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Value of spirits on the up reports IWSR

Spirits' share of the total beverage alcohol value pool is predicted to rise from 35% in 2021 to 42% in 2026, overtaking beer, wine and RTDs in the process.

Over the next five years, spirits are set to gain value share in every region of the world, except for the Commonwealth of Independent States (CIS) countries, where the number will remain steady. "One of the advantages enjoyed by spirits is the very wide differential between low-priced and standard products at one end of the pricing spectrum, and super-premium, ultra-premium and above at the other," said Emily Neill, IWSR COO research & operations.

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"With beer, this price differential between standard and high-value products is smaller. International spirits categories such as whisky, rum, tequila and gin have more of a runway to premiumise."

However, the signs are more positive for beer when it comes to the future evolution of global servings by category volume, or "share of throat". Here, IWSR forecasts that equivalent serves of beer will rise at a CAGR of +1.3% between 2021-26 (or +1.6% including cider and RTDs), leading to a change in category share of +0.4% (+1.2% including cider and RTDs). Spirits' CAGR increase of +1% equates to a category share loss of -0.2%, with wine predicted to decline at a CAGR of -0.2% (category share loss of -0.9%).

This disconnect between value and volume for beer is especially evident in developing countries across Africa, South America and Southeast Asia, where average prices are lower in US dollar terms. 

The value share declines for wine - all regions are forecast by IWSR to show wine's value share shrinking, except for South America and the CIS - disguise an underlying premiumisation trend that has taken root in many markets.

"Wine can premiumise more, and we are indeed seeing a marked 'less but better' trend for wine across many regions. However, the big volume markets for wine - such as the US, France and Italy - are in decline."

In these markets, a generational shift is reducing routine, everyday consumption of lower-priced wines among older consumers. But, of course, younger generations don't tend to do that, but when they buy wine, they spend more on a nice bottle.

Consumer research in the UK and Australia shows that millennial and legal-aged Gen Z regular wine drinkers spend more per bottle than older generations on still wine, so the consumption behaviour of younger LDA wine consumers is pushing lower volumes but higher prices per bottle. However, the steep volume declines override the premiumisation trend globally.

At a time of significant economic uncertainty, companies across the beverage alcohol landscape are wrestling with several issues, such as inflation, rising costs and persistent supply chain pressures, including shipping delays and price hikes in raw materials and packaging.

Pricing strategies by category, demographic and market will be more critical than ever for one to five-year business growth plans.

• IWSR
• Value Generation
• Emily Neill