Premiumisation in Spirits: Aspiration and Adversity

February 2024

While premiumisation has demonstrated remarkable resilience in spirits, the inevitable slowdown is now underway. Discretionary spending is being scaled back, as a result of prolonged cost of living pressures, and the effects will become increasingly pronounced. Nevertheless, trends are not changing course entirely; core drivers of premiumisation are deeply embedded in demand, while moderation favours quality over quantity. How can brands enhance value in an unsettled world?

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Key findings

Premiumisation is under pressure 

Even as inflation eases (for now) in much of the world, cost of living pressures continue to drag on spirits consumption. Premiumisation is slowing as the prolonged strain on household finances forces consumers to cut back on purchases, or even consider trading down. The relative affordability of retail prices means further moves towards at-home socialising will be a common story.

Building flexibility into strategies is ever more important

The developments underway represent a change of pace rather than a change of direction. Still, an adaptable approach to prices, products and outreach efforts will help target short-term affordability needs, although discounting should be used sparingly to avoid undermining positioning. Global economic uncertainty and geopolitical tensions risk further disruption to supply chains and spending habits in the years ahead; flexibility needs to be kept in mind.

“Less but better” is still the foundation of spirits demand

Premiumisation is rooted in several embedded trends: the focus on quality over quantity linked to wellbeing concerns, aspirational consumption, and demand for authenticity and heritage. Those themes will outlast temporary disturbances. Concentrating on qualities known to enhance value, and responding effectively to developments and nuances between categories, will help businesses navigate uncertain times.

The changing nature of aspiration

The meaning of “premium” is evolving as priorities are revised in an interconnected and unsettled world, and demographic shifts see Gen Z and Millennials gain influence. Ostentatious displays are out, and authentic messaging, environmental and social responsibility, and digital literacy are in. Socialising and creating memories are still considered vital, and imaginative experiences can tap into that demand to leave a lasting impression.

 

Scope
Key findings
The situation as it stands
Premiumisation: the backbone of spirits demand
Timeline: from social distancing to the great discretionary squeeze
The macroeconomic storm is not abating
Pricing strategies: weighing the options
Long-term potential, but no smooth path to premiumisation in emerging markets
The rise of Gen Z will accelerate existing demand shifts
The ethical dimension to premium perceptions
Leveraging digital channels: on track for an online future?
Old meets new: heritage adds substance to innovation
Tequila leads the way
Rum: the next focus for super premium acquisitions?
Single malt whisky: on the rise in Scotch and beyond
Cognac: passing the peak in the US
Non-alcoholic spirits: premium by nature
Tapping into the experience economy
Bombay Sapphire takes a creative approach: #SawThisMadeThis
Rémy Cointreau targets Gen Z with Louis XIII The Drop
Burnt Faith brandy: stepping out of cognac’s shadow
Spirit-based RTDs: trading down, trading up and branching out
Conclusion: enhancing value

Alcoholic Drinks

Alcoholic drinks is the aggregation of beer, wine, spirits, cider/perry and RTDs.

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