speed as quickly as possible,” says Ronald. “As a brand we’re excited about what opportunities lie ahead, we’re very excited about the on-trade reopening, and it’s been fantastic how much the consumer has engaged with spirit and mixer in 2020 and we’re con¦dent that will stay.”
And once normality has been realised, brands will be able to get back to the business at hand before everything was disrupted, namely, world domination.
“From the worldwide picture, the category still has room to grow. The UK and Spain are absolutely dierent to a country like France. France only really started with gin and tonics about two years ago so there’s a lot of room to grow in some countries,” says Bachert. “In the US also, export there is the future. We try to find the niches, there are countries where there is room for improvement.”
With the on-trade reopening and the category’s position in the growing low and no-abv trends, in 2021, tonic water can have its cake and eat it.
