Drinks Intel

intel.

INTERVIEW Pernod Ricard chairman and CEO global travel retail Mohit Lal

global drinks

Market intelligence for the global drinks executive. November 2020

PLUS

NO/LOW-ALCOHOL GAINS GLOBAL FOOTHOLD AUSTRALIAN ON-PREMISE ADAPTS TO CHANGING CONSUMER SENTIMENT DIGITALISATION WILL TRANSFORM TRAVEL RETAIL ITALIAN PRODUCERS SHIFT FOCUS TO THE OFF-PREMISE ASIAN CRAFT SPIRITS: THE NEXT M&A FRONTIER

L IA N N E R E P M U R PREMIUM MPION? A H C E R U T U F R O N ALSO-RA

Corporaciรณn Cuba Ron S.A. Calle 246 y 5ta Ave. Complejo Barlovento, Jaimanitas, Playa, La Habana, Cuba. +537 204 9378 I www.cubaron.com I @Cuba Ron S.A.

INSIDE

UP FRONT/EDITOR’S COMMENT

UP FRONT

Alexander Smith

04 Meet the team 06 Charlie Mitchell Now is the time to understand and plan for the new consumer journey 07 Finance review 09 News disruptors 10 Michael Scantlebury Moving online: brand fame matters more than ever 11 New products SPIRITS SPOTLIGHT

12 Premium rum Provenance, innovation and flavours are propelling this category forward, but can it maintain momentum?

22 Brandy How the category is facing its next big challenge: reaching millennials 25 Italian spirits An upswing in off-trade sales has eased some of the pain of a tumultuous year RETAIL REVIEW

28 Moodie Davitt Virtual Travel Retail Expo 2020 China lights the way to travel-retail recovery 30 Travel-retail digitisation Adapting to the future of travel retail has become more pressing 32 Interview Pernod Ricard chairman and CEO global travel retail Mohit Lal MARKET INTELLIGENCE

34 Asian craft spirits Global players to seek out M&A craft opportunities 36 No/low report Moderation drives no/low drinks trend mainstream 37 Australian on-premise A CGA study indicates the channel will return to 2019 levels of trade in 2021 38 Closures Sustainability remains a top concern WINE FOCUS

44 Travel-retail trends Brands hope for new DF&TR business model 46 Champagne & sparkling in travel retail Winemakers embrace shift in focus 49 Ultra-premium Champagne Pandemic fuels shift to digital

S

Dawn of the digital age: 2020 will be viewed as a transformative year for the drinks industry

ome of the latest quarterly reporting from the likes of AB InBev, Heineken, Pernod Ricard and LVMH indicates a global drinks market that is still volatile, but gradually improving compared with previous quarters.

Market pressures have forced most companies to become leaner and more efficient, with many stripping discretionary expenditures and investments to the bone. Companies have also had to be agile and shift resources to support growth of channels and brands that were growing in a bid to retain sales, such as the take-home and e-commerce channels.

E-commerce, which had been developing rapidly anyway, has undoubtedly been turbocharged by the present crisis, and beverage alcohol, which tended to lag behind other FMCG (fast-moving consumer goods) categories in the channel, has received a boost.

The rate of adoption still varies significantly by market. China is by far the most advanced with a high level of integration and scale.

In North America and Western Europe, e-commerce penetration for beverage alcohol dramatically increased through the pandemic.

This is so even in the US, where regulations make it difficult. Significantly, online alcohol ordering and delivery in the US has entered the mainstream.

Drizly, the nation's leading alcohol e-commerce and delivery provider, published an interesting study during the summer that indicated that 71% of current Drizly users and 50% of non-Drizly users anticipate at least 50% of their alcohol shopping will take place online, versus in store, in the next year.

Whereas many consumers were previously uncertain about the legality of buying alcohol online, the past months have both steepened the education and trial curves, with new users growing exponentially since March.

This will be reinforced by the skew towards home consumption, which is poised to endure even after the on-premise fully opens. Not only are many consumers nervous about re-entering the on-premise, but they have also become accustomed to drinking and entertaining at home. There has been a corresponding growth in home cocktail culture. The longer the pandemic drags on, the more likely that consumers retain their new habits.

Most consumer-facing industries are in the midst of a digital revolution, constantly

exploring new ways to make customer experiences easier, faster and more efficient.

The drinks industry is no different. AB InBev CEO Carlos Brito told analysts recently: “We're seeing an acceleration in trends such as online B2B platforms, e-commerce and digital marketing. We have been investing in these capabilities for several years as we advance toward being a truly customer and consumercentric organisation.” I could quote dozens of other drinks executives making similar statements. The industry has probably seen five years of change inside of six months.

Although e-commerce is generally more of a domestic market issue and opportunity, the travel-retail industry is now looking to harness the power of e-commerce to create preordering and click-and-collect systems. Chinese e-commerce giant Alibaba’s equity investment in Dufry, with a target ownership of just under 10%, and a strategic joint venture in China is the most tangible example. It will also give Dufry access to Alibaba’s best-in-class digital technology that will help the group engage globally with consumers on all points of their journey.

Digitisation could be one of the keys to the on-premise recovery. The on-trade, in contrast, has been relatively untouched by technology and remains rooted in the oldfashioned principles of hospitality. However, as with many trends, Covid-19 has accelerated the on-trade’s use of technology that had previously existed at a basic level and on a small scale. While online booking systems, social media engagement, Wi-Fi gateway software and on-demand delivery platforms have been industry norms for some time, the pandemic has forced an increasing number of operators to adopt new tech solutions.

Much of this technology has been adopted out of necessity as bars, pubs and restaurants seek to make venues as safe and efficient as possible, while keeping overheads down amid mounting financial pressure. But beyond playing a merely functional role, some stakeholders believe there’s an untapped opportunity for technology to enhance the hospitality experience both during the Covid-19 crisis and after.

In years to come, when the pandemic is finally a distant memory, 2020 will come to be viewed as a transformative year for the drinks industry and the dawning of the digital era.

NOVEMBER 2020

global drinks intel.

03

intel. global drinks

CONTRIBUTORS/ISSUE 18

Market intelligence

for the global

drinks executive.

November 2020

INTERVIEW PLUS

Pernod Ricard chairman and CEO global travel retail Mohit Lal

NO/LOW-ALCO HOL GAINS GLOBAL FOOTHOLD AUSTRALIAN ADAPTS TO ON-PREMISE CONSUMERCHANGING SENTIMENT DIGITALISATIO TRANSFORM N WILL TRAVEL RETAIL ITALIAN PRODUCERS SHIFT FOCUS TO THE OFF-PREMISE ASIAN CRAFT SPIRITS: THE NEXT M&A FRONTIER

Cover image: iStock.com/Feodora Chiosea

intel. global drinks

Market intelligence for the global drinks executive

PREMIUM RUM PERENNIAL ALSO-RAN OR FUTURE CHAMPION?

Editorial team EDITOR-IN-CHIEF

Alexander T Smith alec@drinks-intel.com

Meet the Intel team

PRODUCTION EDITOR

Kylie Martin kylie@drinks-intel.com COPY EDITOR

Thalia Fourie info@drinks-intel.com RETAIL EDITOR

Doug Newhouse doug@drinks-intel.com DIGITAL EDITOR

Sylvia Enotiades editorial@drinks-intel.com CONTRIBUTORS

ALEXANDER SMITH, previously the long-term editor of IWSR Magazine, heads up the editorial team.

With more than 25 years’ experience covering the drinks sector, Alex is highly connected and draws upon these contacts to provide a stream of cuttingedge interviews with leading industry movers.

Retail editor DOUG NEWHOUSE was the founder and editor of Travel Retail Business and founder of Duty Free News International.

Renowned for his prowess in breaking big stories, Doug has long been considered a highly influential commentator on the travel-retail industry.

JOE BATES has been a business journalist for over 20 years, specialising in the drinks, aviation and duty-free sectors.

His writing has appeared in a wide range of trade and consumer titles, including Duty-Free News International, IWSR Magazine, Jane’s Airport Review and Whisky Magazine, among others.

After training as a newspaper journalist and a short stint in local press, AMY HOPKINS joined The Spirits Business, later becoming the magazine’s editor.

She now writes about drinks for a range of specialist and mainstream publications.

Former newspaper journalist RICHARD WOODARD has been writing about the global wine and spirits industry for nearly 20 years, and is a regular contributor to a number of magazines and websites.

Joe Bates Jaq Bayles Thalia Fourie Amy Hopkins Charlie Mitchell Simon Molony Alex Oldroyd Ashley Rountree Michael Scantlebury Kate Wake-Walker Richard Woodard

Commercial team ADVERTISING DIRECTOR

Rina Maiden rina@drinks-intel.com

BUSINESS DEVELOPMENT DIRECTOR

Hannah Sinclair hannah@drinks-intel.com MARKETING & SUBSCRIPTIONS

Kate Wake-Walker kate@drinks-intel.com

Contact us

Global Drinks Intelligence, Ltd. 91 Coombe Lane, London SW20 0BD +44 (0)208 946 8691 info@drinks-intel.com www.drinks-intel.com

Publisher Intel’s marketing columnist MICHAEL SCANTLEBURY is the creative director and founder of independent creative agency Impero — winner of five Agency of the Year Awards in 2018, and shortlisted for Campaign’s Independent Agency of the Year in 2019.

Intel’s research correspondent CHARLIE MITCHELL is renowned for his on-premise expertise and understanding of consumer behaviour in the eating and drinkingout sector. Charlie is research and insight director at leading data consultancy CGA, which specialises in the out-of-home market.

ALEX OLDROYD is managing director of Fluxion Advisors, which provides strategic advice, primarily around M&A, to drinks companies. Prior to that, she spent five years in investment banking having spent most of her career in equity research during which time she ranked as the No.1 beverage analyst.

SIMON MOLONY is a market analyst with eight years’ experience covering the global drinks industry.

He specialises in tracking the global beer market and the impact of taxation on the value of the global beverage industry.

PR, marketing and comms expert KATE WAKEWALKER worked in advertising for 30 years and brings her expertise to write the marketing pages and build the brand. She also handles Intel’s subscriptions.

Alexander T Smith All details contained in this publication are believed to be correct at time of going to press.

All rights reserved.

Nothing may be reprinted or reproduced in whole or in part without the written permission of the publisher.

Published by Global Drinks Intelligence, Ltd. 2020© ISSN 2632-7236 (print) ISSN 2632-7244 (online) Registration Number: 11672026 (England) Printed in the UK by Rapidity.

04

global drinks intel.

NOVEMBER 2020

9-11 November 2020 Virtual Summit GMT timezone

Why attend?

■ Learn how to re-think and re-place your product in an adult beverage space

Headline speakers include

■ Identify which of these strategies will be most successful for your company

Claire McFerran Global Category & Innovation Manager Heineken

■ Engage with the relevant stakeholders to learn from their experience in launching, marketing, pricing and partnering with the on and the off-trade

Ben Branson CEO Seedlip

■ Get connected with investors to help you raise finance and investments Contact us to find out more www.lonobeveragesummit.com events@kisacoresearch.com (+44) 20 3696 2920

Laura Diamond Head of Strategy AB InBev

Discover & book at www.lonobeveragesummit.com Platinum Partner

Partners

UP FRONT/VIEW FROM THE ON-PREMISE Image: iStock.com/doble-d

Charlie Mitchell

With trends accelerating, now is the time to understand the new consumer journey and build a strategy for success

T

echnology doesn’t move backwards. Once I got a mobile phone, I wasn’t then looking at the next fixed home phone to install. Nor have I been browsing catalogues for a new VHS player recently, since Netflix, Amazon Prime and countless other apps are already installed on my TV. After a year of accelerating trends, there is no looking back. QR codes are now a fundamental part of the out-ofhome experience and app ordering, prebooking and digital menus are commonplace. Now is the time to reconsider the consumer path to purchase in the out-of-home market and build a strategy around what this means for your brands.

Of course, much of this accelerated change has been forced upon us by the Covid-19 crisis, but necessity is the mother of invention. Take Japan’s KTV scene as an unlikely example. In karaoke bars up and down the country, mobile phones are used to control and choose songs, rather than the usual remote control. Lyrics appear on phones, so that customers do not have to stand in the same spot as other singers and — my favourite innovation — there is now a setting on microphones that adjusts tone and clarity of sound to compensate for singing through masks.

Ultimately, like any disruption, behavioural change creates opportunities and threats in equal measure. The consumer path to purchase in the out-of-home market has fundamentally shifted, with technology at its heart.

This provides new touchpoints for brands to intercept consumers on their way to buying products in the onpremise. By investing now in an on-premise strategy that takes new factors into account, those risks can be minimised and the rewards maximised, with first-mover advantage.

Starting at the foot of this consumer journey, CGA’s research has shown that, around the globe, consumers are planning and prebooking their eating and drinking-out experiences far more than previously. Be this to guarantee the best seats in the house, out of regulatory necessity, or simply to ensure that there is a reserved place in limitedcapacity outlets, this is a habit that will stick, just as

pre-booking trains, cinema tickets and even city centre car parking has done over the past decade.

It is this first touchpoint that allows the starting point for a dialogue with consumers where strategy can be developed.

Here, partnerships with operators can lead to sophisticated segmentation of CRM (customer relationship management) systems to optimise potential trade-ups and presales. A simple “thanks for prebooking, would you like a to pre-order a negroni on entry?” would certainly be difficult for me to turn down, especially if the operator already knew, from previous visits, that it was my go-to cocktail.

The next phase of the journey is entry to outlet and positioning. Previous research undertaken on this phase has long concluded that this was one aspect of the consumer journey that was difficult to interfere with — consumers are far too busy trying to locate a table, friends or, often, the bar to take on board suggestions for drinks choices. Now that this has become more formalised, often through a host or maître d’, there is perhaps opportunity for staff suggestions which are now limited at the bar. Turning the focus from bartenders to hosts, then may have merit.

So, to the end point of this journey. Deciding which drink to have. Clearly this is a complex topic, with realms of research already undertaken, with results depending on occasion, time of day and outlet type among others, but let’s consider the role of menu. Previously a static document, this was mostly only used as a reference point — most decisions were made based on what customers could see in front of them or through bartender suggestions. The role of menus has now been elevated. Our research shows that digital menus have jumped significantly in importance within the on-premise drinks-making process.

Be this through necessity or convenience, it is likely that this element will be here to stay, offering a more intimate touchpoint for drinks brands to connect with consumers.

Working with operators to offer gamified menus, perhaps with offers to be won or changeable menu items depending on time of day, all linked to brand can prompt and impact this final and most important stage of the customer journey.

In any period of change, there is an understandable desire to wait and see before implementing strategy. However, like mobile phones and on-demand TV, the direction of travel for changing path to purchase is unlikely to go into reverse.

That’s why implementing strategy now will capitalise on opportunity and limit risks both in the short and long term. ● Charlie Mitchell is research and insight director at CGA. His Intel columns provide perspective from the on-premise, based on the most up-to-date and definitive data available.

For more details, contact charlie.mitchell@cga.co.uk

06

global drinks intel.

NOVEMBER 2020

UP FRONT/FINANCE REVIEW

AB INBEV EARNINGS DIP DESPITE VOLUME INCREASE The world’s largest brewer AnheuserBusch InBev (AB InBev) reported a surprise 4% increase in revenue growth in Q3, positively impacted by a healthy volume performance in key markets such as the US, Brazil and China. Earnings (EBITDA) fell by -0.8% to $4.89bn.

Combined revenues of AB InBev’s global brands, Budweiser, Stella Artois and Corona, increased by 6.8% globally and by 8.1% outside of their respective home markets in the third quarter.

Total volumes grew by 1.9%, with own beer volumes up by 2.6% despite ongoing global on-premise restrictions. Non-beer volumes were down by -2.5%.

AB InBev “demonstrated incredible resilience and momentum” in a fastchanging environment, according to CEO Carlos Brito. However, he warned that the market remains unpredictable, particularly in Europe where increased restrictions and renewed lockdowns are coming into force. “While we expect our performance in the second half of this year to be better than the first, the environment remains volatile and uncertain,” Brito added.

AB InBev had a strong Q3 in the US as sales-to-retailers grew by 1.4%, outperforming the broader beer market that was up by 0.8%. The company’s commercial strategy in the US is centred on driving innovation and rebalancing its portfolio toward growing segments such as seltzers, with Bud Light Seltzer among the top innovations in the country.

Michelob Ultra accelerated in the quarter and remains the second-highest selling beer in the US after Bud Light, according to IRI data. Commenting on the US performance, Brito said: “We have had a strategy for three years that has been consistent, that’s firing in all cylinders.”

The company saw a very healthy performance in Brazil in the third quarter, with volumes up by 25.4% due partially to successful innovations such as Brahma Duplo Malte. Britto said the company was encouraged by the strength of consumer demand for beer and government subsidies supporting consumer disposable income.

A-B Inbev’s business in Europe delivered a healthy performance this quarter, with revenue growth of mid-single digits, supported by the continued strength of

Budweiser led the growth of AB inBev's super-premium brands in China, where Q3 volume was up 3.1% its brands in the off-premise channel and the gradual re-opening of the on-premise channel. The company delivered volume and revenue per hl growth of low single digits.

Volume in China was up by 3.1% in the quarter, supported by the ongoing recovery of the market, particularly in the on-premise channel. AB InBev’s superpremium brands grew by double-digits and premium brands, led by Budweiser, increased by high single digits. The company’s e-commerce business continued to increase by double-digits, and grew the most market share among brewers in the increasingly relevant inhome channel, according to Nielsen.

South Africa struggled, but recovery in mucd of Africa AB InBev’s business in South Africa was significantly impacted by the second outright ban on the sale of alcohol beverages from mid-July to mid-August, resulting in volume and revenue declines of nearly -25% in Q3. It noted robust consumer demand once the government lifted the ban with volume growth resuming in September.

In Africa (excluding South Africa), the majority of AB InBev’s markets demonstrated continued recovery from Q2, with healthy volume growth in Mozambique, Uganda and Zambia, though volumes declined in Tanzania. In Nigeria, there was double-digit volume growth as Covid-19 restrictions continued to ease.

“Whether it is the success of Brahma Duplo Malte in Brazil or Bud Light Seltzer in the US, the contribution of our

innovations to total revenue is growing meaningfully,” said Brito. Last year, innovations contributed approximately $5bn to AB InBev’s total revenue.

Brito acknowledged that the pandemic has driven on channel and occasion shifts.

“The off-trade was able to pick up volume from the on-trade in all markets,” he said.

“It is also true that beer is moving to new occasions. For example, since people are not going to restaurants, they’re having more meals with family and maybe a small group of friends at home. Beer is beginning to penetrate an occasion that was more a wine occasion. Beer is rising in terms of frequency and penetration, so people are drinking in a more moderate way but more frequently.”

There has also been a shift to a new home channel with the rise of e-commerce, according to Brito, leading AB InBev to invest behind its brands. “We tend to lead e-commerce in most countries that are relevant,” he said. “In China, we have more than double the share of the second brewer in the e-commerce channel.”

The company has reallocated resources in response to the changing market conditions.

“The mantra here in the company for many years has been we go where consumers go because that’s where growth is,” explained Brito. “With the dislocations that took place with Covid, we had to be very agile. First, stopping some expenses and investments that were discretionary. As we saw consumers going here and there, we relocated those investments to support channels and brands that were growing.”

NOVEMBER 2020

global drinks intel.

07

UP FRONT/FINANCE REVIEW

DRINKS GROUPS REPORT IMPROVING SALES TRENDS Trading is still difficult and volatile, but several major drinks groups reported improving trends in their most recent financial results.

Product and channel mix continue to adversely impact sales, as the on-trade remains more impacted by the Covid-19 pandemic than the off-trade and travel retail shows few signs of improvement.

Companies are generally looking to mitigate the impact by reducing costs.

Dutch brewing giant Heineken reported that its beer volume fell by -1.9% on an organic basis for the fiscal third quarter, a sequential improvement relative to the previous quarter across all regions. Beer volume for the first nine months of the fiscal year fell by -8.1%. The reported net profit for the first nine months was €396m ($464m), down -76% over the same period in 2019.

Heineken CEO Dolf van den Brink said: “The Covid-19 crisis continued to affect all geographies during the third quarter. The on-trade remained affected by restrictions to operate and some important markets, like South Africa and parts of Mexico, faced bans on the sale of alcoholic beverages.

“Although we have observed a recovery

over the summer, continued volatility is expected for the fourth quarter, as many markets experience additional waves and the corresponding restrictions, including on-trade closures and crisis-related economic consequences.”

Heineken is currently undertaking a strategic review that will result in a -20% reduction in personnel costs at its head and regional offices.

French drinks giant Pernod Ricard reported a -6% decline in sales for the first quarter of the fiscal year to €2.2bn ($2.6bn) and said it represented a “marked improvement” over Q4.

Pernod Ricard chairman and CEO Alexandre Ricard said: “Our first quarter is encouraging. Sales were still in decline, but the business has recovered significantly versus Q4 FY20, thanks to the partial reopening of the on-trade and the strong resilience of our brands in the off-trade.

For FY21, we expect continued resilience of our business in an uncertain and disrupted environment. We will tightly manage costs while maintaining the agility to reinvest to adjust to market opportunities.”

Pernod Ricard sales in the US were up

by 6%, with sales benefiting from good shipments ahead of the Christmas season, but countered by adverse channel and category mix. China was also in positive territory, with sales rising by 4%, with growth supported by on-trade recovery and sell-in ahead of the Mid-Autumn Festival.

Encouragingly, Chivas Regal is back to highsingle-digit depletion growth in China.

Luxury products group LVMH Moët Hennessy Louis Vuitton said that wine and spirits sales fell -15% to €3.3bn ($3.9bn) for the first nine months of 2020 and by just -3% in the third quarter.

After a significant drop in volumes in the second quarter, the Champagne business saw an improvement in the third quarter in all regions. Hennessy Cognac recorded a strong recovery in the third quarter, driven by VS ranges in the US. In selective retailing, which includes its DFS travel-retail unit, organic revenue declined -31% in the first nine months of 2020. The company said: “DFS saw a significant decline in its activity in most destinations as a result of the suspension of international travel, which is showing no signs of improving.”

Ukraine begins vodka privatisation Ukraine has begun the privatisation of the state-owned vodka production monopoly Ukrspyrt by auctioning off the Nemyriv alcohol distillery. Nemyriv, one of 80 state facilities earmarked for disposal, was acquired

by Ukrainian vodka company Nemiroff for UAH55m ($1.9m) on 15 October.

Nemyriv and Nemiroff, as the names suggest, are historically intertwined and are located only a couple of hundred meters apart. Nemyriv, which dates to 1752, was the company’s original distillery until it was nationalised by the Ukrainian government in 1920. Since then, Nemiroff (founded in 1992) and other Ukrainian vodka companies have been compelled to purchase raw spirit from the state production monopoly. That monopoly ended on 1 January this year.

Ukrainian companies, such as Nemiroff, should benefit from the change in several ways. It will no longer be compelled to purchase from Ukrspyrt. The price of 08

global drinks intel.

NOVEMBER 2020

Ukrainian pure alcohol is very high due to Ukrspyrt’s abuse of monopoly powers — in December 2018, Ukraine’s Anti-Monopoly Committee fined the alcohol producer UAH33m ($1.2m) for abusing its position.

This will boost Nemiroff’s margins. Nemiroff will also be able to control and improve the quality of the raw alcohol and, accordingly, the final product. Under the monopoly, the quality of Ukrainian alcohol lagged far behind other countries, as the technology and equipment were outdated.

Nemiroff and other marketers have been fighting the explosive growth of black-market vodka. It is widely alleged that much of the country’s illicit product comes from these state-owned distilleries. Privatisation could reduce the flow of black-market vodka.

Nemiroff Vodka CEO Yuriy Sorochinskiy told Intel earlier this year: “For us, as a legal producer, the black market has a huge impact on sales,” he says. “The high taxation

Nemyriv is one of 80 state facilities being sold off for spirits in Ukraine created this black market. It encouraged other producers to produce vodka and avoid paying taxes.

We estimate that the black market is up to 50% right now. The supplying of blackmarket spirits isn’t all by one state-owned company. Many other producers created the conditions for the large black market.

The privatisation should eventually help to minimise the influence of the black market.”

Sorochinskiy noted that it took Russia almost 15 years to substantially reduce the black market: “This is not a fast process.”

UP FRONT/NEWS DISRUPTORS

Bacardi plans 100% biodegradable spirits bottle Bacardi has unveiled plans to put the world’s most sustainable spirits bottle on shelf by 2023.

This move by Bacardi is possible thanks to its close collaboration with Danimer Scientific, a leading developer and manufacturer of biodegradable products. Petroleum-based plastics used by Bacardi will be replaced by Danimer Scientific’s Nodax, a biopolymer derived from the natural oils of plant seeds such as palm, canola and soy. While a regular plastic bottle takes over 400 years to decompose, the new spirits bottle made from Nodax PHA will biodegrade in a wide range of environments, including compost, soil and fresh or salt water, disappearing without leaving behind harmful microplastics after 18 months.

As well as launching the new biopolymer bottle in 2023, the company has also committed to removing all non-essential single-use plastic from gift box and point-of-sale materials in the next three years. This is all part of Bacardi’s larger goal of being 100% plastic-free in the next 10 years.

As well as the new 100% biopolymer spirits bottle, Bacardi is creating a sustainably sourced paper bottle. By integrating the Nodax PHA polymer, this alternative solution will have equally

Bacardi aims to be 100% plastic-free in the next 10 years strong environmental credentials while ensuring the quality and taste of the spirit inside a bottle made of paper is as good as one made of glass.

WINE ENJOYS MINI BOOM DURING COVID-19 CRISIS Wine drinkers across key consumption markets have been turning more often to wine as a beverage during the Covid-19 pandemic, spurred by new lockdown occasions and more drinking outside of mealtimes, according to a new report by Wine Intelligence.

Wine Consumer Trends in the Covid-19 Era draws on tracking data collected from nationally representative samples of wine drinkers in seven major wine consumption markets in April and August 2020.

The growth in wine consumption occasions follows an explosion in online wine sales in markets where regulations permit, with younger and more involved wine drinkers leading the surge.

Some of the data will raise concerns about the sustainability of this growth, given the difficult economic environment and possible pressure on household finances in the coming months.

So far, many consumers have traded down in terms of their spend per bottle of wine to fund the increasing volume of purchase, and have returned to more mainstream, trusted brands at the expense of less well-known and more pricey offerings.

Key points from wine consumer trends report ■ Growth in wine consumption frequency with the shift to at-home occasions more than compensating for the loss of on-premise occasions.

■ Core wine drinkers driving growth, with increases coming from women, Gen X and those already connected with wine.

■ Non-food occasions driving wine growth bringing opportunity for wine to migrate to occasions where other beverages have been more dominant in the past.

■ Slow recovery in average bottle spend on wine in the off-premise, but remains below pre-pandemic levels in most markets.

In most markets, the future of the onpremise and hospitality generally looks very uncertain. An increasing proportion of wine drinkers do not plan to eat out for the foreseeable future, and holidays and hotel stays are off the agenda for most.

The only exceptions to this are in China and Germany, where popular opinion is more positive about these activities, and consumers appear more confident generally.

■ E-commerce for wine comes of age and is rapidly becoming a new and habitual way of shopping for wine.

■ Shift to wine seen as a safe choice and ‘localism’, with mainstream and local wine brands winning.

■ Consumers more distant from the onpremise due to shifting socialising patterns.

■ Treat-seeking behaviour losing momentum as consumer spending is becoming more conservative.

■ US wine market returns to growth as wine consumption frequency grew strongly in the US, driven by millennials.

Wine Intelligence CEO Lulie Halstead said: “Our data earlier this year pointed to wine being one of the winners of lockdown, and this trend has solidified over the past few months. Producers and off-premise retailers with strategies focused on their heartland of highly involved frequent drinkers have found reward, while new occasions have prompted a different dynamic in terms of product and packaging.”

NOVEMBER 2020

global drinks intel.

09

UP FRONT/MARKETING TRENDS

Michael Scantlebury

Moving online: brand fame matters more than ever

B

rands need two things to win. The first is physical availability — being physically available when people are shopping. Makes a lot of sense, you can’t buy something that’s not for sale. In our game, we call that distribution. The second is mental availability — awareness and desire. How mentally available the brand is at the time of purchase. The consumer recognises, understands and wants you.

In the days before Covid-19 this was a relatively simple equation — be desirable everywhere, including in the mind of consumers. I say simple. Many brands didn’t master mental availability, instead relying on physical placement and branddestroying discounts to drive sales or bar deals that cost a fortune just for the privilege of being poured. For most of these brands, this didn’t mean the end of the world for them... until the world faced a global pandemic.

During the first lockdown, and now our perpetual on-again-off-again lockdown, the usual places consumers shopped for booze (supermarkets, pubs, bars and restaurants) have been less available. This meant that a lot of brands relying on physical availability alone have suffered.

Consumers reacted to the lockdowns by pivoting heavily to online and convenience sales. Corner shops, the local offlicense and the like that have traditionally (and shortsightedly) been ignored by much of our industry; considered too scattered, too decentralised and just too hard to deal with. To their credit, convenience stores often gave up fantastic shelf space in high-view areas — like behind the counter — and booze has always been a big part of their business, but not a big enough part of booze brands’ business plan. The brands that were strong in this area prospered — the beer fridge at my local off-license has always had a fantastic selection of local and craft beers as well as the mainstay. And beyond the counter, you can get pretty much anything you want, from a cheap bottle of cooking port to a bottle of Cognac or Champagne. The brands that featured in any humble offlicense have done extremely well, as people stopped going to the pubs, bars and supermarkets.

The problem becomes more complex when it comes to online shopping. Most brands are well stocked online — be it Amazon, Tesco, Ocado, 31Dover, any of the other great new online stores or brands’ own websites. However, physical availability counts for far less in this situation. Here’s why…

Physical availability only really exists if a consumer can physically see you. When you walk through a supermarket aisle, or go to a pub, or a bottle shop, you look around. You check out what’s on the shelves. You soak in all the products that are physically available. ‘Seeing’ is the prompt to remind consumers to want you. But you don’t walk the aisle of Amazon, and you don’t look behind the counter on Ocado.

You search. And here’s the double jeopardy of this brave new world: if consumers don’t search for you, and start to buy you online, the retailer algorithms will stop suggesting that

10

global drinks intel.

NOVEMBER 2020

your brand should be bought at all, and you’ll become more and more invisible.

If you’re not searched for, you’re dead.

That means, despite what your sales team tells you, these days mental availability is the most potent thing for growing a booze brand. (Spoiler: it always has been, read on.)

To search for something is to think of something. Shoppers need to be primed to want your brand before they get to the online store. So if you’ve built your brand on having fantastic physical availability, but neglected building real connections and brand desire with consumers, as Covid-19 accelerates the move to online shopping, the proverbial chickens are going to come home to roost.

As I have spoken about before, being able to convince most businesses that brand building is a good idea has become fashionably unfashionable. Everybody’s on a short leash and a short-term contract. They need sales now. So sales-driven marketing which produces short-term results is where the marketing money ends up.

Earlier, I said that these days mental availability is the most potent thing for growing a booze brand — that’s a lie. It’s always been the most potent way to do it. Studies into the effectiveness of marketing have proved time and time again that mental availability and brand-fame-building campaigns are the most effective way of building long-term sales growth.

When you’re famous, you’re in the mind of the consumer. I will say it again, long-term sales growth comes from building brand fame, not short-term tactics.

In fact, when Les Binet (a guy that has won more effectiveness awards than anyone else in the UK) studied the numbers, he found that in almost every metric long-term fame-driving campaigns create brands that are less price sensitive, have higher sales, larger penetration, 50% more loyalty and are a hell of a lot more profitable. Yet businesses shy away from them because they want sales now (not in 24 months) because the board will remove them now (not in 24 months) if they don’t deliver.

But those that invested in all that mental availability (for e.g. BrewDog) as well as physical availability (also BrewDog) are the ones that are winning.

Here’s the catch — when sales fall, as most have been because of the pandemic, there is going to be even more pressure on you and your marketing team to show shortterm results. Do all you can to resist it. Now’s the time to build your brand, build it bigger, stronger and faster than all your competitors. Make sure that when the world finally gets back to normal and all that physical availability comes back, you’ll be the strongest brand on the most important shelf in the world — the one in your consumer’s mind. ● Michael Scantlebury is the creative director and founder of independent creative agency Impero.

UP FRONT/NEW PRODUCTS with Thalia Fourie

The Last Drop Autumn Collection 2020

Maior Gin Bodegas Suau, based on the Spanish island of Majorca, has unveiled Maior Gin, a release that comes more than 100 years after the company launched its first gin product in 1919.

Made from native plants from the island, Maior Gin is produced by macerating spirit with fig leaves before undergoing a second distillation with botanicals including juniper, rosemary and Soller orange peel.

It is bottled at 40% ABV and described as a “smooth gin with harmonious aromas that reveal well-balanced citric hints”.

RRP: €23-€25 (70cl)

The Last Drop Distillery’s self-proclaimed ‘Rare Spirits Hunters’ have unveiled its Autumn Collection 2020. Just 18 spirits SKUs have been released under The Last Drop name in more than a decade.

This year’s collection comprises three limited releases that will be available via lastdropdistillers.com and fine spirits retailers. Each 70cl bottle comes with a signature 5cl miniature and tasting book.

The Last Drop’s first-ever rum, the 1974 ‘Overproof’ Very Old Jamaica Rum (67.9% ABV, 183 bottles) was distilled from sugarcane in 1976. It matured in ex-Bourbon barrels in Jamaica’s tropical climate as well as in Britain’s cooler temperatures. The resulting rum has “a smoothness that comes with great age”. The 1980 Buffalo Trace Bourbon Whiskey (45% ABV, 240 bottles) matured for nearly 20 years, creating a spirit

The Nikka Tailored & Taketsuru Pure Malt

Amarula Ethiopian Coffee Amarula Ethiopian Coffee Cream Liqueur was introduced by Distell at the recent Moodie Davitt Virtual Travel Retail Expo. It will be available exclusively in global travel retail including Big Five Duty Free, Heinemann and Dufry retail and wholesale locations from January 2021. A global travel-retail and domestic roll-out will follow in March 2021.

Coffee production is crucial to the Ethiopian way of life and accounts for 60% of the country’s foreign income.

Amarula Ethiopian Coffee (15.5% ABV) is produced from ethically sourced African ingredients. The dark roasted richness of Ethiopian coffee with the original taste of real marula fruit leaves a creamy toffee finish on the palate. It can be enjoyed chilled over crushed ice or in an exotic cocktail.

RRP: £16.49 (1L)

“rich in colour and a magnificent nose”.

The 1959 Vintage Grande Champagne Cognac (40.2% ABV) is a Hors d’Age Cognac believed to have been distilled in 1959 and matured for over 60 years in its original barrel. Just enough liquid remained for 21 bottles (available on allocation only).

RRP: 1980 Buffalo Trace Bourbon Whiskey, £3,500; 1976 ‘Overproof’ Jamaica Rum, £2,600; 1959 Vintage Grande Champagne Cognac, POA (all 70cl+5cl)

Double Dutch Cocktail Sodas Double Dutch’s Cocktail Soda range provides “another option for busy bartenders, hospitality groups, consumers and cocktail enthusiasts to make creative drinks easily and consistently while not compromising on flavour”, according to Raissa de Haas, co-founder of the premium mixer specialist.

Double Dutch used molecular gastronomy to harness classic cocktail ingredients to develop its cocktail sodas that are low in calories (under 20 calories per 10cl), vegan friendly and free from preservatives and artificial ingredients.

They can be mixed with a spirit or drunk solo as a non-alcoholic alternative.

Bloody Mary Soda With Pepper combines rich tomato with basil, cucumber, pepper and chilli for a spicy and herbaceous drink, while Cucumber Margarita Soda With Chilli features flavours of cucumber, Persian lime bell pepper and chilli to produce a drink with a sweeter, earthier taste and a spicy kick.

RRP: £3.75 (4x20cl)

Japanese whisky producer Nikka has released two new permanent expressions in the UK. The Nikka Tailored (43% ABV) combines Miyagikyo and Yoichi malts with Nikka grain whisky (a cornbased whisky distilled in traditional Coffey stills). The liquid is matured in American oak and exsherry casks, with the result said to showcase “balance, roundness and softness”.

Taketsuru Pure Malt (43% ABV) is a blend of aged single malt casks from Yoichi and Miyagikyo and showcases a fine balance between great softness and deep complexity. Miyagikyo remains predominant in this blend, but a higher portion of Yoichi is used in this new edition, giving the whisky an expressive character. The main influence comes from ex-sherry casks and Miyagikyo which has been aged in American oak.

RRP: The Nikka Tailored, £110; Taketsuru Pure Malt, £60 (both 70cl)

NOVEMBER 2020

global drinks intel.

11

SPIRITS SPOTLIGHT/PREMIUM RUM

TAKING CONSUMERS ON JOURNEY OF DISCOVERY Provenance, innovation and flavours are propelling premium rum forward, but brands will need to focus on transparency and education to keep momentum up. Amy Hopkins reports Rum may be one of the last spirits to move upmarket, but the category appears to be making up for lost time.

Data from IWSR Drinks Market Analysis shows the premium-and-above contingent is still miniscule within the total segment, registering sales of 4.4m cases in 2019, compared with 145.7m cases for standard rum. (It’s worth noting that the latter price tier includes high-volume local brands that are mostly confined to their domestic markets, such as Tanduay in the Philippines.)

However, the growth rates tell the true story of what’s driving rum today: between 2014 and 2019, standard rum experienced a CAGR of 3.6%, while the CAGR for premium-and-above rum was more than twice as fast at 8.3% (IWSR).

Looking at the long-term development of the segment, IWSR’s research director Jose Luis Hermoso notes that “premium rum has grown relentlessly. It was around 1m cases in 2000, reached 2m in 2010, 3m in 2015 and 4m in 2018”.

As seen elsewhere in spirits, rum is benefiting from the quality cues of provenance and craft production. Rum

Diplomático Rum: Diversification is key to revival 12

global drinks intel.

NOVEMBER 2020

Appleton Estate’s limited-edition Hearts Collection is aimed at rum connoisseurs and collectors has “managed to clearly establish itself as a credible alternative to high-end classics, like Scotch or Cognac”, according to Pernod Ricard’s Havana Club Rum international marketing director Anne Martin. “Rum is now clearly stepping away from its party/beach/mixer image to enter a more sipping and expert territory, but it’s also bringing a bit more fun and informality to the high-end spirits world,” she says.

‘Easy-to-drink’ expressions lead premiumisation trend Consumers are being both coaxed up the premium ladder and over the fence from other spirits categories by luxury aged rums with approachable taste profiles.

Martin explains that the category’s premiumisation is being led by “easyto-drink” expressions which “have really helped the category grow at scale and accompany neo-consumers’ first steps in the high-end world”.

While the wider rum category was once characterised by commercialisation and standardisation, it is now awash with unique premium products. As such, once consumers have been converted to premium-plus rum, there’s now a world of styles, flavours and innovations to explore.

Diplomático Rum global marketing director Edouard Beaslay notes

that diversification has been crucial to rum’s revival. “One of the main opportunities we’ve seen for superpremium rum over the last few years has been category diversification,” he says.

“This has meant that there’s now a larger number of rums on offer for consumers to explore and discover. They can now pick and choose from a variety of styles that were not as widely available even five or 10 years ago. Meanwhile connoisseurs and collectors can also find unique and exclusive rum releases.”

With multiple origins, a deep heritage and varying production techniques, rum is one of the most richly diverse categories in drinks. Luis Fernandez, founder of new brand Ron Inmortal, notes that perceptions are changing as consumers increasingly view rum as an exciting, multi-dimensional spirit.

“Most consumers think of rum and immediately they see themselves sitting at a tiki bar somewhere in the Caribbean.

They aren’t necessarily thinking about it in terms of a high-quality cocktail or a sipper. But that’s changing, and that’s really the exciting part of rum — how diverse and versatile it is,” he says.

“Consumers are increasingly looking for diversity, and as they experience different styles of rum, from different countries, using different production methods, ➔

SPIRITS SPOTLIGHT/PREMIUM RUM

there’s really so much opportunity this category has to offer.”

Since rum can be aged or unaged, mixed into a cocktail or sipped neat, and take both traditional and modern forms, it appeals to a variety of consumer tastes and plays in many occasions.

As such, while bounteous new players have entered the space in recent years and rates of new product development (NPD) remain high, brands have ample opportunities to differentiate.

“You need a product that offers value and stands out from the rest,” says Gonzalo

➔

Medina García de Polavieja, international marketing manager of bodegas at Williams & Humbert. The Jerez-based producer owns the Dos Maderas brand, which is first aged in the Caribbean before being shipped to Spain to undergo a second period of maturation in ex-sherry casks.

“A specific characteristic of the premium rum segment is that each product has a unique attribute,” he adds. “The mixture of quality and this uniqueness is precisely what places it in the premium segment.”

Segmentation within the rum category has been largely enabled by a new cohort of small independent brands that are gaining traction in developed spirits markets. “Craft spirits are becoming more valued and sought out by consumers, and with time they could be able to take a large quota of the market share,” says García de Polavieja.

But the category goliaths refuse to relent and continually adapt their portfolios to keep consumers engaged.

Take Campari Group’s Appleton Estate, which unveiled a brand refresh earlier this year to “elevate” its premium status and support its ambition to become a “global leader in the premium-plus rum segment”, according to Campari Group global managing director, GSM Spirits Julka Villa.

UK rapper Skepta helped produce a limitededition bottle design for Havana Club 7yo

Master distiller Joy Spence adds: “With this relaunch, Appleton Estate proudly celebrates our Jamaican heritage in a thoroughly modern way. We hope that our new look and feel elevates the highend cocktail and the sophisticated sipping experience, while continuing to spread the joy of rum globally.”

Appleton Estate further augmented its premium status with the launch of the Hearts Collection, a limited-edition vintage range that “specifically caters to rum connoisseurs and high-end spirits collectors,” says Villa. Launched in collaboration with rum expert Luca Dos Maderas: Each product in the premium Gargano, the line comprises three single rum segment has a unique attribute marque rums: 1994, 1995 and 1999.

“Consumers are drinking more premium brown spirits because they Top 10 Global Rum Markets (All Price Bands) deliver on the quality and heritage,” says

Volume Volume % Market % Chg Vol Villa. “The unwavering attention to detail Country 2018 2019 Share 2019 2018-’19 in the distilling and blending processes 1 India 41,330.0 42,525.0 28.3 1,195.0 and adherence to premium standards of 2 United States 21,854.0 21,707.0 14.5 -147.0 Appleton Estate Jamaica Rums, ensures 3 Philippines 18,467.0 20,116.0 13.4 1,649.0 that the world will understand the spirit as 4 Cuba 6,758.0 6,798.0 4.5 40.0 distillers and blenders know it: a drink that is 5 France 4,454.0 4,705.0 3.1 251.0 as sophisticated, high-quality and as mired 6 Germany 4,177.0 4,088.0 2.7 -89.0 in history as Scotch whisky or Cognac.”

7 Dominican Republic 3,529.0 3,522.0 2.3 -6.0 As with other brown spirits, age 8 Spain 3,188.0 3,355.0 2.2 167.0 statements and vintages are an inherent 9 United Kingdom 3,140.0 3,289.0 2.2 149.0 part of the premium rum space, and 10 Canada 3,181.0 3,150.0 2.1 -31.0 consumers are increasingly viewing old, rare

Rest of World 37,233.0 36,903.0 24.6 -329.0 expressions as better-value investments Total Global Rum 147,310.0 150,158.0 100.0 2,849.0 than whisky. However, the traditional luxury tropes of age and rarity are not the only ‘000s of nine-litre cases Source: IWSR Drinks Market Analysis premium indicators in rum today.

Global Rum Markets by Price Band For Havana Club, it’s imperative to align with modern lifestyle trends and

Volume Volume % Market % Growth Price Band 2018 2019 Share 2019 2018 v 2019 reflect the values of younger legal Premium-and-Above 4,034.0 4,422.0 2.9 9.6 drinking-age consumers. “As part of our Standard-and-Below 143,276.0 145,736.0 97.1 1.7 global marketing campaigns, we have Total Global Rum 147,310.0 150,158.0 100.0 1.9 been bringing Cuban energy, creativity ‘000s of nine-litre cases Source: IWSR Drinks Market Analysis and legitimacy to consumers globally, ➔ 14

global drinks intel.

NOVEMBER 2020

SPIRITS SPOTLIGHT/PREMIUM RUM

➔ brought to life through brand activations with relevant fashion brands and music artists from around the world,” explains Martin. “Generation Z consumers of legaldrinking age are searching for brands that offer premium experiences, while sharing values and creativity that inspire them.”

This approach has seen Havana Club partner with Amsterdam-based fashion brand Daily Paper to launch a limited-

edition streetwear collection, and collaborate with Nigerian-British rapper, songwriter and record producer Skepta to produce a limited-edition bottle design for Havana Club 7yo. According to Martin, the latter move has “helped to solidify Havana Club as one of the cult spirits for Gen Z”.

While there’s no one key to success in rum, brands are confident the category’s move upmarket will continue at pace. “We

don’t expect this premiumisation trend to slow down as all indications are that there is still great potential for growth, similar to that experienced in gin and tequila,” adds Martin.

Intel has identified five key trends shaping the premium rum market: place & provenance, transparency & education, spiced & flavoured innovations, more shelf space and experimental production. We explore these themes below and on the next pages.

Place & provenance A notable trend spurring interest in premium rum is the showcase of stylistic and cultural differences throughout its many origins. “Consumers are more and more curious to discover all the specificities of the different regions and terroirs,” says Marc Torterat, marketing director at Marussia Beverages, owner of Caribbean rum Mezan. “In this respect, it seems that rum follows the Scotch single malts, with their specific region or terroir and a style specific to each distillery.”

Mezan highlights different styles of rum from across the Caribbean, bottling special-edition vintages and single casks.

These rums are produced in addition to Mezan’s core range, which includes a blended Jamaican rum and rum from a single distillery in Panama. This kind of multi-origin portfolio allows brands to take consumers on a journey of discovery.

“It is important to showcase just how diverse and versatile rum can be, depending on its origin,” continues Torterat. “British-style rums, such as the

Caribbean journey: Mezan has a multi-origin portfolio that includes Panama-crafted Chiriquí

16

global drinks intel.

NOVEMBER 2020

Jamaican or the Guyanese, tend to be heavier and more powerful, while Spanish rums tend to be rounder and more luscious. Every year we introduce a new provenance, and for 2020 we have released a rum from Dominican Republic.”

Spanish spirits company Beveland Distillers released a range of Venezuelan rums, dubbed Caracas Club, in August.

Caracas Club 8yo and Caracas Club Nectar are a mix of light and dark rums aged between eight and 10 years in white oak, ex-Bourbon barrels. Venezuela is a country with “a long-standing and renowned rummaking tradition”, according to the company.

It claims that the new expressions transport consumers to “heart of Venezuela” with native notes of cacao and banana.

While regions such as Latin American and the Caribbean are known for their rum-making prowess, a number of other localities are putting their own spin on the spirit. Filipino rum Don Papa was an early pioneer of the unusual origins trend, launching in 2012. “Most rums hail from the Caribbean or the West Indies, so having a premium rum from the Philippines has definitely sparked this curiosity of discovery,” says Cristhel Molina, the brand’s UK marketing manager.

Likewise, Jordi Xifra Keysper, marketing director at Beveland Distillers, believes origin-based innovation will play a key role in the development of premium rum.

“People know about Cuban, Dominican, Caribbean, French-style origins, but interest and innovation can come also from new origins unknown to date,” he says. As such, Beveland, which produces the Relicario and Ron Jungla brands, in addition to Caracas Club, has recently launched an Indonesian iteration to sit alongside its Fijian Marama Rum.

Limited-edition Don Papa Rye Aged Rum has been aged in American rye casks for four years Some brands go beyond the concept of provenance to promote their specific terroir. While most rums are distilled from commercial molasses, some brands produce liquid from their own sugarcane, which Appleton Estate believes enhances its appeal for discerning drinkers.

The rum is produced in Jamaica’s Nassau Valley, where “nutrient-rich soil and daily measures of sunlight and rain imbue the water with the softness that yields Appleton Estate’s signature smoothness and mellow flavours,” claims Campari Group’s Villa. “That water, along with yeast and molasses made with sugar from cane grown on our own estate, are the sole building blocks for this storied rum.

“As Appleton approaches three centuries of rum-making, it has outlasted some-140 other distilleries that operated in the 18th century,” adds Villa. “All the while, its distillers and blenders have maintained its gold standard of production and never thought twice on their refusal to add flavourings or colourings, thus allowing Jamaica’s unique terroir to shine through in every drop.” ➔

p l e a s e e n j o y r es p o n s i b ly .

W WW.M EZ ANRUM .C OM

UNSWEETENED, UNCOLORED, UNCHILL FILTERED.

SPIRITS SPOTLIGHT

Spiced & flavoured ➔ Flavoured rum grew by 5.2% in

volume in 2019, with a 3.6% CAGR from 2014-2019, according to the IWSR. The UK is a particularly strong market for flavoured and spiced rum, with sales up 80% between 2014 and 2019, according to a market report published by the Wine and Spirit Trade Association last year.

Product innovation has ramped up massively as brands seek to capitalise on changing flavour preferences. This year alone, Dead Man’s Fingers, owned

by Halewood Artisanal Spirits, has launched five new flavour variations: pineapple, lime, raspberry, passionfruit and hazelnut.

“Brands are changing; life cycles can be short,” says Halewood marketing director James Stocker. “We stay on top of this by monitoring the latest trends, listening to consumer demand and acting accordingly. The advantage of being smaller than some of our competitors is that we are able to launch flavour variants quickly and get feedback from consumers and the trade on what they want and bring that into the NPD plan.” Each flavour in the Dead Man’s Fingers range is designed to be mixed in a cocktail and also sipped neat or with ice, targeting both bar and home occasions.

As rum continues its recruitment mission, a new flavour trend has emerged: botanical rums. The most wellknown brand is currently BrewDog’s Five Hundred Cuts Botanical Rum which, when it launched last year, claimed to “bridge the gap between the funk of rum and the botanical kick of gin”.

The recently launched Havana Club Verde is sure to give this niche subcategory considerable exposure. Havana Club’s Martin says the product was launched “in response to a consumer shift towards more refreshing taste profiles” and has been designed to be mixed with tonic. “Havana Club Verde blurs familiar aromatic boundaries within the category, offering drinkers a fresh new spirit for mixed drinks classically associated with gin,” she adds.

Banana is another flavour trend gaining traction: at the end of last year, William Grant & Sons launched a Caribbean rum infused with banana peel under its Discarded line, while Red 18

global drinks intel.

NOVEMBER 2020

Ron Cihuatán, El Salvador’s first rum, is produced under the watchful eye of master blender Gabriela Ayala at the brand’s distillery near the late-Mayan Cihuatán archaeological site

Transparency & education “Rum has been in swampy ground for many years,” says Beveland’s Xifra Keysper, referring to a lack of clarity over the origin, production method, age and ingredients of some rums. Accusations of this kind have led to widespread calls for greater transparency and accountability in rum.

“We have seen many new brands come and go prematurely as they have failed to deliver their value proposition,” says Walter Aguilar, international commercial director of El Salvadoran rum Ron Cihuatán. “Some brands have failed to provide compelling evidence as far as the provenance of the liquid and/ or the overarching rum experience they want to charge a premium price for.”

Solera ageing is a particularly contentious topic since the age stated on the bottle of solera-aged products is not a minimum age, as is the case in whisky.

According to Campari Group’s Villa: “More work needs to be done to educate consumers on why they should pay more for specific expressions, especially when it comes to minimum ageing as many brands charge a premium when they are not really minimum aged and instead are solera aged.

“Appleton Estate can claim both minimum ageing and tropical ageing among our points of distinction. In terms of tropical ageing, spirits age quicker in tropical climates than in cooler ones — one year in the tropics is the equivalent to nearly three years ageing in a temperate climate — meaning that the flavour of our rums develops at a quicker pace.”

Rum regions that are subject to GIs, AOCs or DOCs are mandated to offer a certain level of transparency, meaning consumers can feel confident that their products adhere to a particular set of standards. Jamaica, Martinique and Venezuela are among the markets that have strict regulations for rum production, while distillers in Barbados are currently debating what their own GI should look like. “The challenges for rum at this premium high end is lack of credibility,” adds IWSR’s Hermoso.

Leg launched a new banana flavour in September. A few days later, Colombian rum brand La Hechicera launched a limited-edition rum infused with organic banana as part of its Serie Experimental range.

La Hechicera managing director Miguel Riascos says flavours will remain part of the brand’s ongoing explorations and hopes flavour innovation will continue in a premium direction. “The days of artificially flavoured cheap rums are coming to an end,” says Riascos. “The category — and consumers — deserve better.” ➔

Dead Man’s Fingers Pineapple Rum daiquiri

圀圀圀⸀䐀伀一倀䄀倀䄀刀唀䴀⸀䌀伀䴀

SPIRITS SPOTLIGHT/PREMIUM RUM

Experimental production Brands are increasingly using experimental production techniques to expand rum’s repertoire. A few, such as Diplomático, innovate at many levels within the production process, starting at distillation. The Venezuelan rum’s Distillery Collection showcases the different styles of distillate produced by its three stills: batch kettle, barbet and pot still. The distillery also uses a variety of cask types including former Bourbon, malt whisky and sherry casks.

“This expertise has enabled us to continue innovating and experimenting with various ageing techniques, types of casks, distillation methods, ABV, etc.,” explains Diplomático Rum’s Beaslay. “This is crucial as we take consumers on a journey of rum discovery.”

➔

Beveland launched Relicario Peated Finish last year

Other brands have achieved success by borrowing flavours and techniques from other categories.

Take Dos Maderas, which draws on its team’s expertise during its second maturation period in sherry casks. “Our experience gained over time in sherry and brandy-making has been essential in creating Dos Maderas,” says Williams & Humbert’s García de Polavieja.

Last year, Beveland’s Relicario launched a Dominican rum finished in peated whisky casks from Speyside. According to Beveland’s Xifra Keysper, this type of innovation could recruit across category lines. “Whisky and rum have the barrel in common, both products are ‘brown spirits’, so that’s our goal — to catch the attention of whisky consumers and bring them into rum with a very unique product.”

Havana Club’s Martin notes that it’s important to recruit “in a way that is both credible and engaging”. Referring to the brand’s high-end Tributo range, she says: “Finishing rum in unusual casks is one of the ways we are engaging with drinkers from other categories such as Cognac or whisky, offering us the opportunity to introduce them to rum in a way that feels familiar.”

The brand has also collaborated with bartenders for its on-trade-exclusive Professional Edition series, which

More shelf space When any drinks category dramatically expands in a short period of time, warnings of consumer fatigue and market saturation swiftly follow.

However, in the UK market, where rum has been particularly buoyant, product continues to fly off the shelves.

“In the UK, we’ve secured major new retail deals for Bumbu with Tesco and Ocado in the past few months,” says Bumbu Rum’s Lawrence. “The challenge has been keeping up with the demand.”

At Waitrose, rum sales are “still some way off gin” but are “growing at twice the rate”, says the supermarket’s spirits buyer John Vine. Shelf space for rum has increased

20

global drinks intel.

NOVEMBER 2020

UK supermarket chain Waitrose has expanded its premium rum offering to meet demand in smaller Waitrose stores, while in the bigger premises, space has been taken away from multi-size value brands and given to premium brands. Vine estimates that the ratio of big versus small rum

Bumbu’s Original and XO aim to be consumer friendly (above), while Havana Club collaborated with bartenders for its Professional Edition (left) highlights different flavour profiles in Cuban rum. Martin says the range has “played a vital role” in inspiring bartenders to “explore new flavour profiles and styles of Cuban rum, and in turn share that discovery and experience with their customers”.

While innovation in premium-plus rum often aims to achieve optimal complexity, having approachable liquid also pays dividends, says Sophie Lawrence, marketing and communications director at Sovereign Brands, maker of Bumbu Rum. Lawrence claims that Bumbu’s Original and XO variants are very consumer friendly.

“The beauty of Bumbu’s first rum, Bumbu Original, is that while it is a premium product, its approachable, smooth taste — vanilla, soft caramel, toasted oak — appeals to everyone, not just the ‘rum connoisseur’,” she says.

brands offered at Waitrose is now 50:50. The supermarket reported that sales of rum climbed an impressive 53% over the 12 weeks up to 28 July, with a surge in demand for both dark (+33%) and white (+67%) varieties.

Ron Inmortal’s Fernandez says: “There’s definitely plenty of space for new and unique rum expressions, especially high-end rums from emerging markets. We’re a long way from seeing market saturation yet, but of course it will eventually happen as ultra-premium brands continue to be developed and grow, just as we witnessed with Bourbon, tequila and vodka.”

For now, rum brands are making hay while the sun shines. ●

SPIRITS SPOTLIGHT/BRANDY

BRANDY’S BIG CHALLENGE: REACHING MILLENNIALS Mixology, innovation and premiumisation are helping to change old perceptions of brandy as it targets millennials.

Simon Molony reports Brandy continues to struggle for volume growth globally, recording a -1.8% decline in 2019, according to the latest data from IWSR Drinks Market Analysis.

The embattled brandy category must shrug off its dusty after-dinner image to attract younger consumers if it is to reverse this trend. Yianna Christou, global brand manager at Alexandrion Group, which owns the Brâncoveanu Vinars brandy range, says: “Brandy consumption is still decreasing as it is not a type of spirits favoured by the new generations of consumers. This is the biggest challenge now.”

This view is echoed elsewhere. Beveland marketing director and sales manager Jordi Xifra Keysper says: “It’s a category with a downward trend for years. There are some markets with a more positive future, such as Mexico, the US and China, but it’s a category that needs to be ‘reformulated’ to get closer to new targets.”

Bardinet international marketing manager Laure Habbouse suggests the category is already in the process of reforming: “A real shift is taking place in the brandy category, which used to be perceived as the ‘old gentlemen’s drink’.

Brandy is now trendy in many markets, with some brands targeting millennials.”

Innovations such as Beveland’s Suau Orange Brandy, made by macerating Suau 8 with various types of oranges, help to reinvigorate the category and attract new generations of consumers Bardinet’s Beehive was reactivated in 2019 with new packaging and the launch of a new XO expression. Habbouse says: “Both initiatives allowed Beehive to grow in volume and elevate the brand’s image, before Covid-19 disrupted the market.”

The market in India is a bright spot and offers hope for the wider category: India accounts for more than 40% of the global brandy market in volume terms, and was one of few sizeable markets to grow volume in 2019 with over 1.7m cases added, according to the IWSR’s data.

John Distilleries corporate PR and communications manager Asa Abraham says: “India continues to present great potential for growth, while internationally

Top 10 Global Brandy Markets (Excl. Cognac and Armagnac)

Country 1 India 2 Philippines 3 Russia 4 United States 5 Brazil 6 Germany 7 Ukraine 8 Bulgaria 9 South Africa 10 Chile Rest of World Global Brandy Total

Volume Volume % Market % Chg Vol 2018 2019 Share 2019 2018-’19 70,942.0 72,683.0 42.3 1,741.0 30,072.0 27,330.0 15.9 -2,743.0 12,960.0 13,111.0 7.6 150.0 7,762.0 7,636.0 4.4 -127.0 5,927.0 5,530.0 3.2 -398.0 4,761.0 4,689.0 2.7 -73.0 4,338.0 4,191.0 2.4 -147.0 3,900.0 3,885.0 2.3 -15.0 3,208.0 2,754.0 1.6 -454.0 3,197.0 2,688.0 1.6 -509.0 28,090.0 27,485.0 16.0 -606.0 175,157.0 171,978.0 100.0 -3,178.0

‘000s of nine-litre cases

22

global drinks intel.

Source: IWSR Drinks Market Analysis

NOVEMBER 2020

the US, the UK and Europe are the mainstay of the category’s sales.”

John Distilleries is an Indian spirits producer which launched John Paul XO Brandy in October 2019. “At present, Paul John XO is more in the luxury space,” Abraham explains. “However, we see the market opening up to newer experiences and we are looking at the home consumption experience right now, which we believe has tremendous potential.”

The US market presents an opportunity for development of the category, as indicated by the recent acquisition of Copper & Kings American Brandy Company by Constellation Brands.

Constellation CEO and president Bill Newlands explains the rationale behind the acquisition: “American craft brandy is a fast-growing category that resonates with consumers, specifically among whisky drinkers, and provides an excellent bridge between fine wine and craft Bourbon.”

Bardinet sees similar potential in the US. “US brands bring a new dynamic; competition is evolving with new entrants that support category growth and elevate brand perception,” Habbouse says.

Alexandrion Group’s Christou lists the UK, Germany and China as hot spots for growth. “There are still good opportunities in export markets, but the issue of finding the right partner is more important than ever,” Christou says.

The Philippines is the second-largest ➔

SPIRITS SPOTLIGHT/BRANDY

➔ market by volume and home to the world’s largest brandy brand in Emperador.

While brandy volumes declined there in 2019, there might be some positives to take from the trading-up from locally produced high-volume brandy to imports.

IWSR market analyst Harold Zhu explains: “Locally produced brandy Emperador lost share to imported Spanish brands Alfonso and Fundador in 2019.”

Williams & Humbert international marketing manager Gonzalo García de Polavieja says the most important markets for its Alfonso I Solera Brandy are in Asia — mainly the Philippines, followed by Singapore. “Our main challenge is to convert Alfonso I into a globally recognised household brand; to consolidate the brand in those markets in which we have already a strong position but also seek to open new markets and opportunities in Africa, South America, the US and Europe,” he says.

Spanish brandy accounts for more than a third of all brandy imports worldwide.

The most notable and recognised is Brandy de Jerez, produced in the Jerez region in Andalusia, which has Protected Designation of Origin. Grupo Osborne, owner of Carlos I Brandy, is among the leading producers of Brandy de Jerez.

Brand manager Orlaith Whelan says: “Carlos I is the most prestigious brandy within the highest-recognised category, BEEHIVE_COCKTAIL_HIGHBALL_BOUTEILLE_XO_CATALOGUE_230720.pdf

1

23/07/2020

17:39

The use of brandy in cocktails, such as this Beehive XO highball, offers a way of reaching younger consumers 24

global drinks intel.

NOVEMBER 2020

Brandy de Jerez Solera Gran Reserva.” The portfolio comprises six expressions, which Whelan says offers diversity to existing consumers and encourages new consumers into the brand and wider brandy category.

The Covid-19 pandemic has presented problems across the beverage alcohol industry, with all categories and players affected to varying degrees.

Christou explains Alexandrion Group’s strategic response: “It was inevitable to put all our efforts behind the off-trade and online. As soon as the first announcements of measures were made, we focused on relaunching our online shop.”

Brandy is highly exposed to the on-premise sales channel, especially in Europe, with obvious implications in the current climate, says Beveland’s Xifra Keysper. Beveland has responded with a diversification of its offering. “We tried to put focus in some products, such as orange brandy, that allows us to get closer to new targets, more young people,” he says.

Innovation key in Covid-19 times and beyond Covid-19 aside, the brandy category faces structural challenges which producers are tackling through innovation strategies.

John Distilleries’ Abraham identifies new packaging as one way of appealing to the consumer. “Innovation on packaging will continue for premium, super-premium and deluxe brandies,” she says.

Abraham suggests that a new grading scale might further invigorate the appeal of John Paul XO. The reclassification, implemented in 2018, strictly applies to Cognac, however John Distilleries follows the same minimum ageing requirements for its XO brandy. “The reclassification of XO from six to 10 years and introduction of (Extra Extra Old) at 14 years would be an interesting upgrade to the ladder,” he says.

Ageing is also an area that might appeal to the consumer, according to Steffen Ostendorf, senior product manager at Diversa Spezialitäten, distributor of Underberg-owned Asbach Uralt brandy.

“Consumers increasingly scrutinise quality and brand heritage statements and tend to take a closer look at ageing processes,” he says. “Our brand responds to this very well

Spanish brands, such as Alfonso I (left) and Carlos I, dominate imports as it delivers concrete and verifiable answers.”

Beveland’s Suau Orange has been an attempt at flavour innovation in the brandy segment, although conditions are difficult and the initial consumer response is hard to gauge, admits Xifra Keysper. “We did some brand activations in Majorca and some states in the US, trying to get closer to the final consumer, but it is not an easy period bearing in mind the on-premise problems.”

Williams & Humbert has had success by taking a more lateral approach which diverges from the traditionally defined brandy, says García de Polavieja. “When we launched Alfonso Light within the range — in spite not being brandy in the strict sense of the meaning — this brand saw remarkable growth in Asia,” he says.

Alfonso Light follows the same production process as brandy, but differs in that its alcohol content is under 36% ABV. The offering has been widely accepted by Asian consumers, says García de Polavieja.

The IWSR’s Zhu validates this: “Light brandy continues to thrive in the Philippines, as it contains lower ABV, which means it is subject to lower-tax rates and costs less to consumers.”

The category has a positive outlook if it can innovate effectively and adapt to changes in consumer demands, according to Grupo Osborne’s Whelan. “Similar to other premium spirits, we see rising demand for diverse, innovative and authentic premium beverages,” she says.

The use of brandy in cocktail making in countries such as China is growing in popularity, adds Whelan. “By encouraging existing consumers to explore the category more widely — for example, through cocktails in a bar — there is value to be unlocked as consumers who may not consume brandy at home could be introduced to the category,” she explains.

Bardinet’s Habbouse suggests that mixology and premiumisation is changing the old perception of brandy. “We now see premium SKUs on shelves in different countries and the cocktail renaissance has led to the reintroduction of brandy into the greater bar culture due to it being super versatile,” she says. All this offers further hope for a category in transition. ●

SPIRITS SPOTLIGHT/ITALIAN SPIRITS

OFF-TRADE SALES BUOY HARD-HIT ITALIAN SPIRITS An upswing in off-trade sales has eased some of the pain of a tumultuous year for pandemic-struck Italian spirits producers, reports Joe Bates Italy was the first major European country to feel the full force of the Covid-19 crisis.

The nationwide lockdown that followed in early March hit domestic on-trade sales of Italian spirits hard. As the virus swept across Europe, exports were also affected. Off-trade and e-commerce sales have performed well, however, while Italy’s on-trade benefited from a significant recovery in the third quarter of the year as bars and restaurants began to reopen from June onwards.

The heavy toll extacted by the pandemic is all too apparent in the latest H1 2020 financial results of the Campari Group. The Italian multinational saw a double-digit sales decline for Aperol, the company’s hugely popular bitter aperitif, due primarily to the disappointing performance of the on-trade skewed Italian market (global sales dropped -17.6%). Campari, the group’s iconic, eponymous bitter liqueur, also suffered a double-digit drop in its home market, but did see strong growth in core markets such as the US (+15.9%) and Germany (+4.7%).

Campari Group responded to the challenges of the pandemic with a number of light-hearted digital initiatives on key brands. An Aperol campaign highlighting moments of consumer conviviality in lockdown ran in multiple markets, reinforcing the brand’s colourful, upbeat positioning. In Italy, a ‘Together We Can’

Antiche Distillerie Riunite distillers Nicola and Patrizia Dal Toso with designer Moreno Panozzo at the new Akademy Lab 20/20 which offers a ‘360-degree immersive experience’ into the world of spirits and liqueurs charity campaign featured ‘mash-up’ videos of more than 1,000 consumers, while in Germany, an Instagram-oriented activation involved Aperol spritz kits being delivered direct to people’s homes.

Smaller Italian spirits producers tell a similar story about the differing fortunes of the Italian on and off-trade this year. “The lockdown between March and May froze our economy,” recalls Sandro Bottega, founder of Venetobased Bottega S.p.A, which produces a wide range of Italian sparkling wines and spirits. “The Italian on-trade paid — and is still paying — for the effects. During the summer, thanks to the extension of the

The Italian Spirits Market by Type

Category Flavoured Spirits Brandy Whisky Vodka Gin and Genever Rum Agave-Based Spirits Other Categories Total Italian Spirits ‘000s of nine-litre cases

Volume Volume % Market % Chg Vol 2018 2019 Share 2019 2018-’19 8,106.0 8,362.0 58.3 257.0 2,021.0 2,024.0 14.1 3.0 1,110.0 1,082.0 7.5 -28.0 1,048.0 1,024.0 7.1 -23.0 813.0 951.0 6.6 138.0 835.0 767.0 5.3 -68.0 113.0 118.0 0.8 5.0 22.0 19.0 0.1 -2.0 14,066.0 14,346.0 100.0 280.0 Source: IWSR Drinks Market Analysis

area designated for outdoor tables, the turnover of bars and restaurants recovered a part of what they lost before.”

However, Bottega says a large upswing in Italian domestic market offtrade spirits sales was a big help during the Q2 period of national lockdown.

“Many people discovered the pleasure of preparing cocktails and experimenting with new recipes,” he explains. “We have launched Negroni Bottega (pictured left), a premix ready-to-drink cocktail in small format (10cl). What makes our Negroni unique is its special recipe based on ingredients produced by Bottega (both our gin and our vermouth), as well as a bitter made with 40 different botanicals, refined and carefully selected.”

Marco Violin, world business developer at Pallini S.p.A, the family-owned producer of Pallini Limoncello, reports that at-home consumption of the company’s products jumped 40% in the first three quarters of 2020, but he says this welcome growth was not enough to offset the decline in ontrade sales. “Overall, we recorded a -10% loss of volume, which is less than average in our industry and definitely a good sign that proves the resilience of the Pallini brands.”

Violin says the virus’s devastating impact on the international travel-retail business has hit Pallini, the top-selling ➔ NOVEMBER 2020

global drinks intel.

25

SPIRITS SPOTLIGHT/ITALIAN SPIRITS

➔ limoncello in duty free, hard. He hopes health precautions within the aviation sector and the rapid discovery of a vaccine will allow the travel industry to recover quickly.

Antiche Distillerie Riunite S.R.L. CEO Nicola Dal Toso says Venetobased Antica Sambuca has seen strong growth in off-trade and online sales both in Italy and other key export markets, such as the UK and Germany, this year. The company demonstrated its bullish outlook on the post-Covid-19 future by opening a new Rossi d’Asiago showroom in the firm’s hometown of Asiago last month. The Akademy Lab 20/20 is billed as offering a “360-degree immersive experience” into the world of liqueurs and spirits for bartenders, bar managers and retailers.

“This academy is an ambitious project: we want to offer a unique path of training and growth; a place for knowledge, practice and experimentation, to discover the art of distillation,” says Dal Toso. “The main objective is to support our partners in their paths of growth, supporting their training and expanding their knowledge, to allow them to achieve their professional goals more easily”.

Designed by famous local designer Moreno Panozzo, the lab features a multisensory showroom, a ‘pharmacy’ where visitors can learn more about the history of the Rossi d’Asiago distillery, and a training area complete with a cocktail station where physical and virtual training and masterclasses can take place.

Rival sambuca brand Molinari has focused on three key areas during the

crisis: education, commercial terms and specific anti-Covid measures. Molinari corporate ambassador Ana Maria Tarrús de Vehí explains: “We have activated a successful online education programme for all our brands, which has permitted us to stay close to the bartender community and allowed them to invest this time on more skills.

“After the lockdown, we’ve supported them with more favourable payment terms and minimum purchase quantities,” she continues. “Last but not least, we have provided Covid protection materials for bar crews, such as masks, hydroalcoholic solutions that are needed to continue the business in this period.”

Molinari’s current ad campaign is called ‘Too Much’ and focuses on conviviality and the spirit of sharing, values that characterise Molinari and Italians, according to Tarrús de Vehí.

“Emily DiDonato, a top model from New York, tells the audience her love for the Italian culture by testifying Molinari as an icon of it,” she says. “We are further supporting our products with special editions and valued-added packs,” she adds. “For example, in November, we will launch our 75th Anniversary Molinari Special Edition (pictured top left). For this unique commemoration, we’ve collaborated with Olimpia Zagnoli, an Italian illustrator known worldwide. Her design aims to celebrate the conviviality and the spirit of sharing that characterises the Italians as well as Molinari since its foundation.”

Positive drinks news has undoubtedly been hard to find in 2020, but Bottega points

Italian malt wins European Whisky of the Year Puni Distillery, Italy’s only single malt whisky distillery, has every reason to celebrate. In the latest edition of whisky writer Jim Murray’s Whisky Bible 2021, Puni Aura, the distillery’s first release in a new cask-strength range limited to just 393 bottles, was named European Whisky of

26

global drinks intel.

NOVEMBER 2020

the Year. “We have been very surprised and excited about this most recent accolade,” says Puni Distillery executive assistant Lena Klopp. “Apart from helping some consumers in their buying decision, winning awards and medals in professional tastings can be paramount in getting spirits listed by distributors or written about in the press.”

Located in the Italian Alps, Puni Distillery (pictured left) was set up in 2010 by the Ebensperger family, using local grains and imported Scottish copper pot stills. Its whiskies are now available in 11 countries, including the US following the signing this year of a US distributor, High Road Spirits.

Dilmoor enjoys export growth with Perlino Dilmoor, one of two Italian drinks companies owned by French multinational La Martiniquaise, is enjoying strong export growth thanks to a partnership with its sister firm Perlino. With headquarters in northern Italy, the company produces a range of Italian liqueurs as well as grappa.

Founded in Genoa in the 1950s, Dilmoor was acquired by La Martiniquaise in 2012, but it wasn’t until the French group’s purchase of the export-oriented sparkling wine producer Perlino in 2015 that Dilmoor’s export business took off.

Export director Giuseppe Bellotti says: “Italy remains by far the biggest market for Dilmoor, but export sales have grown 70% in the last three years, benefiting from the commercial synergy with Perlino, which historically has a strong vocation for export. Most of our export sales are in Europe, but Dilmoor brands now have a presence in more than 20 markets globally and will continue to grow.

“Germany, Spain, France, Switzerland and Poland are the main export markets, but the presence of Dilmoor is rapidly expanding in a number of export markets where we are promoting Villa Cardea, a line which includes limoncello, aperitivo, amaretto, sambuca and grappa.” to a welcome revival in sales for grappa, the Italian grape brandy traditionally drunk as a post-dinner digestive at home and overseas.

Bottega pioneered the presentation of grappa in stylised, contemporary handblown glass bottles; the company also branched out into aged grappas and experimented with grappa-based cocktails.

Canada is Bottega’s main overseas market for grappa. “In cooperation with the monopolies of the different provinces, we are present in the shops all year round,” says Bottega. “Special displays and targeted tastings help to capture the attention of consumers and to promote our spirits. In the US, we joined the project ‘Hello Grappa!’

It is an informational and promotional campaign for grappa promoted by [Italian trade body] AssoDistil and co-funded by the European Union. In the last three years, the project included educational and promotional events in the US.” To sum up, 2020 has been an incredibly difficult year for Italian spirits producers, but the country’s quick on-trade recovery and strong off-trade sales have helped offset some of the heavy Q2 losses. How well Italy and key export markets manage to negotiate the expected second wave of Covid-19 over the winter months will prove crucial for a continued recovery in 2021. ●

OLD SCHOOL. NEW TASTE. Historic in origin. Young in spirit.

The aromatic heart of Antica Sambuca is created by distilling star anise and 17 other herbs and spices in a steam-still.

Tradition meets innovation. www.anticasambuca.com Enjoy Antica SAMBUCA Responsibly

RETAIL REVIEW/MOODIE DAVITT VIRTUAL TRAVEL RETAIL EXPO 2020

CHINA LIGHTS THE WAY TO TRAVEL-RETAIL RECOVERY With travel retail back up and running in China, how to revive the sector elsewhere was top of the agenda at the Moodie Davitt Virtual Travel Retail Expo Reviving the beleaguered travel-retail market was top of the agenda at the Moodie Davitt Virtual Travel Retail Expo 2020. The opportunities arising from e-commerce and challenges to the economics of the travel-retail model were also examined by prominent industry speakers.

China Duty Free Group (CDFG) president Charles Chen explained how China’s dutyfree sector has surged back into fullrecovery mode while overseas retailers continue to struggle. “In the darkest hours of the crisis, the duty-free business of the company almost came to a full stop,” he said. However, the government’s ability to curb the spread of the virus has allowed the consumer and tourism markets within China to quickly recover.

The retailer is looking to capitalise on that momentum and Hainan’s enhanced offshore duty-free shopping policy which came into effect on 1 July. Chen said: “Although duty-free shopping for international travellers in China is not yet restored to the normal state, the dutyfree market in Hainan has been hitting new highs. Thanks to the new policies, the sales in CDFG stores in Hainan are not only recovering but thriving.”

China is at the forefront of online shopping and this extends to CDFG operations. Chen said that its online shopping helped the group maintain sales during the crisis. “CDFG’s online shopping has proved a great success, providing not only a powerful support

The Moodie Davitt Virtual Travel Retail Expo 2020 was billed as a pioneering virtual trade show and symposium for us to sail through the epidemic, but also inspirations and solutions for dutyfree service innovation in the light of consumer habits with new retail.”

He also pointed out that digital and the use of live streaming is playing a growing role in CDFG’s marketing. “It has become a powerful tool for marketers during the epidemic, as video clips and live streaming efficiently reach out to the millennial and Z generations of consumers,” Chen said. “We need to go with the tide and seize these new trends on the consumer market.

High-quality content production and live streaming platforms are all the more important to advertise and promote highquality products and campaigns.”

There is a perception that the Chinese government is channelling Chinese outbound tourists’ massive purchasing into government-owned CDFG stores at the expense of international airport operators.

Chen sought to allay those concerns while at the same time expressing ambitions for CDFG to become more of a global player.

Moodie Davitt CEO Martin Moodie and Dufry CEO Julián Díaz during the virtual conference 28

global drinks intel.

NOVEMBER 2020

He said: “While leveraging on our advantages as a big player and also an early starter, we are becoming more open and ready to collaborate with duty-free operators in China and worldwide to boost the Chinese duty-free market with opening up, exchange and cooperation, working on the demand side to encourage consumption, and bringing overseas spending back to China. Meanwhile, we will continue on our journey of going global and play a more pivotal role in the global duty-free market.”

Travellers will return

Lagardère Travel Retail chairman and CEO Dag Rasmussen told the expo: “What we’re missing now is passengers.

Simple as that, and I’m confident that once travellers are reassured on certain conditions, they will travel again. We are already seeing that in China.”

Lagardère Travel Retail operates stores in 39 countries and Rasmussen said the reduction in passenger numbers has placed the retailer-airport business model under pressure. “The difficulty is that with the growth, we have opened new terminals, new airports, new square metres [of stores], which means that the cost basis is higher,” he explained.

“We can survive with 10% to 15% fewer passengers; this Covid-19 period puts us maybe a couple of years back.

“So it’s not a disaster if we’re able to adapt the business model, which means maybe

having some stores that are closed. We should optimise opening hours, maybe review the way we staff our stores. We have possibilities if we discuss with airports and with brands (suppliers) to decrease the cost basis. And that’s what we need to do.”

The pandemic has not changed travel retail’s importance as a shop window, Digital innovation in the Exhibition Hub (clockwise from top left): Campari Group, Roust, Bacardi and Distell Moët Hennessy CEO Philippe Schaus told expo participants. “Travel retail is a fantastic platform for showcasing our maintaining investment in travel retail still very high,” admitted Díaz. “We can’t products in very often the most elegant because we want to come back strongly say when full recovery is going to take environments to a very attractive cross and be there as a partner when it comes place because much of it is out of our section of consumers,” he said. “These back. It [the travel-retail ecosystem] will control. We are confident that business travellers have a higher propensity to survive to a large degree, although there will eventually return.” discover new things, they have a higher will be mid-tier travel-retail players that Potential of e-commerce level of financial means and are the fall victim to this crisis, without any doubt.

The subject of Chinese e-commerce giant core consumers that we are targeting.

“The last aspect, which is very dear Alibaba’s equity investment in Dufry with Covid-19 is not changing that. If anything, to my colleagues, is the whole financial a target ownership of up to just under we have to elevate the model between airports, retail 10%, and a strategic joint venture in importance of travel retail for operators and brands which has China was a prime topic at the expo. Díaz our group distribution because been based on minimum annual said it was an opportunity to penetrate of the unique properties that it guarantees (MAGS),” continued the Chinese market and the estimated has from a branding side.

Schaus. “It is very difficult 800m consumers that shop online. It will “Now we are facing the today because who can predict also give Dufry access to what he terms greatest crisis that we have the mix of passengers or the “best-in-class digital technology” that faced so far in our industry,” recovery of travel. The shifting will help the group engage globally with added Schaus. “It is a global of responsibility and financial China Duty Free Group consumers on all points of their journey. crisis, unlike most of the others, risk between the airport, the president Charles Chen “We want to become the first travel-retail and it is very unpredictable. operator and brands is evolving digital company,” said Díaz.

Some people say that Covid-19 as we speak. MAGS did work, Other speakers also addressed the has accelerated trends that to some degree, in a relatively potential of e-commerce in the travel-retail were pre-existing anyway, such stable world where there was channel. Lagardère’s Rasmussen said: “We as digital consumption, but a level of predictability. But have seen e-commerce as a rising part of the fundamental long-term in a world where the major retail for a long time. For many years we trends are not really affected by characteristic is unpredictability, have said that there were two growing and Covid-19. We just need to get such a model cannot function attractive segments in retail and that was out of this and be able to travel and needs to be replaced by a Lagardère chairman and more balanced model.” e-commerce and travel retail. again and have consumers in CEO Dag Rasmussen “I’m not sure e-commerce per se will the airports again.”

Dufry Group is the bellwether of fundamentally change the way we do Conference moderator Martin Moodie, the global duty-free business as the largest business today. E-commerce is much more CEO of Moodie Davitt, asked Schaus global retail operator. CEO Julián Díaz of a competitor to downtown retail than whether the travel-retail economic ecoexplained that there had been a gradual to travel retail. If we rank competitors, system is strong enough to withstand improvement in business from the low downtown is becoming weaker. the inevitable short-term pressures of of just 3% of 2019 sales level achieved in E-commerce is attractive, but it needs to the crisis, particularly the absence of April, or 6% in May, to 22% year on year in discount prices, which is not the best use passengers and a potential disinvestment September. He conceded that month-byof our business model — when you have in the channel by brand suppliers. month improvements are not increasing as high percentage rents that doesn’t work.

Schaus responded: “It is a very tough fast as he anticipated when announcing the “I’m not arrogant about the threat of situation. In our travel-retail business, full-year results in the summer. e-commerce, it is competition. But we we are seeing drops of -70% to -80% “It is still far from a normal situation,” [travel retailers] have assets which nobody depending on the region. We are Díaz said, noting that recovery has been else has. And that’s what we have to work on. allocating some of the resources to other slowed by the quarantine rules imposed We shouldn’t forget our fundamentals.” ● divisions. On the other hand, we are also by various countries. “The uncertainty is NOVEMBER 2020

global drinks intel.

29

RETAIL REVIEW/TRAVEL-RETAIL DIGITISATION

DIGITAL TO TRANSFORM TRAVEL-RETAIL CHANNEL Adapting to the future of travel retail with digitalisation has become more pressing since the Covid-19 pandemic, reports Alexander Smith Pernod Ricard Global Travel Retail (GTR) is predicting a major transformation within the travel-retail space, driven by the rapid adoption of digital during the pandemic.

This was the topic of a Pernod Ricard panel discussion moderated by Intel retail editor Doug Newhouse at the Moodie Davitt Virtual Travel Retail Expo 2020.

Newhouse opened the session by placing the ongoing digitalisation of travel retail into context. “It is clearly an understatement to describe 2020 as a turbulent year, although the pandemic has also signalled new travel-retail opportunities not previously present on industry radar screens prior to Covid-19 — alongside accelerated trends that were slowly emerging,” he said. “This is especially the case related to the extensive development and revolutionary digitalisation within travel retail.

“Digital in the new normal goes beyond e-commerce and digital media.

Consumer insights tell us that once shoppers are back in duty free they will expect an elevated and different experience to what they have been used to. This means that the future of travelretail digitalisation needs to start with pre-trip targeted media, and include search and e-commerce, in-store experience, artificial intelligence (AI) brand ambassadors, all the way through to customer services and customer relationship management. Duty-free retailers have noticeably expanded — and in some cases even created — their online shopping capabilities in the past months.”

As a result of the pandemic, consumer awareness of e-commerce in duty free is emerging, accelerated by consumers having to embrace online shopping in a way they never have before. Molzi chief strategy officer and former Amazon UK head buyer beer, wine and spirits Charlie Merrells pointed out that educating consumers around online services — and 30

global drinks intel.

NOVEMBER 2020

Pernod Ricard’s conceptual bar space with a robotic bartender will be a travel-retail world first making these services as accessible as possible — will be essential for travel-retail brands to make an impact in the future.

“What will come has already begun, but the opportunity for travel retail is to get into the nuts and bolts of that and really understand how e-commerce works,” he said. “They need to recognise that e-commerce can be a friend and not a threat. But the starting base is very low — e-commerce is still to be normalised in duty free. The pandemic has forced consumers around the world to embrace online shopping. Consumer education is essential as awareness of these services remains low.”

Convenience critical to travelretail e-commerce journey Merrells explained that there are a number of key ways to successfully drive consumer adaptation in travel retail.

“Right now, it’s important to get back to basics and offer travellers a compelling reason to purchase products within the channel,” he said. “I would really advise a focus on content-based themes that will give customers a reason to purchase, such as customer reviews and quality images and description. There are huge opportunities to provide convenient offers and convenience is critical when you talk about the e-commerce journey.

Education around services such as clickand-collect and making these transactions as frictionless as possible will be key to

reaching consumers at various pick-up points along the traveller journey”.

Pernod Ricard GTR vice-president marketing Craig Johnson agreed: “A frictionless journey will, now more than ever, become absolutely critical.

Airports are some of the most dynamic environments in the world, so the question is now: how are we going to leverage the digital experience to really add to this?”

He also noted that there is a great appetite from retail partners to expand digital services. Pernod Ricard teams have been working with retailers around the world to support them in their growth — provide content to create optimal online experience.

Wavemaker global head of e-commerce Mudit Jaju believes e-commerce will become more omni-channel. “We’re consuming more media than ever before and one of the outcomes of that is the purchase journey becoming more omni-channel,” he told the expo. “We have already seen, particularly in some markets in Asia, the evolution of social platforms into e-commerce channels.

E-commerce is no longer just about retailer websites. Facebook, Snapchat and even Pinterest are starting to become meaningful front-ends. Brands now have this unprecedented opportunity to bring themselves to life on digital platforms, and the platforms are really leaning in.”

Jaju emphasised the role of content

and the opportunities of live streaming in today’s e-commerce landscape. TripurX Tech (an abbreviation for ‘Trip Purchase Infinite’), a key digital partner for China Duty Free Group (CDFG) is a good example.

Its use of live streaming has proven very effective in boosting sales of duty-free products. Courvoisier VSOP and XO sold out in two hours of one live stream.

Jaju also explained that successful pretrip communications with the purpose of driving the consumers into the store or to buy online and pick up at the airport require a complex media mix.

Merrells agreed that travel-retail shopping should be seen as a holistic experience. He stressed the importance of customer relationship management (CRM). That means brands must devise CRM strategies and inspirations.

Digital solutions to combat physical problems How to engage consumers when they are hesitant to handle product is a key challenge in duty free. Pernod Ricard GTR data reveals that 66% of consumers who feel less confident about shopping in duty free fear touching or picking up items that have been handled by other people.

But, Johnson argued, at some point in the future, people will want to go into stores and connect with brand ambassadors for that human interaction again. “What we’ll need to do in the meantime is add richness to products in a different way,” he said.

SharpEnd founder Cameron Worth echoed this, pointing out that “whether it’s through digitalisation, by way of connected bottles for spirits, or through other unique digital touchpoints in order to provide consumers with that wealth of data, brands need to be creative in how they get consumers to engage with product once more”.

This means there is a need to reimagine the travel-retail environment, according to Worth. The challenge is to leverage digital to enhance the experience traditionally given by sales staff and brand consultants. Brand consultants can’t be replaced, but Worth expects reduced interaction with staff, so other means of brand communications will be required.

Panellists: Intel retail editor Doug Newhouse (clockwise from top left), Pernod Ricard GTR vice-president marketing Craig Johnson, Molzi chief strategy officer Charlie Merrells, Moodie Davitt CEO Martin Moodie, Wavemaker global head of e-commerce Mudit Jaju and SharpEnd founder Cameron Worth While all panellists agreed that retail theatre will remain essential, Johnson said these spaces need to become more engaging, revealing a preview of upcoming store innovations. PR GTR is exploring one example of these innovations through its new Martell Perfect Door. A GTR-specific feature, the Perfect Door is an experience wall that has been designed as a digital touchpoint providing travellers with an engaging brand experience. Activated by motion sensors, travellers will have access to the world of Martell via product details and brand heritage, all of which can be initiated using touchless technology.

Johnson explained: “The Martell Perfect Door is just one of the ways we’re looking to enhance the in-person experiences that travellers will have as they move through the airport. We’re conscious that when travelling, people may be trying to cut down on the number of interactions they’re having. The concept of the experience wall realises that and aims to provide the traveller with the information they need, while still having a shopping experience that feels as comfortable as possible”.

Pernod Ricard AI bartender a world first for travel retail Johnson also revealed details around a world first for travel retail, Pernod Ricard GTR’s new conceptual bar space equipped with a robotic bartender. To be introduced into the channel soon, the space supports the group’s vision for the future of retail while addressing heightened expectations around hygienic and contact-free tastings with the AI bartender — the very first time a tasting robot will be used in travel retail.

The AI bartender will enable brand consultants to better understand traveller needs and suggest products. It also meets consumer demand for greater sustainability in the channel: the space’s branding can be changed instantaneously thanks to

its digital screens, removing the need to produce additional point-of-sale assets.

Greater customer understanding is crucial, argued Johnson. He said that Pernod Ricard has been investing heavily to better understand consumer behaviour and how they use technology for planning duty-free shopping. All of this was disrupted by the Covid-19 crisis.

“Rather than cut our insight budget, we are spending heavily on how this will impact consumers in their shopping going forward and the expectation that they have for brands — albeit travellers are very few and far between right now,” Johnson said.

Pernod Ricard GTR’s research involves more than 10,000 travellers across nine nationalities and uses social media monitoring to track recovery, including monitoring the status of the virus, the levels of lockdown and mobility in the domestic market, as well as airline capacity, bookings and passenger traffic. The company believes that by staying true to its core business model and using a consumercentric approach drawing on multiple data sources, it will be able to map the industry’s recovery and establish a closer connection to travellers, creating products and solutions aligned to evolving expectations.

The pandemic has had a profound effect on the global travel industry. While consumer confidence in travel has shown signs of recovery in recent months as a new reality of life around Covid-19 sets in, the fast-changing nature of the pandemic presents continued uncertainty.

Though industry regeneration may prove to be gradual, Pernod Ricard GTR is turning the disruption caused by the pandemic into an opportunity to steer the group in a new and unique direction underpinned by data and digitalisation.

With uncharted territory undoubtedly ahead, keeping open minds and open discussions across the sector will prove more important than ever. ● NOVEMBER 2020

global drinks intel.

31

RETAIL REVIEW/PERNOD RICARD GLOBAL TRAVEL RETAIL

AS LONG AS PEOPLE TRAVEL, THE CHANNEL WILL STAY RELEVANT Pernod Ricard chairman and CEO global travel retail Mohit Lal discusses the present crisis in travel retail and the shape of the industry that is likely to emerge There is usually an opportunity in any crisis and Pernod Ricard’s travel-retail chief believes that the business that eventually emerges from the present tumult could be a significantly improved one. The impact of the Covid-19 pandemic may lead to a long overdue rebasing of travel retail, with a more equitable approach to costs and revenues. The crisis has also forced to the industry to more fully embrace the digital revolution and Pernod Ricard is leading that charge.

One of the real bugbears of the supplier tier for many years has been the inequitable distribution of the travelretail value pool. The supplier critique is that they have been to a great extent subsidising the overbidding by retail operators in the tender process through the excessive margins that it pays, and ultimately the value pool has been flowing toward the airport authorities, the beneficiaries of this overbidding. Even before the crisis, there were some signs that operators were becoming a little more pragmatic. DFS Group, for instance, walked away from the blue-chip Singapore Changi operation. Many suppliers still say privately that there is a way to go.

Pernod Ricard chairman and CEO Mohit Lal tells Intel: “There is the value pool on one side, but then there’s the cost pool on the other side. What’s happened over the years is, because of the continued acceleration of the overall value of travel in the ecosystem, there’s been a little bit of loosening of purse strings where it comes to costs. The cost intensity of this entire channel has gone up. And in future, with this crisis, what’s going to readjust itself is 32

global drinks intel.

NOVEMBER 2020

Pernod Ricard chairman and CEO global travel retail Mohit Lal says the pandemic will change the way travel retail uses digital to stimulate sales. Activated by motion sensors, the Martell Perfect Door is an experience wall devised by Pernod Ricard as a digital touchpoint to provide travellers with an engaging brand experience how revenues get shared. We are already seeing that when we talk to retailers and hear about negotiations with airports.

We are starting to see more pragmatism come about almost on a global scale.

“After this crisis, it need not necessarily go back to what it was on the cost side,” he adds. “We are seeing everyone in the ecosystem trying to optimise the cost side of the business, and therefore as we get out of the crisis, there will be learnings of not going back to historical costs bases of how you dealt with this channel. There is also going to be efforts at revenue maximisation, as well as a more pragmatic way of sharing revenues.

All these three will happen. But they’re not going to happen at a click of a button.

You’re going to see some people take a lead and then some people follow. But the sparks are already there. And those sparks will travel, so I’m very, very sure that as we come out of this crisis, we will start to see how can we maximise revenues,

enlarge the pool as opposed to share the pool, how do we reduce the cost base so that your return on investments start to improve, and then where the sharing was not completely pragmatic, how can that be made more pragmatic?”

More constructive approach by ‘travel-retail trinity’ Lal is also encouraged by the more constructive approach being taken by the three elements of the so-called ‘travelretail trinity’ — brand suppliers, retail operators and airport authorities. “The confrontational element has died down quite significantly because now it is more about survival for many of these players,” he says. “You can’t take the very rigid postures that you used to take in the past.

There are channels beginning to open from far more constructive and open dialogue than there were pre the crisis.”

Travel retail is a significant part of Pernod Ricard’s overall business and

RETAIL REVIEW/PERNOD RICARD GLOBAL TRAVEL RETAIL

accounts for 6% of its total sales. The group reported a -27% decline in global travel-retail sales for the full fiscal year, which isn’t too bad considering the enormous disruption to international travel caused by Covid-19 in the second half of the fiscal year. That disruption has continued into Q1 of its fiscal year, with the group reporting a -64% decline in travel-retail sales due to passenger traffic still significantly down versus preCovid-19 levels. It sees very limited sellout trend improvement, although Pernod Ricard did report a positive impact from the opening of China’s Hainan Island to duty-free spirits sales from 1 July.

Lal says: “The first six months [of the pandemic] started off, obviously, with China at the end of January/beginning of February, then spreading into Asia end of February/beginning of March and then slowly enveloped the whole world. That’s precisely how business was affected because, ultimately, if there are no travellers, there are no buyers.

Even if we look at Q3 of this year, the trend has continued. You’d see sporadic restarts. I wouldn’t necessarily say recovery, but they’re sporadic and there is uncertainty again. We saw European travel restart in the summer, then reverse again quite dramatically. On the other hand, if we look at recent data of passenger numbers and future bookings, it is quite heartening to see the numbers of Russians travelling to Turkey, and the numbers and immigration halls in Turkey seem to be quite crowded.

So, it’s sporadic. I won’t say we are firmly yet on the path of recovery, certainly not.”

The company undertook strong response to channel decline, with strict cost controls and tight receivables management. “When your ship is sailing through a storm you first batten the hatches and make sure you don’t have too many leaks,” explains Lal. “We tightened the way we ran our business. We scaled back on activity that related to brand building or promotions, especially at locations where there was no traffic. We did see volumes come down, so we went into resource conservation more, which is quite normal. We started to look at how effectively can we begin to track recovery and we started to set up dashboards on recovery. We always have a strong pipeline of new products and innovations.

The introduction of some of those has been postponed. It also gave the group a chance leapfrog a lot of initiatives that we had in the pipeline, but because of the scale of ongoing business, doesn’t always give you time to address.

“We’re making sure that we are ready for the future as and when recovery happens because, while global recovery may not happen instantly, regional recovery and pockets of recovery can be quite sharp and we just have to be agile and adaptive to it. There is the issue of how our supply chain will gear up to the new normal. This channel always had very high demand volatility, but now the demand volatility will be even higher. So are you going to match that, especially when supply chains and transportation networks are also feeling the pinch of not knowing what capacity to create when and where. So that’s another area that we are very carefully looking at.

If recovery happens, what’s our capacity to respond to the recovery?”

theatre is the best example of how you can stimulate that emotion when shopping.”

That doesn’t mean digitalisation won’t play a major role. “During the pandemic, more people have been introduced to e-commerce and have become accustomed to placing orders online for home delivery,” Lal observes. “You have this huge number of people suddenly exposed to the ability to browse products and decide what they want to buy digitally. This will change how they buy in travel retail — now they have the ability to do their research before they step into an airport store. Stimulating that through digital means before they travel gets even more important.”

That begs the question as to what is the new normal in travel retail going to look like, and how does Lal see the channel evolving in coming years? “I’d put it very simply that eventually planes will fly, and people will travel,” he says. “It’s for the channel to make sure that it stimulates those people to buy again. I am a firm

IS A MORE EMOTIONAL EXPERIENCE. ❛SHOPPING BUYING IS A MORE CLINICAL EXPERIENCE.

THE TRAVEL-RETAIL THEATRE IS THE BEST EXAMPLE OF HOW YOU CAN STIMULATE THAT EMOTION One area where it is going to be very different is the ongoing digitisation of the travel-retail business. It is a major point of focus for the group (see related article on page 28). The question is whether the dramatic growth of e-commerce during the crisis is a threat or opportunity? Lal believes it is more the latter.

“E-commerce should in theory be more of a domestic market issue,” he says.

“Normally, if you buy a product digitally, the product is delivered home then it is a duty-paid business for alcohol and tobacco because the delivery needs to be air-side for it to be duty free. “The truth is if you look at e-commerce, it impacts your high street sales, your supermarket sales first. It will also impact the travelretail channel because the advantages that used to exist in travel retail will either no longer exist or not exist at the same level as they did before. But you know, there’s a big difference between what I call shopping and buying. Shopping is a more emotional experience. Buying is a more clinical experience. The role of emotion in shopping will stay and the travel-retail

❜

believer in the future of the travel-retail channel. This channel has always been resilient and we’ve seen very strong bounce-back whether it was Sars or the global economic crisis — they were, of course, nothing of the magnitude that we are witnessing now — but I firmly believe this channel will bounce back.

Therefore all the actions that we are taking internally within the group, with our customers and with our approach to travellers, are with an eye on the future because we are very clear that this channel will stay extremely relevant when it comes to wine and spirits.”

One in three bottles of super-premium spirits are sold in the travel-retail channel and the same is true of ultra-premium spirits, points out Lal. “It’s an extremely important and relevant channel for our business,” he says. “So long as people continue to travel it will stay relevant.

It will come back, not exactly the way it was; it’ll change in shape and size and dimension, but you’ll continue to see a trajectory of growth once this crisis is behind us.” ● NOVEMBER 2020

global drinks intel.

33

MARKET INTELLIGENCE/ASIAN CRAFT SPIRITS

GLOBAL PLAYERS SEARCH OUT ASIAN CRAFT BRANDS Global spirits companies are starting to look for Asian craft opportunities, reports Michel Brekelmans and Alex Oldroyd

Global spirits companies have been very active in buying brands created by entrepreneurs in Europe and the US and now they are also starting to pursue Asian craft brands. As we have seen with craft players from other regions, a sale or tie-up with one of the big global spirits groups may well represent both the natural progression in developing the brand and a potential exit for the Asian craft players down the line.

Asian craft brands may have to overcome the consumer perception that imported brands are better than local ones but, if they can do that, the task of building their brand locally is probably a little easier than for Western brands because they are operating in a less crowded market.

(For more on this, refer to Parts 1 and 2 of our Asian craft series in the September and October issues.) However, they face the same challenges as Western brands in terms of finance and route-to-market, in scaling their businesses and accessing international markets.

In March 2020, with Covid-19 already starting to challenge the spirits industry in Asia, Pernod Ricard announced a significant investment in The Kyoto Distillery from Japan, famous for its Ki No Bi Kyoto Dry Gin. The funds will be used primarily to build a new, state-of-the-art

Beam Suntory-owned Roku has proven itself one of most successful Japanese craft gins 34

global drinks intel.

NOVEMBER 2020

Ki No Bi Dry Gin, produced at The Kyoto Distillery, is Pernod Ricard’s first acquisition of an Asian craft brand distillery to meet the growing demand for ultra-premium gin.

Ki No Bi is Pernod Ricard’s first acquisition of an Asian craft brand, but its three-year ‘transform and accelerate’ strategic plan has already seen it invest in American whiskey, mezcal and gin. Ki No Bi joins the Gin Hub which houses Pernod’s burgeoning stable of gin brands and gives some insight into the company’s strategic approach to the category. Its strategic international brand is Beefeater, but it also has established regional brands such as Seagram’s and Plymouth.

The recent craft additions have a common theme in having clear geographical heritage, but each has its own differentiated position within the portfolio, such as German super-premium gin brand Monkey 47, Inverroche from South Africa, Ungava from Canada and Italian flavoured gin Malfy. Ki No Bi is the first Asian craft gin to join Pernod Ricard’s portfolio, but it may not be the last, given the rising taste for gin across Asia, the company’s broad positioning across the region, and Western consumers’ curiosity to try gins from different places.

Meanwhile, staying with Japan, the family owners of Marussia Beverages

have invested in Hatozaki Whisky and recently launched its 135° East Hyōgo Dry Gin in international markets. This is a unique investment as Japanese whisky is increasingly sought after internationally, but the main brands are tightly held by Japanese multinationals. While the leading multinationals would undoubtedly be keen to acquire craft Japanese whisky players, there are few players that have a scalable, high-quality product and a willingness to sell, so this area may not be as active as gin.

The list of Asian brand acquisitions to date is not a long one, though. If we go back a little further and include acquisitions of more established businesses rather than entrepreneur-owned brands, Diageo has made a couple of investments in domestic Asian businesses in Vietnam and China. Its baijiu investment, Shui Jing Fang, has been a long and complex process with bumps along the way, but it seems to be working out now. Other multinationals have dabbled in baijiu, albeit with less success.

Another notable craft investment in Asia is Sazerac’s stake in Paul John Indian Single Malt Whisky. The leading domestic spirits businesses in India are already owned by multinationals Diageo and

MARKET INTELLIGENCE/ASIAN CRAFT SPIRITS

Pernod Ricard. Sazerac joined them with its investment in John Distillers in India in 2017, taking the investment to 43% in 2019. The company has a large Indianmade foreign liquor (IMFL) business, but the investment is also interesting from the perspective that John Distillers also produces Paul John Indian Single Malt Whisky, the winner of a number of international whisky prizes. Sazerac has the capability to accelerate the development of the brand in the US. The reasons why there have been few transactions for entrepreneur-owned brands may be a combination of the dearth of targets and the consumer perception that imported brands are better, meaning the multinationals can focus on building their existing portfolio of international brands. As both of these situations change, the level of activity in Asian craft M&A is likely to pick up. Asia is a decade or so behind the US and Europe in the development of the craft spirits movement, but a number of brands have been popping up and some of them may soon reach a level of maturity that makes them interesting for the multinationals.

However, the competition for these acquisitions may be narrower than we have seen in other regions, particularly the US. The multinationals generally acquire craft brands with a view to adding value in two ways. First, the multinational can exploit the craft brand’s local position

Sazerac has increased its stake in award-winning Paul John Indian Single Malt Whisky

to enhance the portfolio it sells in that market. Second, it can leverage its broader distribution platform to scale the acquired brand. Fewer multinationals have the necessary local market position in Asia they hold in the US or Europe, and the ones that are established in the region tend to be the better-capitalised players who can afford acquisitions. Meanwhile, there are few examples of Asian spirits brands that have successfully scaled internationally. This may be a function of the limited number of Asian spirits

Marussia Beverages has bolstered its spirits portfolio with Japanese whisky Hatozaki companies with international distribution platforms — really just Beam Suntory.

It is also notable that, to date, the successful Asian spirits exports have largely been confined to whisky and, to a lesser extent, gin, both categories where the liquid can pick up on local characteristics but remain familiar to Western consumers.

This is in contrast to some of the domestic spirits, such as sake and baijiu, which remain niche products internationally.

Asian heritage is something of a novelty for Western spirits consumers who are seeking to try new things. However, many Asian countries have become known for massproduced, value-for-money exports, so the geographic branding does not necessarily play well. Japan is a notable exception.

Its leading whisky brands have earned tremendous international respect.

In the meantime, some of the big companies

Marussia Beverages launched 135° East Gin in seven international markets, including the UK and the US are taking things into their own hands.

Innovation is an increasingly important driver for growth in both spirits and other consumer goods. Multinational spirits companies have embraced innovation around their core brands. However, the big players have generally proved reluctant to launch their own craft brands as it is difficult to recreate the passion and flair of a startup, the failure rate is high, success often slow and very small brands can be a distraction for an organisation designed for scale. Nonetheless, in the absence of established targets, they have started to get creative themselves.

Diageo has formed a joint venture with a Chinese baijiu distiller to create a Chinese whisky. According to Diageo, Zhong Shi Ji, the resulting collaboration between a Scotch master blender and a baijiu master, has a unique process including maturation in Chinese ceramic pots. Pernod Ricard is constructing a new whisky distillery of its own in China. It has earmarked $150m for investment in the distillery and visitor centre in Sichuan, which is scheduled to start production of a whisky created by a Chinese master distiller next year. Meanwhile, arguably the two most successful Japanese craft gins have been developed by Beam Suntory (Roku) and Asahi (Nikka Coffey).

As the craft movement gathers pace in Asia, we may see more craft brands getting snapped up by multinationals, particularly given the attractive growth in the premium segment in the region, increasing consumer willingness to pay a premium price for domestic brands, and the increasing threat to premium imports from rising trade barriers. ● NOVEMBER 2020

global drinks intel.

35

MARKET INTELLIGENCE/NO/LOW REPORT

MODERATION DRIVES NO/ LOW TREND MAINSTREAM CGA’s research shines the spotlight on the no/lowalcohol alternatives trend, which is becoming established as a fundamental part of any on-premise offering The growing trend for no/low-alcohol drinks provides a continued opportunity for operators and suppliers alike as consumers look to limit, but not abstain, from alcohol in a post-Covid-19 world, research from CGA has revealed. With the macro trend of consumer desire to be productive, healthy and make ethical choices now firmly entrenched (and accelerated) in both on and off-premise decision making, no/low options are set for growth across the globe.

CGA’s 2019 report Understanding Moderation in the On-Trade previously revealed the huge scale of the opportunity for businesses across the out-of-home drinking sector. It showed that one in three (32%) UK adults had tried a no/low-alcohol beer, wine or spirit in the last six months, equating to some 15.5m consumers — with a further 8.9m finding the category appealing, highlighting the scope and size of both the current and future opportunity within the category.

This was further borne out in business leaders’ predictions for the drinks trends that were set to impact the out-of-home market in 2020, back in January. Across the survey of leaders, board members and CEOs from the breadth of the UK onpremise, half picked no/low alternatives as a trend to emerge or continue in 2020, maintaining the category’s position as the most selected trend for the second year running, well ahead of other contenders like craft beer, microdistillery spirits and artisan coffee.

CGA’s data showed that sales of the category increased by 48% in the UK on-premise in 2019, with sales of no/low36

global drinks intel.

NOVEMBER 2020

Launches of no/low-alcohol drinks have boomed in the UK, with Diageo’s alcohol-free Guinness 0.0 stout and Bristol-based Mockingbird Spirit alcoholfree ‘tequila’ two of of the latest to be released alcohol beer, wine and spirits passing the £60m-a-year mark. Fast forward nearly a year and, with the Covid-19 pandemic bringing health precautions to the fore, no/low-alcohol options remain a topic of interest across the globe.

In the US, 83% of consumers have been out for a drink-led occasion in the on-premise without having consumed alcoholic drinks, albeit tap water and soft drinks still lead the way for drinks choices on these occasions, rather than no/low alternatives, which are yet to make the same impact in the American market as they have done in European markets.

Most no/low consumers in UK, US and Australia not teetotal CGA’s research in Australia further highlights the trend, with over half of the population having either already trialled no/low-alcoholic drinks in the onpremise or keen to do so.

In both the US and Australia, as with the British on-premise, consumers who opt for no/low alcohol are not necessarily teetotallers, nor are they skimping on visits to the sector. CGA’s research has revealed that in all markets, those choosing no/low options are a valuable consumer set to attract, typically visiting the sector more often than average and spending more per visit.

In fact, fewer than one in 10 consumers who drink no/low options class themselves as teetotal. CGA’s research

suggests that these are alternative choices for consumers who are either eager to trial the category, are the designated driver or are moderating their alcohol content, but, in all cases, remain engaged with eating and drinking out.

CGA research and insights director Charlie Mitchell suggests that effective targeting is crucial in order to unlock the opportunity provided by the no/low sector. “This consumer, who appreciates high quality and would rather sacrifice alcohol than miss out on a social occasion should be the core target audience for drinks suppliers with no and low options in the portfolio.”

With a raft of new-to-market options having launched over the past two years (103 no/low products were launched in the UK on-premise in 2019), CGA’s research revealed a warning shot to producers looking to latch on to the continuing trend. Just 6% of UK consumers who had trialled a no lowalcohol option rated the quality as five out of five, with 10% scoring it with the lowest one-out-of-five rating.

“Our research shows that while there is a clear appetite for no/low alternatives, much of this is currently being driven by experimental consumers looking to try something new,” says Mitchell. “If, during that first experience of the category, the experience does not meet expectations, there is a danger in losing consumers to the category altogether.” ●

MARKET INTELLIGENCE/AUSTRALIAN ON-PREMISE

GREAT OPPORTUNITIES IN AUSTRALIAN ON-PREMISE Three-quarters of Australian consumers have returned to pubs, bars and restaurants since the country’s Covid-19 nationwide lockdown, new research from leading research consultancy CGA reveals. However, there remain anxieties to overcome in this valuable on-premise market.

Most of Australia’s on-premise opened its doors in May after one of the world’s most successful nationwide lockdowns.

However, security failures at quarantine hotels and poor communication to migrant communities allowed the virus to roar back in Victoria, forcing the state into a strict lockdown at the start of July. Much of the state’s on-premise was forced to close or offer take-away only as a result. Measures were not eased until the end of October.

The shutdown of pubs and restaurants was a bitter pill to swallow in a country where the on-premise is so engrained in the habits of Australians. Nearly twothirds (63%) of LDA Australians visited the sector at least weekly prior to Covid-19, a figure higher than in equivalent markets such as the UK or France. Although coffee shops were the most frequently visited channel in the out-of-home market, 50% of on-premise users ate at restaurants at least weekly and 39% went to pubs.

Despite the tendency of suppliers and producers to target the off-premise, CGA found the on-premise offers opportunities for driving trial and off-premise volume, with seven in 10 consumers experimenting with spirit choices in the on-premise before making off-premise purchases.

In the fast-changing Australian drinking-out landscape, CGA’s Consumer Pulse research found shifts in footfall, spend and consumer attitudes in the wake of Covid-19. Since restrictions lifted, 75% of Australians have visited the on-premise, but more than half (53%) are visiting pubs, bars, restaurants and cafés less often than a year ago, with only 18% going more frequently.

Image: iStock.com/Natsicha

The Australian on-premise will return to 2019 levels of trade in 2021, offering opportunities to operators and suppliers, according to a new CGA study

Sydney Opera House and bar during lockdown at the end of March As a result, average monthly spend has fallen too — from AUD262 ($190) before Covid-19 to AUD235 ($167) now. When asked to predict levels of visit in 2021, there is an even split between consumers who predict they will go out more than 2019, will go out less than 2019 and will go out as often — this indicates that the sector will return to previous levels of trade in 2021.

Understanding new attitudes, occasions and drinks choices The CGA survey uncovers many important trends in the on-premise, including a growing preference for local outlets and Australian drinks brands. It also identifies post-lockdown changes in the demographics of drinkers, including reduced numbers of older consumers, which have led to a drop in the number of people drinking wine.

Changing occasions — including a reduction in after-work socialising, latenight drinking and celebrations from younger adults — have led to a drop in the number of drinkers choosing cocktails.

A third (34%) of cocktail drinkers have chosen the category less often since returning to the on-premise, compared with only 14% who have selected cocktails more frequently.

By contrast, the popularity of beer has been sustained, with more than a quarter

(28%) of beer drinkers choosing it more often than before Covid-19.

The survey also suggests an increasing interest in the value end of the drinks market. ‘Good value’ is now a more important factor in drinks choices for 35% of Australians revisiting the market, making it the top issue of increased importance ahead of ‘Australian’ (32%) and ‘high quality’ (24%). While value does not necessarily mean cheap, this suggests that the pandemic and subsequent pressure on some consumers’ spending has prompted drinkers to think more carefully about what they are getting for their money.

“Australia has a vibrant and resilient on-premise sector, but these figures show how visits and spend have been substantially altered by the pandemic,” says CGA commercial director Graeme Loudon. “As pubs, bars and restaurants adapt to the new normal and try to encourage consumers back, it is more important than ever to understand how people’s eating and drinking-out habits have evolved, and how to meet their fastchanging needs.

“The months ahead will undoubtedly be challenging, but operators and suppliers that can respond nimbly to market dynamics, and tailor their strategies to both those who have and haven’t returned, can be optimistic about succeeding when pandemic pressures ease.” ●

As well as national insights, CGA’s Consumer Pulse research also indicates the latest attitudes in the market in Victoria and metropolitan Melbourne. As the on-premise continues to reopen, CGA is preparing further research to support suppliers as they strategically navigate the ongoing recovery phase.

For more details, e-mail CGA commercial director Graeme Loudon at graeme.loudon@cga.co.uk NOVEMBER 2020

global drinks intel.

37

MARKET INTELLIGENCE/CLOSURES

SUSTAINABILITY STILL TOP CLOSURE CONCERN Despite the negative impact of Covid-19, reducing the environmental impact of closures remains a top priority for producers. Joe Bates reports

A Covid-19-driven slump in wine consumption and the delayed bottling of this year’s harvest are set to make 2020 a tough one for closure producers.

The global closure market could shrink by -10% this year, according to one major industry player, and there are fears that some smaller cork closure manufacturers could fold as cash-strapped winemakers switch from lower-end natural corks to cheaper technical cork closures.

The longer-term closure market Portuguese cork stopper producer Amorim continued production throughout the pandemic trends of recent years remain unaffected, however, with sustainability still a key concern. stopper line prospered despite the crisis, plastic closure producer.

Thanks to digital printing growing 13% over the same time period.

“For some products, technology, winemakers De Jesus argues the pandemic has created such as our 22x30 ROPP can choose from a evera renewed concern for environmental issues. screw caps, mainly used widening selection of He claims sustainability “took a back seat” for small bottles of wine closure designs, finishes and during the global financial crisis of 2008-09, for the airlines, we had a colours. Meanwhile, in the but the issue has now been pushed “front significant decrease. Other field of natural cork, several and centre” by Covid-19. “I like to think products, for example Spirits closures are doing well major improvements in the there’s no going back now and it’s not just spirits closures are for Bulgarian producer Herti ongoing fight against TCA the pandemic,” he says. “At times this year performing quite well.” have been announced this year. it’s felt like the whole planet is screaming Amorim hails carbon study The impact of the pandemic on —look at the fires in California, for Amorim, the Portuguese multinational closure demand has been significant, instance. I think it has led a lot of people and largest cork stopper producer, didn’t but some market subsectors have to stop and think about their habits.” stop production during the Covid-19 fared better than others. “We had a De Jesus believes Amorim will benefit pandemic, reveals Amorim director good start to the year, but since March, from this increased consumer concern marketing and communications Carlos each month is different, going down and around the environment and the growing de Jesus. He notes that Portugal wasn’t up,” says a spokesperson for Herti, the regulatory pressure on wineries and hit too hard by the virus and that Bulgarian multinational aluminium and distillers to reduce their CO2 emissions as all of Amorim’s cork stoppers have a many European wineries — deemed to negative carbon balance, according to an be essential food producers by their independent study conducted by EY and respective governments — relied on released in August.

Amorim to supply them with stoppers The study focused on different throughout the crisis. stages of the stoppers’ life cycle and Nonetheless, the crisis has affected included forestry activities, cork Amorim negatively this year, with preparation, raw material transportation, stopper sales dropping -5.4% to €279.6m production, finishing and packaging. ($331.5m) over the first half of 2020.

It concluded that 80% of Amorim’s Stoppers for sparkling wine (-12%) and stopper range was individually carbon spirits (-7%) suffered the worst, while negative and 100% was carbon negative sales of still wine, down -2%, fared less Amorim director marketing & communications if the carbon capture of the cork oak badly. Conversely, sales of the company’s Carlos de Jesus says sustainability is a key issue forests were considered. ➔ micro-agglomerated Neutrocork 38

global drinks intel.

NOVEMBER 2020

IN

SHAPE ART SHAPE ART

Bespoke aluminium closures

INTRICATE & DIFFERENTIATING

NO VA TI ON

REFINED & ELEGANT

ARTISTIC & TEXTURED

Sustainable solution

Contact your SHAPEART expert at +33 3 85 97 50 50

info.capsules@amcor.com - www.amcor.com

SHAPEART Iconic closures for distinctive brands

The largest range of capsules and closures for Wine, Sparkling Wine

and Spirits.

SOFTGARD Tin

CAPGARD Aluminium

ROLLTOP Polylaminate

STELVIN® The original wine aluminium closure

HOODS Tin Polylaminate

MARKET INTELLIGENCE

Origine by Diam is a sustainable closure offering a wide range of oxygen-transfer rates

Diam Bouchage focuses on oxygen permeability

➔ Bruno de Saizieu, vice-president

sales and marketing, at Diam Bouchage, the French producer of technical cork line Diam, says the price of natural cork, which had risen steeply over the past two years, has fallen as a result of the pandemic. He says Diam will aim to maintain existing closure prices as much as possible as the company wasn’t able to pass on the large increase in cork costs to customers without losing business.

De Saizieu believes times of crisis often speed corporate decision making and to that extent, Covid-19 has worked in Diam’s favour, with top-end winemakers opting to switch from natural cork to Diam’s technical cork closures. Diam has also done well with entry-level wine during the pandemic lockdown, but de Saizieu reveals its closures designed for medium-priced wine between $5 and $10 have suffered.

In March 2017, Diam Bouchage unveiled a more sustainable version of its Diam closure called Origine by Diam.

It comprises a beeswax emulsion and a binder composed of 100% vegetable polyols. Annual sales of Origine now run into tens of millions, according to de Saizieu, who says customers are drawn to the closure both for its eco credentials and the wide range of oxygen-transfer rates it offers winemakers.

De Saizieu believes that while winemakers will continue to insist on TCA-free closures, it will be the ability for winemakers to control oxygen transfer rates that will be the bigger issue over the next decade. “We have different permeability in the Diam family with Diam 3, 5, 10 and 30, but why not 2?” he says. “We have to work to have more permeability. Each one is different and the winemaker has to play with different permeabilities to find the right one for his wines.”

40

global drinks intel.

NOVEMBER 2020

Tapì talks trends The Covid-19 pandemic has changed which features are seen as key in terms of drinks closures, according to Italian multinational closure company Tapì.

Tapì export manager Paolo Boratto says consumers are currently paying the most attention to three features — hygiene, safety and virtuality.

“To respond to this, Tapì has recently launched a new technology, NFC, and applied it to our closures,” he says.

“Users can access dynamic multimedia content to find out more information about our products.”

However, Boratto says the focus on sustainability continues to be strong. “For this reason we are constantly aiming for ever more efficient production in terms of energy, being environmentally friendly and continuing to research sustainable materials,” he explains.

“Continuing to follow the sustainability trend, we are designing new closures in this area. For example, Abor, T-Cask and Devin have production processes that allow us to create a number of closure lines by using distillation waste — from casks and grape pomace — that would otherwise have gone to landfill.”

In contrast, other new Tapì products

ShapeArt: closures at the heart of the design process Amcor’s latest recyclable aluminium closure line ShapeArt is a good example of the growing movement towards bespoke closures. The new range allows customers to customise a wide range of different looks, shapes and designs with the help of Amcor’s in-house team of designers and engineers. “Besides

Amcor’s ShapeArt closures are customisable

Tapì’s Mekano closure is reusable are making it easier for end consumers to recycle and reuse closures. “Duo is a closure dedicated to the spirits and cosmetics markets,” says Boratto. “It can be completely separated, making it easy for the end consumer to recycle.

“Lastly, we have to mention Mekano — a unique design that’s been developed into the first locking-bar top.

It has a strong aesthetic impact and it’s extremely innovative. Reusable, entirely customisable and safe — Mekano was created to give an authentic identity to products in the spirits, wine, soft drinks and beer markets.”

shapes and textures, ShapeArt also comes with different printing options such as glossy, matte, metallic and so on,” says a company spokesperson. “Premiumisation covers the shape, the texture, but also the colour or even the material.

“Usually, the closure is considered as the last element to change as most brands do not imagine the creative possibilities that a closure can offer,” the spokesperson adds. “ShapeArt is there to challenge this idea.”

Amcor is keen to stress the eco credentials of the new ShapeArt line.

“In packaging, sustainability is the new black,” says the spokesperson. “Indeed, it has become an integral part of our product development. Customers are more and more aware of this aspect when selecting their packaging and therefore our development teams are taking this ‘eco-design’ component into account as part of their conception.

“Amcor’s commitment is to have all products to be recyclable or reusable by 2025 (Amcor’s 2025 Pledge). We also committed to use significantly more recycled materials and to help drive greater packaging recycling.” ➔

MARKET INTELLIGENCE/CLOSURES

MASILVA wages war on TCA

➔ MASILVA, one of Portugal’s leading

cork closure suppliers, prides itself on a commitment to research and development to improve the quality and performance of its closures, especially with regards to the fight against TCA and other phenols. The company’s Sara Advanced cork cleaning system has now been up and running for two years and has been an integral part of the production cycle of all the company’s natural cork closures since the beginning of 2018. MASILVA CEO José Silva says he is delighted by its performance in being able to reduce off-flavours and off-aromas by 99.66% without damaging the natural structure of the cork, which he says is essential for a snug fit inside the bottle.

The award-winning system is employed at the post-punching stage of the cork closure production line and uses dry steam,

temperature and pressure in a controlled way to dramatically reduce not only TCA, but other phenols which can negatively alter a wine’s flavour profile. Silva says: “We had several quality controls done, mechanical and chemical, to ensure the excellence of its performance. We even had an international expert in the world of aromas, Alexandre Schmitt, to apply his considerable skills in a blind sensory analysis comparing natural corks processed with Sara Advanced technology to those without, verifying the neutrality of the process.”

Silva is at pains to point out Sara Advanced is just one of several processes used in the company’s bark-to-bottle production process. The Dynavox system sterilises every plank of the 15,000 tons of cork the company uses each year; the Mazone system sterilises all 600m corks MASILVA produces after they have been through the Sara Advanced process.

Guala joins virus relief effort Italian multinational Guala Closures Group took a proactive approach with its response to the coronavirus pandemic.

In addition to taking rigorous action to protect its own employees, Guala used its in-house know-how to produce muchneeded personal protective equipment (PPE). Group marketing director Violette Montagnese reveals the company’s research and development (R&D) centre in Luxembourg started to make face shields for local health bodies using 3D printers to meet the growing demand.

“Requests started to come from all over Europe, therefore we created a mould for injection, which allowed us to increase our production capacity to up to 6,000 face shields per day,” she reveals. Montagnese says that demand for PPE from private businesses encouraged Guala to start selling face shields, using the profits to donate to charities and hospitals battling the virus. Guala Closures’ subsidiaries around the world also donated thousands of the masks to hospitals in their local areas.

A commitment to reducing its environmental impact remains a top priority for Guala despite the challenges of the past few months. Last year, the group announced it would aim to use 35% recycled materials by 2025, extending its 42

global drinks intel.

NOVEMBER 2020

A key worker in Guala-produced PPE existing range of sustainable closures.

Montagnese says: “As a concrete result of this corporate social responsibility commitment, Guala Closures Group recently developed eco-design guidelines for its R&D centres in Italy, Mexico, the UK, Ukraine and Luxembourg.”

Guala was an early pioneer of smart closures, which allow brands to directly communicate with consumers via NFC technology or QR codes and assist their efforts in important back-office areas such as supply chain management, theft prevention and stock management. In February, the company intensified its interests in this area, announcing a strategic partnership with London-based internet of things agency SharpEnd to scale up its offer of connected packaging solutions.

“But our quality assurance to our customers does not end here,” adds Silva.

“For customers that still want an order to be checked individually, we have available an additional cutting-edge technology that inspects every single cork for TCA detection to levels as low as 0.5ppt/L (parts per trillion), the OnebyOne system. This is the same as finding a drop of water in 800 Olympic swimming pools. This system uses gas phase spectroscopy, a technology that is used intensively in airports for bomb detection, in the pharmaceutical industry for several applications, and others.”

Cork Supply unveils InnoCork Circuit to fight TCA Another major cork closure player, Cork Supply Portugal, has also announced a new anti-TCA measure in the shape: the InnoCork Circuit process. The first part of the two-step process sees the corks heated to 85°C in a 24-hour cycle during which steam distillation removes TCA and other off-aromas. In the second step, corks are heated to 65°C degrees using steam and an ethanol distillate, thereby removing any residual particles. After the process is complete, the corks are guaranteed to be 99.85% free of TCA and other off-aromas.

“The InnoCork Circuit is a novelty in the market because it is a combination of two technologies, one of which is a Cork Supply patented technology, that are both fully integrated in our production process,” explains Cork Supply global brand manager Monika Michalski. “As they are both fully integrated in our production process, all our natural corks will undergo this two-stage extraction process and have no additional cost added on top.

“Some other companies are working on different solutions, but the InnoCork Circuit is unparalleled due to our forest-to-bottle philosophy and every euro invested in our quality control. No other company in the industry is investing as much in quality control per cork as Cork Supply is.”

In summary, the Covid-19 crisis has driven the issue of sustainability even further up the agenda for closure suppliers, but it has also forced producers to adopt new digital ways of marketing and communicating with customers given that face-to-face meetings and drinks fairs have been cancelled this year. These changes have proved a major challenge and closure suppliers are pinning their hopes on a swift market recovery in 2021. ●

Advertise now! Don’t miss our

BUMPER DECEMBER & JANUARY ISSUE global drinks intel. publishes 10 issues a year to more than 10,000 readers in 80-plus countries, with bonus distribution at key trade shows. When you advertise with us, you place your brand in front of the world’s leading distributors, agents and buyers who have purchasing power influence in their specific markets. If you are looking to increase market presence, new distribution channels and brand awareness in the global drinks arena, then global drinks intel. is your vehicle to success.

the nce for intellige Market

inks global dr

2020 ve. Jan executi

intel.

intel.

global drinks

THE STING FORECA RE OF THE FUTU DUSTRY IN DRINKS TE M WHI PREMIUOVERVIEW SPIRITS

Market intelligenc e for

W HAIN NO BLOCKCITY FOR THE A REAL INDUSTRY DRINKS ESSURE DER PR DE WINE UNE UK ON-TRA IN TH

the global drink s executive. Oct

2019

rinks global d

EUROPE LEAD THE ‘GINAISSANC S THE WAY AS E’ CONTINUES UPSCALE CLUB SALES OF VOD SCENE DRIVES KA IN EUROPE BETTER DRIN t 2020 DRIVES PREMIU KING TREND July/Augus executive.

MISATION IN bal drinks BROWN SPIRITS CATEGORYt intelligence for the glo Marke INNOVA MIXOLOGY IN TION AND LIQUEURS

DF&TR DRINK RETAILERS S TFWA Cannes Special Edition oducts ohol pr trend c l a o Low/n moderation e surf th

IN-DEPTH TMALL ♦ DUB PROFILES AI DUTY FREE DUFRY ♦ BEAM SUNTORY PERNOD RICA ♦ LAGARDERE RD

OT: ISE REBOTCH ON-PREM DS TO WA 10 TREN BUT STABLE, HIT KE US WINE TA S EXPORTER

Market intelligenc e for

the global drink s executive. May

2020

rgest-Grow in La

AUSTRALIA & THE US WINE CONSUM PTION DURING LOCKDO WN BRAND BUILDIN G IN THE MIDDLE OF A GLOBAL CRISIS HOW WILL M& A BE IMPACTED COVID-19 PAN BY THE DEMIC?

Drinks indust ry adjusts to th e

020 MMER 2 S FOR SU S TREND K IN R D T HOTTES

TRA ARE ARRIVAL VEL-RETAIL FEATURES VODKA ♦ COG S STORES A MODEL FOR THE NAC FUT WHAT CONSUM ♦ CHAMPAGNE & SPARKLI URE? NG WINE ERS REALLY THIN BIG VS SMALL BRANDS ♦ THE K OF DUTY FREE CASE FOR WIN E OCTOBER 2019

intel. global drinks

A ED VODKCK FLAVOUR COMEBA MAKES A

sB pirit rands gS

TOP 10

sive IWS clu R’s Ex

. l e t n i drinks global

global drinks

intel.

01

NEW NORMA L

DEC/JAN FEATURES INCLUDE: CREAM LIQUEURS • FESTIVE COCKTAILS • ARMAGNAC BITTERS • HOT TRENDS TO WATCH IN 2021 • INTERVIEWS AND INSIGHTS FROM LO & NO BEVERAGE SUMMIT • MY STORY: ELWYN GLADSTONE • WINE INTELLIGENCE INSIGHTS SHERRY • CHINESE WINE MARKET • UK ON-PREMISE

subscribe

advertise

get coverage

Kate Wake-Walker kate@drinks-intel.com +44 (0) 7798 600 407

Hannah Sinclair & Rina Maiden hannah@drinks-intel.com rina@drinks-intel.com

Alexander Smith alec@drinks-intel.com +44 (0) 7769 216 386

A ‘one-stop shop’ for the global drinks executive

WINE FOCUS/TRAVEL-RETAIL TRENDS

BRANDS HOPE FOR NEW DF&TR BUSINESS MODEL Suppliers hope the Covid-19 crisis will lead to more flexible and mutually beneficial relationships with duty-free retailers. By Richard Woodard If wine has a sometimes uneasy relationship with travel retail (TR), the current crisis is doing little to improve matters. Nonetheless, there are a host of companies out there for whom the channel is more than just a tempting promotional vehicle to showcase their wares to a captive audience of travellers.

“Travel retail represents more than 10% of our turnover, so it is more than just a ‘shop window’, even if this shop window remains a very important one,” says Philippe Marion, sales and marketing director at Bordeaux-based Barton & Guestier. “Working with the top international operators — like Dufry, Heinemann, Lagardère TR, Lotte and DFS — we are present worldwide.”

Italy’s Masi Agricola also sources about 10% of revenue from travel retail — the result of 20 years of prioritising it as a strategic channel for the company. “Masi works with most of the relevant global travel-retail operators, as well as with many local airports, cruise and ferry lines, and airlines,” says Pier Giuseppe Torresani, export and travel-retail sales director.

“In terms of sales, there are specific situations where some local conditions, i.e. price advantages, encourage travellers to buy large quantities. The best example is the TR business in the Nordics area.”

Masi’s Brolo di Campofiorin 2008 was selected for Viking Line by Master of Wine Tuomas Meriluoto For such suppliers, travel retail is too significant a channel to be abandoned during the Covid-19 pandemic; instead, they hope that resilience and adapting to the new situation will help them make the most of the long-awaited resurgence when it comes.

“The duty-free and travel-retail channel (DF&TR) is highly resilient, and travellers will return when borders reopen and when they feel safe, as seen in some markets,” says Simon Carter, general manager of global travel retail at Treasury Wine Estates (TWE), owner of brands including Penfolds, Wolf Blass and Beaulieu Vineyard (BV). “Our activation plans are flexible and adaptable, and we will continue to execute our priority luxury brands strongly to bring travellers into the wine category.”

‘Committed’ to DF&TR

Baron Philippe de Rothschild has revamped its Réserve Mouton Cadet range 44

global drinks intel.

NOVEMBER 2020

This is a view echoed by Véronique Hombroekx, MD of branded wines at Baron Philippe de Rothschild, who pledges that GTR “is and will continue to be” an important channel for the company.

“The market is flat right now because of the global pandemic, and that situation is likely to last for another few months,” she adds. “The market will pick up again when travellers’ confidence returns. Although the crisis means we have to be patient, we remain confident, committed and energetic.”

That means initiatives such as a new line-up for Escudo Rojo from Chile, including Escudo Rojo Origine and a revamped Réserve Mouton Cadet range, says Hombroekx. “The new labels feature a QR code which gives easy access to a web page for the chosen appellation, taking the user straight into the heart of the appellation and providing clear information about the wine, including wine and food pairings.”

Meanwhile, Barton & Guestier has followed the launch in late 2019 of its B&G Travel Retail Exclusive range — featuring five appellations — with the unveiling this year of a luxury gift pack for Thomas Barton Private Reserve.

And, at the end of 2019, Masi released a special vintage of one of its most illustrious wines, Brolo di Campofiorin 2008, selected by Master of Wine Tuomas Meriluoto MW for Viking Line.

There seems to be no let-up at TWE either. Apart from the various activities centred on the company’s Penfolds brand over the past year or so (see box next page), Carter highlights the partnership launched in July with China Duty Free Group (CDFG) to bring a permanent presence for its Penfolds, Wolf Blass, BV and Maison de Grand Esprit brands at the CDF Duty Free Mall in Sanya, Hainan Island, China.

“This launch coincided with the ➔

➔ commencement of an expanded

and APAC traveller insights to fine-tune onshore duty-free policy that permits its long-term strategy for the channel, travellers to purchase RMB100,000 says Carter. “This includes optimising ($14,600) of duty-free goods annually that our presence within customers’ digital now includes wine,” Carter adds. platforms and extending reach and “In addition, we’re working closely consumer engagement to take advantage with Lotte Duty Free at Singapore of the growth in e-commerce in recent Changi on the permanent showcase times,” he explains. “Across many of our premium and luxury portfolio markets, we’ve collaborated to maximise to take DF&TR at Changi to the next availability of TWE brands in airport level. Strong visibility of the luxury TWE ‘click-and-collect’ programmes, including portfolio drives wine category growth and duty-free and duty-paid products, and brings more travellers in the also upweighted emphasis category, which is incredibly on downtown duty free, in important in this high-profile addition to onshore tax-free international location.” initiatives, in China.”

Such ventures also illustrate There is hope that the huge the value of close relationships changes of the past several with retailers in a channel that months may, in time, help create is notoriously demanding in a new, more flexible and mutually terms of margin and expense. beneficial relationship between “Travellers are often looking wine suppliers and duty-free Baron Philippe de Rothschild retailers. “With Covid-19, even for good bargains,” says MD of branded wines Masi’s Torresani. “Retailers if many airport shops reopened, Véronique Hombroekx are demanding high margins tastings will be impossible in and/or high promotional the coming months,” points investments. We cannot avoid it, but out Barton & Guestier’s Marion. “We are we can decide — as we did a long time working on other ways to propose original ago — to work directly with travel-retail experiences to our consumers. operators, avoiding the cost of the “We expect that, post-Covid, landlords distributors and agents that are normal in and operators will be able to negotiate the domestic business. a better sharing balance of the revenue “Partnership with retailers is the key because brands, especially in the wine to be successful in this business. They business, cannot sustain the investments need us as we are a renowned brand; requested and the expected retail we need them as they connect us with margins for long.” clients. Together we can create specific That view is shared by Hombroekx at strategies that reinforce our brands and Baron Philippe de Rothschild. “Suppliers, our common business.” operators and airports — the three pillars At Barton & Guestier, Marion agrees. of the channel — have to work together “Strong relationships are key,” he says. and cooperate much more fluidly,” she “It is very important to know we can argues. “Sharing more information with count on each other, not only in the good suppliers would enable them to adjust their times, but also when times get tougher supply and help them to meet customers’ like right now. It is key to work with expectations as effectively as possible. people who understand the category, “As a supplier, Baron Philippe de that can understand the innovation Rothschild should be helping to grow the we bring to them, and also appreciate category through its activations on the that wine is a different beast, with ground. Agility and responsiveness are vintages, volume issue and a much more essential in a crisis: we need to create a fragmented market.” virtuous circle and show adaptability.”

During the current crisis, the quality There are difficult months ahead for and efficiency of the supplier-retailer all strands of the travel-retail beverage relationship has arguably never been sector, but wine suppliers, in particular, more important. As well as exclusive hope that the current crisis could yet products and packaging, travel retail now be the launchpad for a new — and more requires suppliers to work in a new way. profitable — business model for the TWE has researched the latest global duty-free channel. ●

Penfolds g4 is the second release in a trilogy

Penfolds sets its sights on luxury Treasury Wine Estates has been steadily driving its marquee Penfolds brand into the luxury space — and those efforts are continuing, despite the obvious limitations of the Covid-19 pandemic.

Following on from the world’s largest public display of Penfolds Grange 2014 at Sydney Airport during 2019’s Chinese New Year celebrations, and the unveiling of a 2012 vintage Champagne produced in association with Champagne Thiénot, this year’s programme of activities and launches has had to adapt to the fast-changing global crisis.

In August, the global release of the Penfolds Collection 2020 included virtual masterclasses for key customers, enabling them to start selling the wines as soon as retail locations were ready to reopen.

Among the new releases was Penfolds g4, a AUD3,500 ($4,805) blend of four Grange vintages: 2008, 2012, 2014 and 2016, and limited to 2,500 bottles. “g4 is the second release in a trilogy, and we’re working closely with our travel-retail partners to showcase this exclusive luxury wine in key airport locations around the world, such as Beijing Capital, Hong Kong International, Shanghai Pudong and Sydney International, where Penfolds has strong permanent brand visibility and presence, subject to airport reopenings,” says Treasury Wine Estates general manager GTR Simon Carter.

The release follows on from Penfolds g3, a AUD3,000 ($4,118) blend of the 2008, 2012 and 2014 Penfolds vintages, launched in 2017.

The final part of the trilogy, Penfolds g5, is due to follow in 2021.

NOVEMBER 2020

global drinks intel.

45

WINE FOCUS/CHAMPAGNE & SPARKLING IN TRAVEL RETAIL

SPARKLING WINEMAKERS LOOK TO THE NEW NORMAL Champagne and sparkling wine producers are embracing the shift in opportunities brought by the Covid-19 crisis.

Richard Woodard reports These are difficult times for selling celebratory drinks in the extremely hardhit world of travel retail, but producers are taking comfort in a slow increase in business during the northern hemisphere summer — and long-term global trends for sparkling wine consumption that remain very encouraging indeed.

“Sales have been heavily impacted in global travel retail (GTR) and it is very difficult to predict the next few months as Covid-19 is far from going away — indeed, every day we see reports of new waves and spikes within Europe,” says Champagne Lanson head of travel retail Edouard de Boissieu. “Nevertheless, we still believe in the future of the industry and our category within it.”

In a similar vein, Warren Goslett, GTR director at Austrian sparkling specialist Schlumberger, believes there is still “a way to go” before any real rebound in the demand for flying and international travel.

“As we are seeing, the pandemic seems to be accelerating instead of decelerating and, until travellers feel absolutely safe, they just won’t fly,” he says.

In Europe, the past few months have brought some respite from the almost complete shutdown of travel-retail sales during the spring. “Since travel started again during the summer period, we are happy to finally observe an increase of sales, and we have the strong hope that this increase continues over the upcoming

Schlumberger was relaunched this year 46

global drinks intel.

NOVEMBER 2020

Perlino Prosecco, Henkell Cuvée Unique, Bottega Accademia Prosecco Rainbow Collection and Freixenet Prosecco months gradually,” says Sandra Janetzki, senior vice-president of sparkling wine powerhouse Henkell Freixenet Global.

The crisis has brought a shift in the business opportunities available to producers. Bottega president Sandro Bottega believes a return to old travel-retail habits will take “longer than we expected — until the vaccine is ready. Nobody can predict the timing,” he says. “Opportunities will focus on traditional modes of travel such as trains and highways.”

Focus on ‘must-haves’

Janetzki also notes a change in shopping behaviour among consumers, with a stronger focus on “must-have items” for gifting, and a desire to spend less time in duty-free stores. “Well-known international brands might benefit from this behaviour, and should investigate digital solutions to approach the consumer at the point of sale,” she says. “Henkell Freixenet has been in discussions with its partners to adapt the strategies for the next months to the ‘new normal’.”

Such shifts bring challenges and opportunities too. De Boissieu notes an “interesting evolution” in certain regions and channels. “We have seen some growth with Scandinavian cruise lines due to the willingness of Scandinavian people to travel within the region, instead of destinations further afield,” he adds. “Asia is likely to be the first region to recover and we are already seeing that within China — you only have to look at the sales in Hainan to know

that the Chinese still want to spend.”

Ah yes, Asia. The region represents a great, relatively under-exploited opportunity for Champagne and sparkling wine — it has “a high potential as sparkling wine culture is still at its beginning”, as Janetzki puts it.

From Reims to Penedès to the Veneto, Champagne and sparkling wine businesses hope that the rebound from the pandemic will also act as a launchpad for their products in the region.

“Asia is still a relatively untapped market for Champagne, but sales have been increasing — 2018 was a record year (as was 2019), particularly in Japan, but with China, Hong Kong and Taiwan showing major increases in demand,” says de Boissieu.

“Obviously, everything came to a halt this year, but now that we see some movement, the market should recover. China is a very interesting market for us and we are now approaching it locally with the assistance of a brand developer based in Hong Kong.”

Champagne and sparkling wine producers are united in targeting the Asian opportunity, but it’s all about nonChampagne fizz playing catch-up in other parts of the world, such as Europe and the Americas. Historically, Champagne has been pre-eminent here in travel retail, but that’s been changing in recent years.

“While travel had been a luxury activity in the past, it has become accessible for everybody,” says Janetzki, referring to the boom in budget airlines such as Ryanair and EasyJet. “This led to not only a ➔

15-17 FEB. 2021 PARIS EXPO PORTE DE VERSAILLES

WE ARE the wine & spirits bu si ness even t

I N PA R I S

DRINK RESPONSIBLY

wineparis-vinexpo.com | #wineparis | #vinexpoparis | Trade-only exhibition

WINE FOCUS/CHAMPAGNE & SPARKLING IN TRAVEL RETAIL

Top 10 GTR Markets: Sparkling Wine (Incl. Champagne)

Country 1 US/Canada 2 Nordics (All Countries) 3 Germany 4 British Isles (Incl. Ireland) 5 Gulf (All Countries) 6 France 7 Italy 8 Singapore 9 Australia 10 Russia Rest of World Global Total

Volume Volume % Market % Chg Vol 2018 2019 Share 2019 2018-’19 200.0 217.0 14.0 8.4 203.0 200.0 13.0 -1.2 180.0 170.0 11.0 -5.6 150.0 137.0 8.9 -8.8 117.0 105.0 6.8 -10.5 99.0 98.0 6.4 -1.0 56.0 58.0 3.7 2.7 48.0 49.0 3.2 2.6 46.0 45.0 2.9 -2.7 36.0 36.0 2.3 -0.7 469.0 429.0 27.8 -8.5 1,602.0 1,542.0 100.0 -3.8

‘000s of nine-litre cases

Source: IWSR Drinks Market Analysis

➔ changed customer structure, but also a new portfolio offer at GTR shops, as customers were increasingly looking for products that deliver good value for money.”

Sparkling wine producers certainly show a spirit of innovation and playfulness when approaching the channel, from Henkell’s five-pack of Henkell Trocken Piccolos (which hit the travel retail-friendly 1L mark) to Schlumberger’s 20cl ‘Baby Bottle’ format that has been a long-term success.

Bottega’s vibrantly coloured Accademia Prosecco Rainbow Collection takes its inspiration from the festive atmosphere of the Venice Carnival. “With the different combinations, we can celebrate Halloween and other events,” says Bottega. “We can also reproduce the flags of different countries.”

Since the arrival of the pandemic, Bottega has also launched the collection in a unique display unit for Italian motorways.

Sparkling wine can offer a more positive image to retailers and consumers than its pure price-fighting capabilities. Goslett highlights the fact that Schlumberger, like Champagne producers, uses the méthode traditionelle means of production — and was even officially classified as a Champagne house until the Treaty of Versailles in 1919. Founder Robert Alwin Schlumberger was cellar master at Ruinart before founding Schlumberger in 1842.

For Elena Branda, who works in Perlino’s marketing office, travel retail represents an “interesting opportunity” as sparkling wine from Italy elevates its global profile. “‘Made in Italy’ is recognised all over the world, and the Italian bubble is gaining ground even where before it was a little bit shadowy,” she says.

“We see the GTR channel as a really interesting opportunity for Perlino, but we 48

global drinks intel.

NOVEMBER 2020

are still exploring it in depth. We already supply to cruise lines and ferries, but still have no presence in airport travel-retail shops.” Channel-exclusive products, including prosecco, newly ratified variant prosecco rosé and another well-known Italian product, a Limoncello di Sorrento IGP, are Perlino’s weapons of choice.

The green light for rosé production for prosecco, given earlier this year, offers the successful Italian sparkler a new segment to explore in travel retail. As well as Perlino, Henkell Freixenet is planning to launch a new Prosecco Rosé DOC Millesimato under its Mionetto brand.

“As soon as the harvest has finished in October, production is ready to start and we will introduce the product in the first quarter of 2021,” says Janetzki.

Such innovations, and revamps such as that of the Lanson range (see box) and the Schlumberger brand, are aimed at keeping Champagne and sparkling wine in the travel-retail spotlight as the world, bit by bit, returns to some semblance of normality.

“Sparkling wine consumption is getting more casual, and people like to celebrate the small moments and successes in life in a similar way as the big ones,” says Janetzki, clearly hopeful that this democratising trend in sparkling wine will pick up again as soon as the crisis passes.

Bottega agrees, putting his faith in the region that is the historic core of sparkling wine consumption. “Europe is where these wines have been successful for ever, and where consumption is more consolidated,” he points out. “When the pandemic ends, those countries that have been more affected will celebrate more than any other.”

For wine producers the world over, that moment can’t come soon enough. ●

The reinvention of Champagne Lanson Lanson’s renewed focus on travel retail is being given an extra boost with the wholesale revamp of its range during 2020, when the Champagne house celebrates its 260th anniversary.

The relaunch includes new packaging and gift packs for the current range, as well as the introduction of two new cuvées: Le Black Réserve and Le Blanc de Blancs — products that are exclusive to travel retail, specialist wine retailers and the on-premise.

The two new products have their roots in the arrival of Lanson winemaker Hervé Dantan in 2013 and a new approach centred on gastronomy. Le Black Réserve includes more reserve wines in its blend than for flagship product Le Black Label, mostly aged in cask to produce fuller, more mature wines.

Meanwhile, Le Blanc de Blancs aims to raise the profile of chardonnay in the Lanson range, using, says Dantan, “our finest chardonnays from the most inspiring terroirs and our favourite crus”.

“Covid-19 has impacted hugely on all of us and travel retail is facing a volume drop that could not be avoided,” says Champagne Lanson head of travel retail Edouard de Boissieu. “However, travel retail remains a priority channel for Lanson; we have not diverted from our ambition to grow our footprint in this business and believe our new redefined range will help us to achieve that goal.

“For Lanson, GTR offers us an image-building channel where the brand still has great development potential in the mid to long term.”

WINE FOCUS/ULTRA-PREMIUM CHAMPAGNE

PANDEMIC FUELS SHIFT TO DIGITAL Ultra-premium producers were faced with tough calls when global Champagne sales slumped by -30%, reports Richard Woodard

At the end of 2019, when the word ‘coronavirus’ was a relatively obscure term used mainly by medics and epidemiologists, some clear trends were prevalent in Champagne: volumes dropping as sales of cheaper Champagne fell, especially in France; value increasing as global demand for high-end cuvées continued to rise.

It’s stating the obvious to say that everything changed when Covid-19 swept around the world, but even with the huge impact on sales over the past six months and counting, the underlying pursuit of value over volume remains for the Champenois. Restaurants and bars may have closed their doors and, when open, seen bookings plummet, but there is still demand for expensive Champagne.

By the end of August, global Champagne shipments had slumped by almost -30% compared with last year, reports Champagne Lanson marketing and communication director Guillaume Truchot. Lanson’s strong retail distribution partly protected it from this dynamic, but some tough decisions had to be made.

“Obviously, when we realised that the impact of Covid-19 on sales was going

New kid on the block Champagne Carbon says online sales will be key in the coming months and years to last for months rather than weeks, we decided to reduce and adjust our market investments, based on the local situation country by country,” Truchot says.

“In many cases, it was forced upon us, with events being cancelled — at least in any physical attending sense like the Wimbledon tennis championships — or the shutting down of all hospitality meaning that any investment in this area would be a total waste of time.

“There is no point investing if consumers cannot see the brand. It was all about protecting the bottom line without pulling out of markets altogether.”

Champagne Carbon is a new player on this long-established scene, with a luxury positioning and a hand-crafted image, underscored by its use of carbon fibre bottles. “Carbon is not like DP [Dom Pérignon] or Krug,” points out export manager Jean-Baptiste Prevost. “We haven’t existed for decades or centuries. For a brand like us, it’s the beginning of our history.”

Carbon grabbed some early headlines with its sponsorship of Formula 1 but,

Top 10 Global Champagne Markets

Volume Volume % Market % Chg Vol Country 2018 2019 Share 2019 2018-’19 1 France 12,254.0 11,801.0 48.4 -452.0 2 United Kingdom 2,043.0 1,995.0 8.2 -48.0 3 United States 1,805.0 1,859.0 7.6 54.0 4 Japan 1,050.0 1,105.0 4.5 55.0 5 Germany 814.0 782.0 3.2 -32.0 6 Duty Free 816.0 776.0 3.2 -40.0 7 Belgium and Luxembourg 795.0 768.0 3.2 -28.0 8 Italy 724.0 690.0 2.8 -34.0 9 Australia 695.0 670.0 2.8 -25.0 10 Switzerland 499.0 469.0 1.9 -31.0 Rest of World 3,381.0 3,443.0 14.1 63.0

Global Total 24,875.0 24,358.0 100.0 -516.0 ‘000s of nine-litre cases

Source: IWSR Drinks Market Analysis

as the sport struggled to return in the face of the pandemic in March this year, the company terminated the deal. “We are developing our brand image and awareness, and it has to be with positive things,” says Prevost. “A podium with no public and drivers wearing masks doesn’t look very positive to us.”

If it’s been a time of tough decisions for Champagne houses, it’s also been one of displaying resilience and finding new ways to operate. Carbon, for instance, has made a virtue of its relatively small stature. “We can adjust very quickly,” points out Prevost. “We are selling more in e-commerce. Online sales will definitely be the key in the next months and years.”

This shift into digital — and from onpremise into retail — is a familiar refrain in the region. “People are still engaging with Champagne, [but] maybe in a different way,” says Taittinger MD Clovis Taittinger. “More in-home, or where they can safely celebrate in a small way, or simply gifting or saying thank you to someone special.” This has been key to the success of Taittinger’s prestige cuvée, Comtes de Champagne, a “hidden gem” that has gained a lot of recognition in recent years, says Taittinger.

“Developing our presence with retailers has been essential,” adds Gosset export director Bertrand Verduzier.

“E-commerce is growing, of course. It has only accelerated in the last few months, but the trend was there before.”

At Henkell Freixenet, owner of Alfred Gratien Champagne, online offers and digital activities support the launch of the house’s new Collection Memory series of library releases (see box next page).

Freixenet Gratien (France) CEO Olivier Dupré acknowledges a double-digit drop ➔ NOVEMBER 2020

global drinks intel.

49

WINE FOCUS

➔ in shipments compared to 2019 thanks

to the huge impact on the on-premise and travel retail, but highlights the “great success” of Gratien’s 2012 vintage, released to long-term UK partner The Wine Society as an en primeur special offer.

Sometimes the breadth of a company’s brands can provide a buffer against the worst effects of a downturn. At VrankenPommery Monopole, for instance, prestige products such as Cuvée Louise Pommery, Apanage Blanc de Blancs and Clos Pompadour are hugely reliant on gastronomy and travel retail — but the group’s strong portfolio of brands across price points and geographies (Provence, Camargue, Portugal) helps to soften the impact of the pandemic, reports senior international sales director Myriam Renard.

The company has also persisted with supporting the beleaguered on-premise, sponsoring the high-profile Bocuse d’Or competition, including its European finals in Tallinn in mid-October.

Fresh thinking has permeated the industry from the smallest boutique operators to the biggest player of them all, Moët Hennessy, with its strong stable of high-end brands. “Early in the pandemic, Moët Hennessy looked to reallocate resources to areas of our business that were seeing increased demand — particularly e-retail and convenience — and focused on new consumers, occasions, routes-to-market and availability,” says Moët Hennessy UK MD Alexei Rosin.

“We also started updating our longer-term strategy and thinking about how people will shop in the medium and long term. People previously hesitant about online shopping have overcome their barriers and will continue to purchase online due to safety or convenience reasons. The pandemic has given us the opportunity to go back to the drawing board and think about how and why the consumer chooses our products, and how we can best serve their evolving needs.”

This idea of the pandemic giving companies room to breathe and think is another common thread during the crisis, creating a shift in the tone of communication. “Today, we take more time to talk to our customers about the vineyards,

50

global drinks intel.

NOVEMBER 2020

New product development picks up speed Ultra-premium Champagne launches are a fixture of the luxury lifestyle calendar, traditionally dependent on high-profile launches and dinners at select venues.

With such physical events prohibited by the pandemic, many launches were postponed — with some companies also fearing that any sign of celebration was out of tune with a crisis that has cost so many lives.

But, as the crisis persisted, new product development (NPD) activity started to ratchet up in the second half of the year, supported by virtual tastings and masterclasses as the Champenois transitioned into a new digital-focused marketing strategy. Here are a few of the recent luxury launches: ■ Louis Roederer Cristal Vinothèque 1999: In both white and rosé variants, this is the third vintage of Cristal’s library releases, which began three years ago. The wines spend at least 20 years in Roederer’s cellars before release.

■ Taittinger Comtes de Champagne Blanc de Blancs 2008: Postponed from March to October, the Taittinger prestige cuvée’s latest vintage had a limited digital campaign. “To be honest, we did not want to overdo this,” says Taittinger MD Clovis Taittinger. “We will come back very social and human when time will allow.”

■ Gosset Brut 12 Ans de Cave a Minima: A multi-vintage blend aged on the lees for at least 12 years, with no malolactic fermentation. Released in January 2020,

the harvests, our daily commitment to the protection of the environment, our cuvées,” says Renard. “We are not promoting; we are talking to our community — that’s a lot different.”

Underpinning everything is the central belief in the bright future of Champagne’s upper price echelons. “The mediumterm outlook will depend very much on a number of factors — further lockdown measures, unemployment, recession and, of course, the added impact of Brexit [on the UK],” says Alex Tilling, Louis Roederer brand manager at UK importer

Expérience Pommery #15, Taittinger Comtes de Champagne Blanc de Blancs 2008 and Gosset Brut 12 Ans de Cave a Minima

Alfred Gratien Collection Memory 1996 before the pandemic took hold. Look out also for a revamped Célébris range in the new year.

■ Expérience Pommery #15, Introspection: A special release of Pommery’s Cuvée Louise 2004 vintage, this marks 15 years of contemporary art exhibitions held in the remarkable chalk caves at Maison Pommery in Reims.

■ Alfred Gratien Collection Memory: Another library release, Collection Memory includes a trilogy of vintages — 1996, 1997 and 1998 — aged for at least 20 years in the Alfred Gratien wine library, and presented in a case specially crafted for the occasion.

■ Moët Hennessy various releases: Moët Hennessy has persisted with a succession of high-end releases this year, including Dom Pérignon 2010, Krug Clos du Mesnil 2006 and Veuve Clicquot La Grande Dame 2012, including a limitededition pack designed by Japanese artist Yayoi Kusama, launching into London department store Selfridges.

Maisons Marques et Domaines. “However, most Champagne has the benefit that it will improve with a few years in bottle, so time is on its side. This value growth is largely a decline in own-label supermarket Champagne. We would anticipate that continues. We have certainly seen steady growth in the vintage cuvées over the years, and would expect that to remain a trend.”

To Prevost, the pursuit of value is imperative for an industry with such high overheads — ­ some of the most expensive grapes in the world, as well as presses that cost €200,000 ($237,000) each, and labelling machines at €60,000 (£71,000).

“Champagne is hand-made,” he says.

“When you see all the investment needed to produce more sustainable Champagnes, this has a huge cost, and the cost is going up every year. Champagne has no future if it’s not value.” ●