Gin thrives in beleaguered European market

Despite economic headwinds, Western Europe continues its thirst for premium gin, with boutique brands stimulating interest in the market.

Gin is the “category to follow” in Europe, with an number a international brands finding success in the market

*This article was first printed in the January 2015 issue of The Spirits Business

Spain may be emerging from its worst recession since the days of Franco, but the economy remains fragile. With almost six million Spaniards out of work, the country has the worst unemployment rate this side of Greece, and there are fears that deflation could undermine any recovery. Against this backdrop, one particular white spirit is proving more than resilient.

“Gin is definitely the category to follow at the moment,” says Ronnie Cox, brands heritage director at Berry Bros. & Rudd. “There are now 250 gins in wholesale distribution in Spain, which is double the number three years ago.” Among them, is Berry’s No.3 London dry gin, which, despite the intense competition, is doing “extremely well”. Of the bigger gin brands, Tanqueray is up 14% according to Ed Pilkington, Diageo’s consumer marketing and innovation director for Western Europe. “There is a genuine sense of more confidence in the market than even 12 months ago, and people are saying Spain could be coming back into growth,” he continues. “The good thing about the gin category is that it’s dynamic with lots of brands.” Yet Sipsmith’s founder, Sam Galsworthy, finds Spain quite tough. “You’re up against cheaper, more established brands, and it’s a very mature and oversaturated market place.”

Twenty years ago, Scotch was the country’s dominant spirit until it was sidelined by rum, years before gin took over. “Whisky’s still really important, as is J&B,” says Pilkington. “It’s always been an iconic brand in Spain, and it’s important it stays that way.” However, he concedes the blend known here as “Jota Be” is unlikely to recover its all-time peak of nearly three million cases, at least in the short term, even with the assistance of J&B Honey, launched last summer.

Pilkington admits it was inspired by: “A certain notable brand out of Tennessee that has been doing a pretty good job of selling a honey-flavoured whisky across Europe. We wanted to breathe some life into the whisky category, get consumers excited about J&B and have something to talk about.”

Diageo and David Beckham’s Haig Club single gain Scotch has been rolling out across Europe

Beckham influence

A similar job in the UK has been given to Haig Club, which sells for around £40 in supermarkets. Despite its glitzy blue bottle and backing from David Beckham, it is still a premium price for a grain whisky. This pleases Pilkington, who says: “Categories tend to be revitalised from the top down.” It will be fascinating to discover how it did over Christmas.

Europe accounts for just over a third of Pernod Ricard’s global sales, and while Spain slipped 7% in the year to June, France grew 3% with a strong performance from Absolut (+17%) and Havana Club (+16%). The country’s Scotch market contracted 1% (IWSR), though Pernod claimed 4% growth for Chivas Regal and 7% for Clan Campbell in its year-end results in August. The firm’s other big blend in France – Ballantine’s – is “becoming more and more popular in the off-trade,” says global brand director, Peter Moore. The focus over the festive period was about tempting people to trade up to special releases of Ballantine’s Finest and 12- and 17-year-old expressions.

Dmitry Ivanov, CMO of Bacardi, sees Europe as a land of opportunity. “There’s plenty of potential for rum to gain share from other spirits, beers and wines. It’s an accessible category, not only from a price perspective, but from a product range.” Apart from France and Spain, described as “old legacy markets where rum has been around forever”, he believes “the rest is still pretty new, even in the UK, which is back in growth”.

Recent innovations include Bacardi Gold and Bacardi Gran Reserva – a white sipping rum that was launched in duty free last May. A new expression, currently under wraps, will appear in the next six months. Last year the brand’s new Untameable campaign was rolled into Europe, where Ivanov feels the greatest potential for growth is among the dark rum category.

Diageo’s Captain Morgan rum sits alongside Jack Daniel’s as one of the best-selling spirits brands in Europe

Sailing south

There is certainly more competition from Diageo’s Captain Morgan, which has built sales of over 600,000 cases in Germany. Pilkington claims the brand currently vies with Jack Daniel’s as the best-performing spirits brand in Europe. “And now the Captain’s sailing south,” he says. “We launched in Iberia last year, and have just launched in Italy.” After that will come Portugal and Greece. Despite everything, he feels the Greek market “starting to pick up” and that “people are now out spending money on premium spirits.” Historically, the Greeks were certainly big fans of Johnnie Walker, and once drank more Scotch per capita than anyone else.

So is there a light at the end of the tunnel in Europe’s most battered economy? “There are always signs of light in Greece,” says Spiros Malandrakis, senior analyst at Euromonitor, “but sometimes it’s just the train approaching.” He mentions the rise of “nostalgia brands” like Fix beer, and local spirits like Raki which “really boomed in the first couple of years of the recession as international spirits collapsed.” He also points to so-called “austerity fatigue” that has seen a recovery in the country’s Champagne sales. “When you hit rock bottom there’s always a certain bounce back,” he says.

Malandrakis has tracked the growth in craft spirits and believes there has been something of a consumer shift. “That’s definitely the case in some of the big cities like London, Berlin or Barcelona, where the seeds are planted for what eventually becomes the prevailing trend in the market. The whole craft movement is based on the idea of moving away from the major brands and into locally-produced products that support the local economy and perhaps use local ingredients.”

At Sipsmith, Galsworthy says: “It’s difficult to know for sure. Certainly anecdotally it would seem there is an exciting shift, but ‘exciting’ to a brand like us is minute to a brand like Gordon’s or Tanqueray. I just wonder if they are really that phased at the moment.” The official view from the big boys is that boutique brands are doing a wonderful job in reenergising Europe’s spirits category. But if they start stealing market share in 2015, that view might change considerably.