Established spirits brands risk becoming ‘passé’

Established spirits producers should forget about defining the craft sector, and focus on becoming more relevant in the face of changing consumer attitudes, analysts have warned.

International spirits producers should focus on how to tackle “structural challenges” in the US

According to Rabobank’s Spirits Quarterly Q2 2015, consumption trends in the US mean “upstart” brands such as Tito’s Handmade Vodka are witnessing “dramatic growth”, while established brands such as Smirnoff and Absolut experience volume losses.

Analysts argue that new consumer attitudes are mirrored in the “rapid rise” of the craft spirits sector, prompting a number of international drinks group to get involved in discussions around the definition of the category.

However, Rabobank claims that multinational companies should instead focus on tackling “structural challenges” created by the soaring popularity of craft spirits, in order to avoid being viewed as dated.

The report states: “The discussions have focused mostly on the definition of craft, but in Rabobank’s view, the outcome of these discussions is of less relevance to the industry.

“More pressing is the signal that the US consumer is changing, and that spirits players need to figure out how to tackle the structural changes following from that.”

Rabobank argues that the growing success of craft spirits brands is a “smaller symptom” of the “underlying challenges” major brand owners face – namely, that they could be viewed as “passé” in the face of an evolving consumer base.

“To ensure that new consumers are drawn into the category, producers will have to find new ways to capture their imagination,” said Rabobank beverage analyst Elena Saputo. “In order to stay relevant, they will have to innovate, introducing new products and brands, along with finding new ways of reaching the ever-changing consumer.”

As such, the group has urged established brands to adopted “bold strategies” to cater to evolving consumer tastes and take on “more calculated risks”.

“It is paramount that big-brand owners take action quickly in responding to emerging trends,” said Stephen Rannekleiv, global spirits and wine analyst for Rabobank. “However, the truly successful companies will be the ones that find ways to drive the trends, rather than limiting themselves to reactive responses.”

NABCA data suggests that more than half of the top 100 US spirits brands suffered volume declines in 2014, even though the overall market showed healthy volume growth.

In its Spirits Quarterly Q2 2015, Rabobank warned that imported flavoured vodkas were losing market share to flavoured whiskeys in the US, while Scotch struggled against the success of “more innovative” spirits categories.