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Alcoholic Drinks 2016: Narrative Gets Slurred but Which are the Designated Drivers?

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Entering negative territory for the first time in more than a decade to register a decline of 0.7% , global alcoholic drinks volumes saw historic growth narratives derailed under the influence of macro headwinds hitting China (-3.5%), Brazil (-2.5%) and Eastern Europe (- 4.9) while Western Europe and Australasia begrudgingly nursed their saturation induced hangover while largely flatlining. North America (+2.3%) provided a much needed shot of optimism in an otherwise sobering global landscape where even the intoxicating potential of AMEA (+2.3%) was diluted by generous measurements of currency volatility and commodity price fluctuations.

Impaired or clearheaded?

While terms such as authenticity and craftsmanship are losing gravitas as they become ubiquitous and overused, the trajectories of sophistication, moderation, perceived exotic credentials, accessibility and restrained yet grounded aspirational attributes remain the key driving forces fuelling pockets of buoyancy.

These are the common threads behind the categories witnessing the strongest top line growth despite their seemingly disparate nature. Premium English gin, Irish and Japanese whiskey, dark and non-alcoholic beer are hence the flag bearers of growth and it is no coincidence that those also happen to be the segments gaining further momentum with the ever important millennial demographic in mature western markets.

Beyond those star performers, tequila and bourbon remained solid at the same time that cognac bounced back strongly. Cognac’s resurgence does allay some of the more astute and pressing fears weighting heavily on China but glancing behind the frothy exuberance of top line figures makes it clear that this is primarily due to belated diversification initiatives rather than a guarantee that China is out of the woods yet.

On the other hand, rum and vodka seem to be raising the white flag as they find themselves amongst the worst performers while witnessing bitter low single digit declines that no amount of sweetener in their flavoured sophistication initiatives managed to shake off.

Cider, once hailed as a nigh unstoppable engine of growth remains strong but has somewhat softened as Americans are moving to Hard Soda drinks while still light white and still light red wine varietals join sparkling wines back to a healthy – if not yet fully celebratory - levels.

While initial forecasts suggest a gradual recovery from 2016 onwards, performance will remain substandard compared to historical trajectories. With risks skewed to the downside, macro black swan events hatching in most continents and drinking patterns in flux, it is not the industry’s vision that is impaired but rather the horizon that can be treacherous.

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