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Nick Gillett: Are spirits brands still benefitting from premiumisation?

Various reports suggest that it has, while others in the US wait with bated breath for the final nail in the coffin – to find out if widespread trade tariffs are likely to come into play. But here in the UK, the situation feels a lot more nuanced than that, especially for those of us who only deal in premium spirits brands. My take is that premiumisation isn’t dead – especially for brands that offer quality bang for buck.

The perfect storm

The obvious cause of slowing premiumisation is the difficult economy and how this is hitting disposable income. Pair this with the wider trends affecting the spirits industry, such as sober curiosity and moderation led by health and wellness, and you well and truly have a perfect storm of circumstances. But within this bleak outlook there is a ray of hope.

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My distribution business, Mangrove Global, deals mainly in the premium, independent spirits sector. Our brands not only have an above-average price point, but they’re also high-quality liquids in their own right, and they each have a spectacular story to tell. What we’re seeing with our portfolio is that premiumisation continues to increase – and is definitely remaining steady. As well as the stalwart SKUs sold by our brands, we can guarantee that special editions and rare finishes (which often come with an even heftier price point) will always sell out. And I understand why.

All brands, regardless of price, are affected by alcohol duty hikes. But the lower end of the price spectrum is hit substantially harder, to the degree that changes to the liquid might have to be made to mitigate costs. At the higher end of the spectrum, your money tends to go further. The duty stabilizes and as a result your spend goes directly into the quality of the liquid. The informed consumer – which is very much our customer base – understands this and is willing to continue that act of ‘buying better’.

The question of value

More so than cost, it all comes down to offering the customer value. Regardless of what level of disposable income consumers have, I firmly believe that all are being more considered with their purchases. But beyond the price point, people are seeking value. But what is ‘value’?

In hospitality venues, value isn’t just about price – it’s about the full experience. It’s sipping a delicious drink in a setting you love, surrounded by the right atmosphere. It’s the expertise of a bartender guiding you to the perfect choice or the small accommodations that make your visit exceptional.

For spirits brands, value is obviously a high-quality liquid, and in decades gone by it might not have been much more than this. Now, it is about much more. We see consumers continuing to care more about environmental practices, employment policies and production methods. The internet is a hub of information and consumers are using it to inform themselves and challenge brands, which is only a good thing.

Drinks brands now need to be more ethical in how they do things and share the stories behind the liquid in a way that pleases the consumer. And some brands are doing that very well. If you want to understand the history of Nearest Green – the real Godfather of Tennessee Whiskey and his impact on one Jack Daniels – buy Uncle Nearest. If you drink Saint Lucian rum, you’ll be delighted with the region’s recent Geographical Indicator and how it protects centuries of the island’s tradition. And to drink in a way that truly helps the planet with an environment-led business, look no further than Avallen Calvados.

All these brands are delivering value at their price point – and it goes far beyond what lies within the bottle.

What does the future look like?

I’ve been on record already this year stating that 2025 is going to be one of change for the industry. A real shake up, perhaps more than we’ve seen in the past few decades. But despite that, I reckon pockets of premiumisation will still remain at the end of it all.

Trade Tariffs are going to be the big issue for spirits globally this year, as will the recent duty hikes, and costs associated with the ill-managed Extended Responsibility for Packaging (EPR) scheme which various drinks industry trade bodies are trying to get amended, because of unmanageable costs. I’ve written before about the many, many punitive regimes that Government has put on the industry, all at once. And these will continue to affect the price of bottles across the UK and beyond.

As tough as it might get, there is opportunity there for brands who get it right. Our sales data tells us that there is appetite for premium bottles – limited edition runs, single-cask releases – but also steadfast brands such as Chairman’s Reserve Spiced Rum or Molinari Sambuca, and on the non-alcoholic side, Lewis Hamilton’s Almave. They’re all bucking the well-reported trends with their substantial success. To mirror that success, I believe the actions are three-fold: offer a quality product; bring the on-trade along with you with education pieces and strong distributor relationships; and understand what your value is beyond what’s in the bottle. Obviously, there’s a good bit of luck involved and the surrounding market has to go right too, but that’s the best way to succeed at a premium price point.

The best thing about the spirits industry is that, through sheer hard graft and a bit of optimism, we make our own success. So, forgive me if I’m not willing to say that premiumisation is dead, just yet.

Nick Gillett is MD of premium spirit specialist Mangrove UK.