‘Status spirits’ see value grow by 35%

During 2021, the value of international status spirits increased by 8% ahead of its 2019 pre-pandemic figures, according to IWSR’s latest report.

IWSR’s Status Spirits Strategic Study 2022 analyses the performance of ‘status spirits’ in key markets worldwide. Status spirits are brands that market for US$100 and above.

Excluding baijiu, the global market for international status spirits saw growth rise by 35% in value terms in 2021.

This leaves it 8% ahead of pre-pandemic figures in 2019.

Between 2016-2021, the value of the international status spirits category expanded at a compound annual growth rate (CAGR) of 9%.

“While there are undoubtedly headwinds – including the cost-of-living crisis, ongoing Covid-19 restrictions in some places and the war in Ukraine – status spirits have proved resilient,” said Thorsten Hartmann, head of custom analytics, IWSR.

China remains a key market for high-end international spirits – especially Cognac.

Meanwhile, baijiu ‘retains’ 84% value share of the status spirits market, but consumption is ‘almost completely’ confined to China.

However according to the IWSR, the US may take leadership in the luxury market, as agave spirits have made strong gains – the category accounts for more than 40% of US status spirits sales by value.

“The much shorter maturation cycle of agave spirits compared to brown spirits allows for faster production ramp-up, and the relative youth of the category makes it much easier for new entrants,” said Adam Rogers, research director North America, IWSR.

“Status spirits growth in the US should be more assured than in China, as the market is more diversified and there’s less of a swing to purchases abroad.”

A proposed alcohol ban for Chinese civil servants and CCP officials could affect the outlook of the luxury spirits market.

Yet, with travel retail back on its feet, it’s expected Cognac sales will be driven up, as well as this having an effect on the growth of status spirits internationally.

Hartmann added: “The fundamentals for future growth are solid: increased wealth; a focus on spirits as an investment by consumers, retailers and brand owners; new audiences coming online; and digital engagement.”

The auction scene, described as ‘buoyant’ by IWSR, has seen a growth in status spirits sales, as brands are increasingly opting for this as a ‘primary route to market’.

Market instability

Yet uncertainty in the market is present, as rising inflation drives increased interest rates.

“Higher interest rates tend to dampen speculative investments on non-income-producing assets such as status spirits, as they increase the cost of borrowing to fund purchases, as well as the opportunity costs of ownership,” said Hartmann.

“While wealthy consumers will continue to buy bottles to drink, the market for pure investments is likely to cool as income-generating assets become more attractive.”

Three markets are prominent in the international status spirits sector: China, the US and travel retail.

These accounted for 65% of global value in 2021.

Smaller key markets include Japan, Taiwan, Russia, France and the UK, which all grew in value in 2021.

China

China’s global value share of international status spirits, excluding baijiu, is 30%.

“China’s economic troubles are likely to limit status spirits growth over the next five years, and its leading position could come under threat from the US. If the rumoured alcohol ban for CCP members [Chinese Communist Party] and civil servants goes ahead, that too will limit the category’s growth,” said Shirley Zhu, research director Greater China, IWSR.

“There will also be a structural shift not necessarily in consumption but in purchasing patterns – Chinese HNWIs [high-net-worth individuals] will at some stage rejoin the international circuit and will transfer some purchasing of status spirits to global travel retail and rest-of-world domestic markets.”

Duty free is expected to recover by 2026, yet this relies on the comeback of Chinese tourism in international travel, which rests on the decisions of the Chinese government, said IWSR.