Rabobank Report: Global Spirits Industry Q2 2015 - A "Crafty Conundrum"

NEW YORK, March 16, 2015 /PRNewswire/ -- Rabobank's report on the global spirits industry in Q2 2015 focuses on the challenges of engaging with and adapting to a changing consumer base worldwide.  In the spirits industry, consumers are looking for new experiences, and Millennials especially are pushing the boundaries of the sector in an effort to find new brands and products.

"It is paramount that big-brand owners take action quickly in responding to emerging trends," said Stephen Rannekleiv, global spirits and wine analyst.  "However, the truly successful companies will be the ones that find ways to drive the trends, rather than limiting themselves to reactive responses."

Regional Highlights:

• In the U.S., the shift in consumer behavior is mirrored by the rapid rise of craft spirits, and is creating structural challenges for established spirits players. The rapid rise of upstart brands like Tito's Handmade and Templeton Rye have fuelled discussions among major distillers and craft spirits producers alike. The discussions have focused mostly on the definition of craft, but in Rabobank's view, the outcome of these discussions is of less relevance to the industry. More pressing is the signal that the U.S. consumer is changing, and that spirits players need to figure out how to tackle the structural changes following from that.
• In Europe, Scotch producers are starting to feel the squeeze. The sector registered a decline in exports for the second year in a row, driven by a contraction of blended Scotch, a category that is struggling to remain relevant among younger consumers in particular. However, other parts of the sector showed promising growth, signaling that there is still potential for growth in the Scotch sector. To benefit from this however, Scotch producers must take action.
• The Chinese liquor industry has seen consistent weak performance, with consumers continuing to trade down. The Chinese New Year brought some much-needed relief for the sector, but spirits producers are looking towards new categories to revive growth in the sector.
• Premiumization is expected to drive growth in the Indian spirits sector in 2015. Demand for Indian foreign-made liquor continued to show mixed results, as some brands were under pressure while other showed strong buoyancy. Revenue and margin growth in FY 2014/15 will be driven by premiumization, with expectations of broad improvement in industry revenues.
• Imported spirits are struggling in Brazil as a result of a weakening economic environment and a strengthening U.S. dollar. As a result, it is expected that we will see an increase in inflation in the category, leading to a reduction in out-of-home expenditure and trading down in the spirits category.

"To ensure that new consumers are drawn into the category, producers will have to find new ways to capture their imagination.  In order to stay relevant, they will have to innovate, introducing new products and brands, along with finding new ways of reaching the ever-changing consumer," says Rabobank beverage analyst Elena Saputo.

The full report is available to media upon request. 

Rabobank Group is a global financial services leader providing wholesale and retail banking, leasing, real estate services, and renewable energy project financing. Founded over a century ago, Rabobank is one of the largest banks in the world, with nearly $1 trillion in assets and operations in more than 40 countries.  In North America, Rabobank is a premier bank to the food, beverage and agribusiness industry.  Rabobank's Food & Agribusiness Research and Advisory team is comprised of more than 80 analysts around the world who provide expert analysis, insight and counsel to Rabobank clients about trends, issues and developments in all sectors of agriculture. www.rabobank.com/f&a

SOURCE Rabobank

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