Eastern Europe is still leading in spirits per capita consumption globally. Despite vodka continuing to dominate spirits, consumer taste preferences shift towards flavour sophistication. This drives other spirits, whiskies and brandy. Mid- and high-income consumers prefer premium and higher price vodkas, considering them less harmful to health and inducing lighter hangovers. Food/drink/tobacco specialists is the best performing channel in 2015-2020, driven by two major players in Russia.
Whiskies, gin and rum have gained popularity in Eastern Europe. The spirits category posted a 5% volume CAGR over the review period 2015-2020. The same growth is expected to continue throughout the forecast period 2021-2025. Developing cocktail culture, low maturity level, increasing availability and consumer awareness support the growth of whiskies, gin and rum in Eastern Europe.
Consumers look for the best value for money and prefer quality over quantity. This was supported by intensified promotional offers and declining disposable incomes in 2020. Prestige spirits showed stable low single-digit growth, while economy spirits showed growth during the pandemic in 2020 after accelerating decline over 2017-2019. Sales of vodka in Poland and Ukraine, as well as locally-produced gin in Russia, drove the growth of economy spirits in 2020. Locally-produced economy and standard spirits can potentially become an option for low-income consumers, particularly if disposable incomes continue to decline.
The top 10 spirits producers in Eastern Europe include only two international companies - Pernod Ricard and Diageo - which have a presence in multiple key markets. The remaining are local origin companies, which are focused on the leading markets, where their performance is supported by consumers’ loyalty. Local currency devaluation in Belarus, Croatia, Czech Republic, Georgia, Hungary, Poland, Romania, Russia and Ukraine additionally reduced the competitiveness of imported spirits.
Post-pandemic optimism will result in on-trade, feasts, weddings, festivals and travel recovery. These will be the main short-term drivers of spirits consumption growth. The increasing popularity of healthy lifestyle, mindful drinking and preferences of millennials and Gen Z consumers towards alcohol as well as the declining population will be limiting factors for the growth of spirits over the long-term period.
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