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IWSR points to post-covid premiumization opportunities in wine and spirits

Katie Nichol

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IWSR points to post-covid premiumization opportunities in wine and spirits

Consumer savings amassed during lockdowns could spell big business for premium wine and spirits brands, according to drinks market analyst IWSR. While scotch whisky and cognac continue to drive the premium-plus market, tequila, mescal and rum are among the emerging contenders to watch.

New analysis from IWSR signals that consumers looking to treat themselves by trading up in their at-home beverage alcohol consumption represent “significant opportunities” for premium wine and spirits players. Indeed, many brands have already moved to respond to this demand, shifting promotional spend to targeting consumers at home and coming up with more creative packaging and experiences, says the drinks market specialist.

“Covid restrictions have led consumers to appreciate the value of at-home treating through the purchase of premium products. The pandemic has put a lot of things into perspective, and ‘carpe diem’ is back on the agenda,” says IWSR research director Jose Luis Hermoso.

Alcohol remains an affordable luxury for those with the means and inclination to spend. Volume losses experienced by premium-and-above price bands for spirits in 2020 are expected to be regained this year. Brands should prepare themselves for a two-speed market recovery, however, with less developed nations set to feel a greater and longer impact from the effects of Covid-19.

By market, China’s premium-and-above spirits market is forecast to experience an 11% volume gain in 2021 after a 4% dip last year. Baijiu, cognac and whisky are all expected to return to growth. In the UK, volume growth of close to 6% is forecast for 2021, after an almost stagnant market in 2020. Premium alcohol-free spirits put in a good performance last year, driven by new launches and changing consumer attitudes. In the US, where brands adapted to at-home consumption in 2020, with close to a +10% volume gain in premium-and-above spirits, growth of around +7% is expected this year. Celebrity endorsements, a more varied offer and increased interest in flavored drinks are also boosting premium-plus spirits in this market.

By category, malt Scotch whisky and cognac continue to drive the market, although Irish, US and international whiskies are increasingly focusing on the premium-plus space. “On-trend categories such as tequila and mezcal could be the ones to watch,” adds Hermoso, noting that rum has potential, and prestige-and-above agave-based spirits have trebled in volume in the past five years, with a CAGR of close to +40% forecast over the next five years. As for wine, consumption for premium-and-above products is only predicted to return to 2019 levels in 2022, while premium sparkling wines are expected to see long-term recovery and growth with the return of on-trade and large-scale celebrations.

Consumer engagement is more important than ever in the premium-plus market. “Luxury consumers are becoming more discerning about what is in the bottle, and how the liquid justifies its price,” Hermoso highlights. “Fancy, expensive packaging is no longer enough.” And prices could be set to rise over the next 12 months, if continuing supply chain issues mean brands look to pass increased costs onto consumers. “For some [importers], the cost to bring one container on a barge into the US has increased 60-75% between 2019 and 2021,” points out IWSR.

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