Spirits sector performed strongly in 2019

A strong domestic hospitality sector will be vital in allowing the sector to return in coming years to the level of growth seen in 2019.

2019 will be seen as a “benchmark” year for the spirits industry in light of Covid according to Drinks Ireland|Spirits’ Irish Spirits Market report 2019, published recently. We take a look at the report here.

The value of spirits exports from the island of Ireland continued its upward trajectory, up by nearly 16% to €1.17 billion last year as Irish whiskey sales volumes grew 10.9% worldwide, from 10.58 million nine-litre cases to 11.93 million.

Meanwhile, sales of Irish cream liqueur increased by 3.9%, from 8.2 million cases to 8.52 million according to Drinks Ireland|Spirits which published its Irish Spirits Markets report 2019 recently.

However this year’s Covid-19 crisis has significantly impacted Ireland’s spirits sector, hitting production, exports and sales according to Ireland’s spirits producers and in the context of current challenges 2019 will come to be regarded as a “benchmark” year for the industry as it seeks to recover from the Covid crisis in years to come. This will require solid foundations upon which to build.

The fourth report from the Ibec trade association representing the spirits sector details its performance at a time before Covid (BC?) when the economy was performing well.

Domestic spirits sales

But it also shows that domestic spirits sales – mostly via the off-trade - grew just 0.7% from 2.4 million cases to 2.42 million last year as overall alcohol

consumption in Ireland continued to decline. Nevertheless this growth, while slower than that in 2018, illustrates the continued popularity of high-quality spirits products created by a dynamic and innovative Irish industry, states Drinks Ireland|Spirits.

Spirits’ overall share of the alcoholic beverage trade in Ireland rose to 20.8% of the market last year, up from 20.5% in 2018. By volume, the off-trade enjoyed 68.2% of spirits sales and was responsible for selling 1.2 million nine-litre cases. But the on-trade took the lion’s share of the value, accounting for 64.7% of sales or €658 million.

Ireland’s most popular spirits drink was vodka, driven in part by its use in cocktails, followed by Irish whiskey and gin. While growth of Irish whiskey and gin slowed in 2019 compared to 2018 both remained significant with sales up by 1.5% and 4.6% respectively, states the report. Vodka sales grew by 0.6%.

“Continuing a trend from last year, sales of Scotch continue to fall (dramatically) with a -13.1% decrease on the previous year,” notes the report, “US whiskeys and bourbons have also registered a decrease (-4.4%) the most likely reason for which being the EU’s 25% tariffs on these products.”

Their value too fell by 16.6% from €4.4 million to €3.7 million.

Biggest gain last year was tequila with sales up 6.2% to 17,000 cases from 2018’s 16,000 cases.

Covid reverses spirits’ fortunes

However it’s fair to say that the growth in the spirits market last year has been reversed as a result of Covid-19 this year.

A strong domestic hospitality sector will be vital in allowing the sector to return to the level of growth seen in 2019 in years to come according to Drinks Ireland|Spirits which adds that a safe and sustainable reopening is important.

Drinks Ireland|Spirits reports that, “Spirits producers have been significantly impacted by the closure of the hospitality sector, saying that that these venues should be allowed to reopen or stay open in a controlled, safe and sustainable manner where possible”.

It says that the on-trade, including pubs and restaurants, are vital for enabling new and emerging producers to gain traction in the domestic market.

“These venues give consumers the opportunity to try new or different Irish spirits, championed by staff in

these establishments who take pride in sharing their knowledge with domestic and international visitors alike.”

In addition to Covid-19, the report points to other challenges facing the sector as a result of the ongoing trade dispute between the US and the EU. These have resulted in tariffs of 25% being placed on Irish cream liqueur and other Irish liqueurs as well as on Single Malt Irish whiskey from Northern Ireland. An earlier round of tariffs saw the EU apply 25% in tariffs to US whiskey and bourbon imports in retaliation for US tariffs on European steel and aluminium products. These are due to increase automatically to 50% in July 2021.

And like many other industries, the spirits sector faces many uncertainties as a result of Brexit, with a trade deal still to be agreed.

Biggest markets

In 2019, the US (at 7.4 million cases) and UK (at 1.6 million cases) were the two biggest export markets for Ireland’s Geographic Indicationprotected spirits: Irish Whiskey, Irish cream liqueur and Poitín.

The third-largest market for GI-protected Irish spirits was Global Travel Retail (1.3 million cases), now under severe pressure as a result of the global collapse in international travel.

Germany on 982,000 cases comes fourth while Canada comes fifth with 965,000 cases.

The top five markets for Irish cream liqueur emerged as the US (2.39 million cases), the UK (1.1 million cases), Canada (672,000 cases), Global Travel Retail (633,400 cases) and Germany (616,100 cases).

Ireland itself consumed an estimated 89,400 cases.

Poitín sales fell 3.6% from 3,890 cases to 3,750 cases.

Excise reduction call The spirits sector too called for a reduction on excise in Budget 2021 as an additional measure to support recovery.

“Ireland retains its thirdplace position in the 2019 European spirits excise league table with only Sweden and Finland ahead of it,” states the report which puts excise taken on spirits in 2018 at €372.2 million.

“In 2019 excise raised by all alcohol categories fell by 0.64%. Spirits contributed €373.4 million or 30.3% of the excise duty collected by the Irish State. While the overall total fell by 0.64% spirits contribution increased by 0.32% in 2019.”

Return to dynamic spirits industry sought

Pat Rigney, Drinks Ireland|Spirits’ Chair and Managing Director/Founder of The Shed Distillery (producer of Drumshanbo Gunpowder Irish Gin) points out that, “In 2019, we see that Ireland had a dynamic spirits industry with domestic sales and exports continuing to grow. “This growth allowed the sector to support the domestic economy and jobs across Ireland including in more rural locations where many of our distilleries are located. While the sector remains vibrant and innovative, it has been severely impacted by Covid-19.

For example the hospitality sector is vital for consumers to explore products from new and emerging

Irish spirits producers. This is on top of other challenges associated with Brexit and the EU and US trade disputes.”

In his forward to the report Pat

Rigney states, “In many ways this report represents a lodestar to where the sector is looking to return to in the coming years”.

He adds that, “The pubs, bars and restaurants of the home Irish market are vital to the continued growth and prosperity of Ireland’s spirits and craft spirits businesses. In many instances the hospitality sector is the first opportunity the Irish

consumer or the overseas visitor has to experience new and exciting Irish spirits. The barman behind the bar or the waiter offering suggestions is key to educating the Irish and overseas consumer and providing profile to new Irish brands and distilleries.”

Author of the report and Head of Drinks Ireland|Spirits Vincent McGovern added, “The Irish Government can support the indigenous spirits sector in a number of ways as it seeks to recover from Covid-19. Ireland’s excise taxes are the second-highest in Europe and will act as a barrier to recovery.

“As part of a broad package of measures the government should look to deliver a 15% reduction in excise tax on drinks products which would help the industry and minimise the risk of job losses.

“In addition, in the immediate term Government could also look to facilitate a safe and sustainable reopening of the hospitality sector. Venues, including pubs and restaurants, are regulated environments and should be allowed to reopen and remain open in line with other EU countries. “They are hugely important for our spirits sector, including for new and emerging producers who need the opportunity to get their product in front of consumers. It’s #OpeningTime.” n

On again, off again – the story of the Irish pub reopening(s)

While the public now seems to empathise with publicans some of whom have had to endure up to four ‘false starts’, the true cost in terms of time and effort – not to mention the financial expense – of reopening has not been detailed. We spoke to some publicans and suppliers about the frustrations and wasted effort, expense and heartbreak that’s gone into prepping the ‘wet’ pub for re-opening dates that failed to show.

The postponement of his pub being allowed to reopen at the end of June took its toll on Tom Dunbar of Dunbar’s pub in Ferns, County Wexford.

“I didn’t go back down to the bar for two or three weeks afterwards,” he recalls.

A publican of 50 years standing, in a pub dating back to 1882, he’s never experienced anything so damaging. For him, the on/off again reopening of pubs by the government has been

painful – mentally as much as physically.

For people like Tom reopening has been a fraught learning process.

“We were a bit more cautious about what we were doing after that and so stock didn’t come before the rug was pulled the second time,” he says. For Tom Dunbar, the failure to reopen the first

Three false starts later – time was “such a deflation” with only two days’ and with the accompanying notice being given.

drain on finances, effort and mental wellbeing – he’s open once more.

But he’d to put up Perspex screens at the counter and capacity was clearly reduced when he reopened, having reorganised the seating to comply with Social Distancing and having installed appropriate signage.

This had all been done before the first June reopening date, subsequently postponed by Government.

“We’d everything ready” he remembers, “with everything polished, painted and cleaned.

“The suppliers were very good ‘though and we’d no problem getting stuff back when reopening didn’t happen.”

The failure to reopen the first time was “such a deflation” with only two days’ notice being given.

“It just knocked the equilibrium out of me in terms of when I was working and when I wasn’t working,” he explains, “Before Covid closed us, every day I used know exactly what was going on and where I should have been but then I didn’t know Monday from Tuesday as my body clock got all messed up.”

He really missed his customers too as he’s someone who speaks to people all the time.

Now he’s open again. But he reckons that he’s had to spend around €10,000 to €12,000 on Covid-19 precautions “… and I’m not completely finished yet”.

Mellett’s Emporium, Swinford

For Marie Mellet of Mellett’s Emporium in Swinford, County Mayo, it was also a case of third time lucky having endured two ‘false starts’.

The drink that had been ordered and delivered had to be taken back but the suppliers were really good about it, she told Drinks Industry Ireland.

“We’d turn on the fridges about a week beforehand, start up the cold room and the heating etc only to be told we weren’t opening!”.

They’ve deep-cleaned the pub four times now!

So while she’s reopened since, she’s also very aware that they could be closed again at any moment.

“Now, we won’t open two cases of bottled beer at the same time. In March we were left with an obscene amount of stock comprising halfopen cases so it was a serious loss of

“We won’t open two cases of bottled beer at the same time” - Marie Mellett is very aware that they could be closed again at any moment.

stock,” she explains.

And in reopening, she’s also become acutely aware of the amount of waste being generated to comply with Covid countermeasures.

“Bar staff aren’t allowed to dry their hands on a standard towel so we use paper towels,” she says, “We’re going through reams of it and the bins are constantly full.”

Then there’s death by a thousand cuts.

“It’s small in the grand scheme of things” she offers, “but another cost nonetheless – we’ve six automatic hand sanitisers, four automatic soap dispensers and four hands-free taps - in total we’d to buy 76 AA batteries for them!”

So far, she’s not had to let any staff go as a result of the pandemic.

“We actually took on a new member of staff thanks to the EWSS which, while not enough, is still a great help,” she says, “But we’ve to cover the wages for six weeks until payment is made. The biggest problem with that is that tomorrow is pay day and I’m not sure where the money is going to come from. It’s a huge problem for lots of places.”

For Marie, the most annoying aspect of the whole thing is that no barstools are allowed in the rural pub.

On reopening on the Monday night they were at full capacity with just 10 people in the pub.

“That’s not sustainable,” she believes, “The barstool situation could be the death of the rural pub.”

This is a common story says Brian Foley, VFI Communications and Public Affairs Manager.

“Never before has a business sector experienced what the pub trade has gone through over the past six months. When we closed on 15th March the general assumption was pubs would reopen in a matter of weeks. The ensuing drawn-out process was torture for many of our members.

“There was huge frustration over the Summer months as we attempted to obtain guidelines for reopening which only appeared days before the scheduled 20th July opening date.” – Brian Foley.

“From the outset publicans wanted to know two things - when and how; when could they open and what guidelines were required. There was huge frustration over the Summer months as we attempted to obtain guidelines for reopening which only appeared days before the scheduled 20th July opening date. Then reopening was postponed, a disappointment publicans were unfortunately going to get used to.

“There was huge enthusiasm amongst publicans to get it right, installing everything from hand sanitisers, signage and contract tracing to protective gear for staff and cleaning protocols. It’s all geared towards making customers and staff as safe as possible but it shouldn’t be forgotten the work to make pubs ready for the ’new normal’ was undertaken when publicans had overnight lost their entire livelihoods.

“Having gone through hell, they’re finally open and finding their feet. The pressure remains though as the country ducks and weaves in its battle with Covid; publicans face the threat of trading being limited to outdoor areas if NPHET deem their county to be at risk, like Donegal. For now, most are simply glad to be open and back meeting old regulars.” >>

Dublin closed

In Dublin, around 250 pubs that don’t serve food were prevented from opening for the fourth time while those that did serve food – were closed anyway as the capital moved to Level Three.

Gary Cusack of Mulligan’s of Poolbeg Street has found the many ‘false dawns’ to be very annoying.

“If we have a week’s notice we’ll get the cold room back up-and-running, replenish the ice-makers and liaise with the breweries to deliver stock.” – Gary Cusack.

“Getting so close and then being told ‘no’,” he recalls, “When the lockdown came on Paddy’s Weekend we had 120 to 150 kegs in Mulligan’s. We sell a lot of Guinness but unfortunately it had to go out and back onto the truck.”

While closed, initially, they got all the jobs done that needed to be done.

“We’d the floors redone, the furniture cleaned and we did a lot of work on our cellar. The wiring was also updated – it was a lot easier to do it while we were closed.

“But there’s only so much painting and cleaning and decluttering that you can do and we did it all in the first weeks.”

Now he finds being closed simply frustrating.

After 32 years in the family-run pub he and his brother Ger just want to get back open again.

“When it came to reopening, we always waited for guidance from the government so we didn’t do anything before the first couple of false starts,” he says, “It was only for the last two dates that we actually went to work putting in partitions, setting up sanitiser stations, putting in Perspex and introducing extra chairs and tables.

“If we have a week’s notice we’ll get the cold room back up-andrunning, replenish the ice-makers and liaise with the breweries to deliver stock.

“All the staff have done the Covid19 course online and myself and Ger, along with our nephew Darren, are looking at introducing separate bubbles of staff on one shift that never meet the other shift.

“We’ve set up two separate pods that will never cross paths.”

In all, Gary reckons he’d to spend between €5,000 and €10,000 on preparing Mulligans for reopening.

Others have adapted in order to survive by going into partnership with a nearby pizzeria to fulfil the €9 meal threshold qualification.

Many publicans had put a great deal of work into the setting-up of staff rosters etc for the opening dates orginally proposed - the 29th of June, the 20th of July, the 10th of August and the 31st of August - only to get the slap of disappointment.

“The 20th of July was the shocker,” believes LVA Chief Executive Donall O’Keeffe, “That’s when the mood music changed very close to the dates given in an environment of there having been no significant change in the infection rate.

“The trade has done all that’s been asked of them and so to remain closed is just heartbreaking.” - Donall O’Keeffe.

“There was huge investment in management time and expense as well as the once-off but substantial cost of recreating the physical infrastructure in the Dublin pubs for these reopening dates,” he explains, pointing out that table arrangements had to be re-thought, customer management had to be pre-planned.

“There was all that time spent as well as the distress, hassle and emotions that went into these preparations for a day that, ultimately, they didn’t get to open on,” he said, “This was compounded by the absolute lack of clarity going forward.”

At the time of going to press Donall O’Keeffe describes Dublin publicans as being in “deep despair, extremely frustrated and disillusioned” with a government who’ve let four reopening dates pass by for wet pubs in the capital - and many feel at this time of high infection rates that a fifth postponement may be on its way.

“The trade has done all that’s been asked of them and so to remain closed is just heartbreaking,” he says, “The uncertainty is the killer. We could handle it if we had a definitive date on re-opening but we’ve no confidence on the next reopening date given being adhered to.”

It’s conceivable, he tells Drinks Industry Ireland, that the country is heading towards there being rolling lockdowns and restrictions.

Brewing is a costly and timeconsuming process. Suppliers had already started to work with Dublin publicans countrywide all over again to supply product for the latest re-opening, delivering kegs ahead of the September the 21st date.

Drinks Industry Ireland Director Patricia Callan, who’s called on the Government to avoid this ‘stop and start’ approach to re-opening pubs, points out that these ‘stop and starts’ are bad for the pubs concerned, for the suppliers but also for the economy and society.

“As a result of previous ‘false starts’ beer was brewed and delivered, beer lines were cleaned and subsequently breweries had to do a massive keg uplift as the pubs then couldn’t re-open,” she says.

“This is now the fourth time new product has been brewed and delivered in kegs to Dublin pubs to then not be used. It’s also the fourth time drinks suppliers have worked

with pubs in Dublin to clean beer lines ahead of a re-opening.

“This is now the fourth time that pubs in Dublin that do not serve food have been told they could re-open to then be told, at very short notice, that they no longer can.

“It’s completely disproportionate and unfair for these pubs to be treated as political scapegoats and differently to the rest of the hospitality sector. Dublin pubs that serve food have reopened safely.”

Supplier costs

Indeed, the cost to suppliers of these false starts in pubs that closed for so long involves dealing with significant ‘legacy stock’.

“During that time we had to replace stock that remained unsold which was costly as it had sat there in some instances since last March,” explains David Whelan, Bulmers Commercial Director, “We carried out an uplift and have given credit to the trade for this.

“We had to replace stock that remained unsold which was costly as it had sat there in some instances since last March.” - David Whelan.

“In addition, we invested some €1,500 in 500 pubs around the country over the last few months,” he says.

Following the first false alarm, suppliers were more circumspect about getting supplies out to the on-trade for the second proposed reopening date.

“We’ve probably taken a more pragmatic approach over recent times,” he reckons of the repeated postponements, looking to see ‘the whites of their eyes’ in government before placing stock.

Certainly the Friday evening announcement on the 18th of September for the cancellation of reopening for non-food pubs in Dublin the following Monday the 21st

of September – and the closing of restaurants and non-food pubs at midnight that very night was way too late for both the on-trade and its suppliers.

“There was a roadmap launched earlier in the week and for that to change at the back-end of the same week was incredibly disruptive and disheartening,” he explains, “At a minimum, a lot of those pubs will Heineken Ireland deployed the largest operation in its history which saw its teams clean the beer and cider taps in every one of the outlets across the country have been closed for 220 following the swift lockdown in March. days by end of the latest Lockdown in Dublin beer collected for green energy and which would have ended on October animal feed. the 12th and we’re seeing the impact “We worked closely with those of this on them and on ourselves as pubs as they got ready to open and suppliers - and on our staff.” prepare for the new reality. We found

Heineken Ireland deployed the that our customers were particularly largest operation in its history which concerned with being kept informed saw its teams clean the beer and of the latest updates on supports, cider taps in every one of the outlets learnings from how other European across the country following the swift pub sectors were responding to the lockdown in March. crisis and how best to reopen under

“We collected over 100,000 kegs the new guidelines. of beer and cider and committed “To address these needs, we to shouldering the cost of the developed an innovative new Pub unused stock in outlets,” comments Hub digital platform (https://www. Heineken Ireland’s Commercial heinekenireland.ie/pub-hub/) to keep Director Sharon Walsh, “This was connected to our customers and allow the equivalent to a contribution of them to access information and advice over 10 million pints to pubs across from Europe and from their peers who Ireland. This contribution ensured have been able to open earlier. that all Heineken Ireland product in “However, the delay in reopening outlets around the country was at the so-called ‘wet pubs’, along with peak freshness and of the highest the decision not to open these pubs quality when the sector started to in Dublin and to close hospitality reopen from the 29th June. We in counties at Level 3 of the Living also remained committed to our with Covid Plan, is a real challenge Sustainability Strategy, Brewing a for our customers and for our own Better World, by repurposing the business. Remember, those pubs in Donegal had only just opened four days before they were told they had to shut their doors again. “The pub sector is a highly regulated environment and they’ve played their part as responsible businesses throughout this crisis. Neither they, nor suppliers such as ourselves, can continue with this level of uncertainty and the disproportionate constraints we are faced with,” she concludes. At the time of going to press the trade awaits developments on the latest 12th of October reopening date. “We collected over 100,000 kegs of beer and cider and committed to shouldering And Christmas is coming in fast with these next few months being the the cost of the unused stock in outlets.” most important trading months of - Heineken Ireland’s Commercial Director the year. Sharon Walsh. Hark. n