Editorial by Ulrich Adam, Director General of spiritsEUROPE
Modern consumption trends dictate that premiumisation is here to stay .
Despite the huge headwinds of the covid crisis, international trade disputes and now rampant inflation, the European spirits sector has been quietly transforming itself in recent years due to what has been called the ‘premiumisation megatrend’.
Premiumisation is something of an industry buzzword, but what it captures has incredible momentum: European consumers are ‘drinking less but drinking better.’
Generational shifts in attitudes towards health, lifestyles and personal relationships with brands mean that more and more people are willing to pay more for higher quality products and experiences that resonate more with them, whether that be through visiting the distillery behind their favourite drinks, experimenting with cocktails at home, or simply exploring what the explosion of craft producers have to offer.
In aggregate, the value of the spirits market in 2019 was 32% higher than in 2009, even as volumes declined by 3% . While we do not have reliable data on EU-wide trends since the start of the covid-related restrictions, market data shows a notable shift towards more premium products, even as volumes declined in most markets. And the generational shift is also notable. Adeo Group reported that 54% of 18–34-year-olds are likely to choose a premium drink versus just 35% of those over 55.
Last year, the drinks analytics firm IWSR forecast a 40% increase in sales of premium spirits by 2024, though it is unclear what effect this year’s inflation crisis and economic uncertainty will have on those projections.
What is clear is that policymakers, public health advocates and distillers alike should be working hard to support this trend. The fact that Europeans are being more selective in what they drink, where they drink it and how they drink it is welcome news for all of us who have been preaching the gospel of ‘responsible drinking’ for so many years. Put simply, premiumisation is good for the public purse, good for public health and good for our public houses.
So what can be done to support this trend? The simplest thing would be to iron out discrepancies in the tax system that incentivise consumers to choose cheaper products. When a glass of whisky containing the same amount of alcohol as a glass of beer is taxed twice as much, you will be inclined to choose the beer, even if that is not your first choice.
Levying duty on a per-unit basis will allow distillers, retailers and hospitality outlets to continue to encourage a more discerning approach to enjoying alcohol, without putting premium products out of reach of ordinary people. I hope that we can all raise a glass to that.
Ulrich Adam, Director General*
*In his capacity as permanent representative of SPRL ADLOR Consulting